A judge on Wednesday cancelled an extraordinary general meeting for CMC shareholders called by the ousted chairman, Mr Peter Wambua Muthoka. The agency contract that sparked off CMC board war
Lady Justice Mumbi Ngugi also allowed the capital markets regulator to conduct investigations into alleged fraud at the motor dealer.
She dismissed Mr Muthoka’s application seeking court approval to convene the meeting and ordered that he be restrained from calling the shareholders at the Bomas of Kenya on November 21.
Mr Muthoka, the single majority shareholder through his clearing and forwarding company, Andy Forwarders, where he is the managing director, had moved to court to challenge the Capital Markets Authority’s statutory powers to block the shareholder’s meeting earlier set for Monday next week.
But in her ruling yesterday, the judge declined to allow Mr Muthoka to call the meeting, arguing that “rights and freedoms can only thrive alongside those of others in the society because the alternative would be anarchy.”
Further, she observed that the petitioner’s right to property is not absolute and would be subject to the rights of all other shareholders of the company.
She agreed with CMA’s submissions that unless conservatory orders were issued to preserve the property, the regulator would suffer prejudice. She conceded to the application and ruled that status quo be maintained.
Shortly after delivering the ruling, Mr Fred Ojiambo, representing Mr Muthoka and Andy Forwarders, pleaded with the court to stay the proceedings to allow the petitioner time to appeal against her findings.
However, Lady Justice Ngugi declined to grant the application upon which Mr Ojiambo asked her to disqualify herself from hearing the substantive petition.
He told the judge that the import of her ruling clearly vindicated Mr Muthoka on the allegations of fraud.
“In view of the statements you have made in respect of this petition, it is clear in my mind that you cannot reach a different view in the main petition,” Mr Ojiambo said.
Lady Justice Ngugi directed that the matter be handled by another judge.
Mr Ojiambo had earlier submitted that CMA had no jurisdiction under the Markets Acts to determine the manner in which a shareholder may exercise his/her legal power under the Companies Act.
“Interfering with the petitioner’s right of convening the extraordinary meeting constitutes to a deprivation of the shareholders’ interest in its property in violation of Article 40 of the Constitution,” said Mr Ojiambo. He also accused the regulator of acting discriminately against Mr Muthoka in favour of partisan interests of other CMC shareholders, including the top management “who are in breach of Regulation 63 of the CMA general regulations.”
Responding to the suit, CMA chief executive, Stella Kilonzo indicated that one of the directors is under the regulator’s watch on accusations of financial impropriety.
“CMA is undertaking investigations into the operations of the company’s shares on the Nairobi Securities Exchange (NSE), including insider trading and breach of the regulator’s requirements,” said Ms Kilonzo through the CMA lawyers CMC was also joined in the suit as an interested party.
Mr Muthoka had indicated that the extra-ordinary general meeting was designed to change the composition of the board. He is the single largest shareholder in CMC with 24.7 per cent of issued shares.
Mr Muthoka has accused CMA of violating his rights and power to requisition and hold an EGM by virtue of Section 132(1) of the Companies Act.
CMC’s management also accused him of over-billing them by up to Sh2 billion in a period of five years—prompting the capital markets regulator to stop trading in the motor dealer’s shares at the Nairobi Securities Exchange and order a forensic audit into the company’s finances.
Some of the directors opposed to Mr Muthoka said that the special meeting was aimed at derailing the audit and securing Andy Forwarders multi-million shilling contracts with CMC.
Multinational logistics firms SDV Transami and Damco have since secured a CMC supply chain contract, making them the biggest winners in the ongoing wars among the motor dealer’s principal shareholders.
CMC imports more than 2,000 units of its wide range of vehicle brands, including salon cars, heavy commercial trucks and tractors, ranking among the biggest consumers of logistics services in the country.
It is understood that the ousted chairman secured the backing of a number of minority shareholders to cement his influence in the company. The minority shareholders have a 41.3 per cent stake.
