CMC shareholder thrown out.

Mr. Peter Muthoka, the largest shareholder in troubled motor firm CMC, and a co-director were on Monday toppled in a fresh boardroom coup engineered by the Capital Markets Authority (CMA).

The coup that took place during a board meeting also saw long- serving director Richard Kemoli resign.

Minutes of the board meeting show that Mr Muthoka and Joseph Kivai, who represent Andy Forwarders, were removed by a majority vote that also ushered in CMA’s three nominees to the board — Ms Zehrabanu Janmohammed, Dr Joshua Okumbe, and Mrs Susan Wakhungu-Githuku.

The three will serve as non-executive directors in the caretaker board that will oversee CMC’s operations until January next year.
Monday’s board meeting was held in response to CMA’s letter to CMC directors dated February 27 asking for the names of seven directors that were to be nominated by the nine warring board members.

Fred Ojiambo, the Nairobi lawyer who acts for Andy Forwarders, termed the move as a nullity that has no basis in law.

“The method by which a director of a public company can be removed are clearly defined in the Company’s Act and CMA is not the enforcer of that law,” he said adding that the regulator had teamed up with one faction of the CMC board to act in complete disregard of the law.

“What surprises me is the impunity with which these people are acting,” he said. “It is the CMA itself that sought and got a court order preserving the CMC board until the case in court is heard and determined.”

CMA could not tell what law it used to reconstitute the motor dealer’s board or explain why it was acting in breach of the court order preserving the CMC board.

CMA chief executive Stella Kilonzo referred us to her lawyers when asked to explain the agencies actions and her lawyers did not talk to us by time of going to press.

It remains to be seen how the unprecedented move in which minority shareholders teaming up with the regulator to oust a major shareholder will play out in the coming months but it has come out as CMA’s attempt to avoid settling the boardroom wrangles at a shareholder’s meeting as provided for in the law.

The ouster of the three directors marks the latest twist in long-drawn battle for control of CMC that began on September 8 when Joel Kibe replaced Mr Muthoka as chairman in a boardroom coup.

CMC’s board has been torn down the middle, with majority of the directors supporting Mr Kibe in opposition to Mr Muthoka and Mr Kivai. The boardroom fights have denied the country’s fourth largest auto dealer the strategic focus it needs to grow in the Kenyan market, raising concern among customers and key suppliers such as Jaguar Land Rover (JLR) which has given the company a deadline of April 2 to fix its operational and strategic issues.

CMA hopes that the removal of key protagonists from the board will give the firm a chance to settle down to business and avert a near collapse from prevailing loss of confidence from its business partners including banks, insurers, and customers.

Ms Janmohammed is a director at Standard Group while Dr Okumbe is a member of the disciplinary committee of the Institute of Certified Public Accounts (ICPAK).
He is also a member of the centre for corporate governance and a founding member of institute of directors (IOD). Ms Githuku is a publisher and CEO Human Performance Dynamics Africa (HPDA) who has worked as a human resources director for Coca-Cola in Africa.
The new boardroom line-up also retained finance director Mary Ngige and chief executive Bill Lay who first kicked up the storm with claims that Andy Forwarders had defrauded the company through inflated charges for services rendered.

He also revealed that former chair of the CMC board Jeremiah Kiereini and former CEO Martin Forster had operated illegal off-shore accounts that they used to defraud the company of millions of shillings.

The removal of Mr Muthoka and Mr Kivai appears to have been executed through sheer voting power in the boardroom as opposed to the normal corporate practice of electing directors through voting by shares.

That the voting directors decided to retain themselves in the new board instead of nominating representatives as directed by CMA clearly shows that the move was merely aimed at ousting Mr Muthoka.

An independent audit commissioned by the CMA has found a number of directors, including Mr Lay to have acted in breach of the law and good corporate governance regulations.
The auditors Weber Wentzel found Mr Lay found to have executed irregular transactions with Pewin Motors, a sales agent whose contract he signed on his first day in office.

It has also found former attorney general Charles Njonjo to have been a signatory to the secret Jersey accounts in which millions of CMC funds were funnelled offshore and shared by a small group of directors

Earlier, CMA had said it would vet members of the caretaker board based on their integrity but that does not appear to have been done with Mr Njonjo and Mr Lay in the new board.

Mr Muthoka and Mr Kivai voted in opposition to the proposal to replace them by the CMA nominees but were outnumbered by the affirmative votes of Mr Lay, Kibe, Njonjo, Ashok Shah, Paul Ndungu, Andy Hamilton, and Ms Ngige. Mr Muthoka had planned to kick out Mr Kibe, Lay, and Hamilton in a special shareholder meeting which was first scheduled for November 21 but whose approval now lies with the courts after CMA went to court to block it.

CMA says the caretaker board should pave way for prudent management of the company and the resumption of trading of its shares which have been suspended at the Nairobi Securities Exchange (NSE) since September last year.
CMC has moved to court to reclaim from Andy Forwarders Sh1.5 billion – including interest on the alleged Sh1.1 billion overcharges detailed in the PwC report.

Mr Muthoka insists the PwC report is not a forensic audit and should not be relied on for regulatory or court actions, citing a disclaimer by PwC.

“The procedures we performed did not constitute an examination or a review in accordance with generally accepted auditing standards or attestation standards and therefore we did not audit or otherwise verify the information supplied to us,” PwC said in the report.