The legal battle for control of Directline Assurance pitting media mogul Samuel Kamau Macharia and the Insurance Regulatory Authority (IRA) has revealed that the insurer’s true ownership is uncertain, with both parties keeping conflicting shareholder records.
The regulator has described Mr Macharia as a minority shareholder with a 10 percent stake through Royal Media Services, which does not entitle him to stage a corporate coup by declaring himself chairman and ousting the CEO of the troubled insurance firm.
Mr Macharia has disputed IRA’s list of Directline’s shareholder register, with the businessman saying he and his associates are majority shareholders.
He further argues that the IRA’s version of the shareholder register was a creation of the firm’s directors whom the billionaire reckons had no powers to create and allocate shares.
This implies that Mr Macharia and his family own a 20 percent stake, AKM Investments (48 percent) and Janus Limited (32 percent), an ownership the tycoon argues made him majority owner and gave him the right to stage the corporate coup.
Mr Macharia imposed himself as the chairman and director of the firm, which is the largest in the PSV underwriting business on September 3, and went ahead to remove the firm’s CEO, Terry Wijenje.
But the regulator froze the changes and declared the firm has six owners with Royal Media Services owning a 10 percent stake and four other investment vehicles having a 20 percent stake, prompting the legal fight.
Mr Macharia has termed the IRA shareholder register as fake and blamed the regulator for sleeping on the job on its failure to unmask the real owners of Directline Assurance.
“The Insurance Regulatory Authority and Commissioner of Insurance failed to regulate Directline’s shareholding and other aspects of Directline,” the media tycoon said in court documents.
The ownership based on Mr Macharia’s position could be in breach of regulations that limit individual ownership of firms to a maximum of 25 percent.
Court records show that the company’s ownership is the key issue in the battle that has been referred to both the courts and the arbitration process.
“All the claims the plaintiffs bring into this action, they have their roots in the dispute on shareholding, directorship and the management of Directline by personnel appointed by directors who the plaintiffs allege were illegally appointed as directors,” Justice Mary Kasango said.
The judge made the comments in an application by Mr Macharia, which sought to validate his shakeup of the insurer’s boardroom in August.
The court referred the dispute for arbitration in a ruling delivered on October 15, 2019 amid opposition from the Mr Macharia.
His plans to take control of the company kicked off on August 19, 2019 when he held a meeting with employees in the absence of the CEO.
He told the staff that Ms Wajenje was leaving her post. 11 days later, On August 30, 2019, he notified the CEO of her suspension through a letter and required her to show reasons why she should not be fired.
He also wrote to Directline chairman Kevin McCourt on the same day, asking him to resign from his position.
Mr Macharia subsequently went ahead and installed himself as chairman and named Isaac Ngaru as the company’s chief executive officer.
Around the same time, two associates of Mr Macharia started reporting to the company’s offices to monitor the activities of employees.
The company’s other directors are Mr Geoffrey Radier, Mr James Gacoka and Ms Elizabeth Waichigo. Mr Macharia’s son, John Gichia Macharia, who died in a road accident in May last year, was also a major shareholder.
His takeover prompted action from IRA, which declared the board and management changes illegal.
The regulator insisted on its right to approve persons holding position of CEO, chair and other directors before they can take up those posts.
“That it came to the attention of (IRA) that (Mr Macharia), who is a minority shareholder in Directline as from our records, purported to make changes in the board and/or management of Directline contrary to the set out legal procedures, changes which would have the potential of destabilizing Directline and put the policyholders and the public at large at great risk,” IRA’s chief executive Godfrey Kiptum said in court documents.
The regulator also appointed three directors –John Katiku, Rodgers Kinoti and Mercy Mwangi— in what it termed as a move to protect the interests of policyholders.
Mr Macharia says that Directline has maintained two contradictory and mutually exclusive shareholder registers since 2011.
He accused the company secretary and consultancy firm—Maonga Ndonye Associates—of filing the “fake” shareholder registry with the regulator.
“Maonga Ndonye Associates as certified public secretaries failed to apply their skill care in discharge of its functions,” said Mr Macharia, asking the court to declare the consultants actions as breach of the law.