NIC Group #ticker:NIC and CBA Group, whose planned merger is the subject of a court case over non-payment of taxes running into hundreds of millions of shillings, will return to court next month when a decision will be made on whether they need to provide a bank guarantee.
High Court Judge Weldon Korir made the orders in an urgent application by activist Okiya Omtatah who argues that the National Treasury has effected a secretive and opaque decision to exempt merger of the two lenders from tax.
“That mention on October 16 to confirm compliance and address the questions as to whether the interested parties should provide a bank guarantee for the waived taxes,” the judge ruled in orders issued on Monday.
The tax waiver was granted on July 26, but was only announced to the public on August 18.
“The taxpayer will suffer great loss estimated at Sh350 million in lost tax revenues that would otherwise accrue to public coffers,” Mr Omtatah says in his application.
He argues that the Cabinet Secretary for the National Treasury, does not have the powers to arbitrarily grant the tax waiver.
He has sued the secretary and the Attorney-General while NIC and CBA have been listed as interested parties.
The family of President Uhuru Kenyatta has a significant stake in CBA while the Nairobi Securities Exchange-listed NIC Group is controlled by the Philip Ndegwa family.
If successful, the planned merger would create one of the largest financial services groups in the region.
The two lenders said a successful tie-up would allow the combined entity to “invest in future growth and in new technology to create enhanced offerings and wider services to its customers, as well as deliver deeper financial inclusion while generating attractive returns to shareholders.”