The capital markets regulator has rejected Monday’s forceful removal of motor dealer CMC’s top shareholder Peter Muthoka from the company’s board, sparking a fresh row with the five directors who voted themselves into the new board.
Kung’u Gatabaki, who chairs the board of the Capital Markets Authority (CMA), has disowned the reconstituted team, arguing that his directive to have five CMC nominees sit in the new board was to be executed by consensus – not through forceful expulsion based on boardroom voting power.
In a letter to CMC chairman Joel Kibe dated March 13, Mr Gatabaki said CMA had expected three of the motor dealer’s directors to step down on their own volition, creating room for the three nominees appointed by the regulator.
“We are, therefore, surprised by the ‘removal’ of Mr Muthoka and Mr Kivai by the majority of the directors in order to create two of the vacancies (Mr Kemoli’s resignation creates the third),” reads part of the letter.
“Given the current absence of consensus among the board members, the authority will have to review the situation before it can proceed with the proposed solution.”
The CMA’s apparent back-pedalling on the Monday coup met sharp reaction from Mr Kibe, who insisted that the new board will remain in place to oversee the company’s operations until January next year as the CMA had directed.
“CMA did not specify by what means its objective of reconstituting the board was to be achieved and the board will remain as it is till next year,” Mr Kibe said.
“This will not be a back-and-forth thing anymore. We will not allow them to be shifting goal posts,” he added.
The regulator had in a letter dated February 27 asked CMC directors to reconstitute the board, but retain chief executive Bill Lay and Finance director Mary Ngige and incorporate its three appointees. Seven directors of the motor dealer, including Mr Kibe, on Monday voted out Mr Muthoka and Joseph Kivai — who represented the interests of Andy Forwarders, the largest shareholder at CMC, saying the move was in line with CMA’s orders.
Mr Richard Kemoli, who represented the interest of former chairman Jeremiah Kiereini, was forced to resign before the other two were voted out.
CMA’s step appears to be a tactical retreat aimed at forestalling contempt of court proceedings that Mr Muthoka has filed against the regulator.
CMA late last year sought court orders preserving the CMC board until its quest to block an extraordinary general meeting (EGM) called by Mr Muthoka is heard and determined.
Mr Muthoka had planned to kick out fellow directors Mr Kibe, Andy Hamilton, Paul Ndung’u and Mr Lay at the EGM – using the 24.7 per cent shareholding and in concert with Mr Kiereini’s 12.5 per cent stake.
The court is this morning expected to rule on the contempt of court application, a move that is seen to be behind the regulator’s climb-down from the hard stance it had taken earlier. CMA’s legal counsel had on Monday told Mr Justice Isaac Lenaola that the Monday boardroom coup had come as a surprise to his client, setting the tone for the latest move.
On Thursday, Mr Kibe insisted that the new board will remain intact and will no-longer be influenced by the CMA’s directives – whether inspired by court rulings or not.
Mr Muthoka contends that it is illegal for the company to run without Andy Forwarders’ representative.
“There is no company in the world that runs without representation of major shareholders like Mr Kiereini or myself in the board,” Mr Muthoka said.
“We were supposed to appoint nominees, but other directors selfishly decided to remove us and retain themselves in the board. Directors can only be replaced by shareholders not co-directors,” he said.
As it stands now, Mr Muthoka and Mr Kiereini have no representation in the board despite controlling a combined 37.2 per cent stake in the company.
The hard-line stance taken by both sides means CMA may have to pull out its three nominees and reinstate the ousted directors to settle the matter.