Time flies with great content! Renew in to keep enjoying all our premium content.
Prime
MUA minority owners fail to block subsidiaries sale
The applicants argued that the sale was approved by interested directors without an open process and would “unjustly enrich” majority owners at the expense of minorities.
Two minority shareholders of MUA Insurance (Kenya) have lost their bid to stop the sale of its stakes in its Tanzania and Ugandan units, clearing the way for a deal aimed at plugging a Sh867.5 million solvency gap.
The High Court ruled the applicants Moyez Alibhai and Maheboob Alibhai failed to meet the legal test for an injunction.
“Mere dissatisfaction with a board decision, without cogent proof of breach of fiduciary duty or trust, does not demonstrate a prima facie case,” the court said.
The case arose from a February 18, 2025 board resolution to sell MUA Kenya’s majority holdings in MUA Tanzania and MUA Uganda to MUA Limited Mauritius.
The buyers are linked to the group’s majority shareholder and directors.
The two minority shareholders sought permission to sue on the company’s behalf and to freeze the deal. They argued the process invited self-dealing and undervaluation and asked for an independent valuation and a fresh bidding process.
They wanted the interim order to remain in force pending the hearing and determination of their application and the intended suit. They also wanted an order for stay of sale of the company’s assets pending an independent valuation and if necessary, a competitive rebidding.
In court papers, Mr Alibhai Moyez said the subsidiaries were “significant long established” businesses and that the proposed prices were below their true value. He said the pair had offered to buy at higher prices, subject to due diligence, but the board rejected the approach, citing urgency.
The applicants argued that the sale was approved by interested directors without an open process and would “unjustly enrich” majority owners at the expense of minorities.
The court heard that the deal was approved by interested directors without an open, competitive, or independently reviewed process, and that it involved self-dealing and conflict of interest, in breach of the directors’ fiduciary duties.
But the company and its directors pushed back with numbers and urgency.
A non-executive director, Japhet Mucheke, told the court MUA Kenya had a negative capital adequacy ratio of minus 44.6 percent and a solvency deficit of about Sh867.5 million as at December 31, 2024.
Independent valuations were used, he said, and the board chose a quick sale after regulatory hurdles blocked other options. He warned that stopping the deal risked collapsing the company.
In the ruling, the court noted the board, including the applicants, had weighed two recapitalisation routes and chose the sale by majority.
The applicants were part of the board discussions on the February 18, 2025 resolution and wrote to the board on March 13, 2025 expressing their disagreement and offering to buy the shares themselves.
“The law requires courts to refuse leave where the act complained of was authorised by the company before it occurred, or has been ratified by the company,” the court observed.
It added the applicants produced no alternative valuation, no binding competing offer, and no proof of funding. The court also removed MUA Limited Mauritius from the case, saying a derivative claim targets directors’ conduct.
“A derivative claim may be brought only in respect of a cause of action arising from an actual or proposed act or omission … by a director of the company,” the court said, noting the buyer is neither a director nor a shareholder. It also faulted service on a foreign company without prior leave.
It concluded the application was defective, paving the way for the board to proceed with a transaction it says is vital to keep the insurer solvent and protect policyholders.
