Eight directors of agricultural firm Kakuzi have argued that a probe conducted against them by capital markets regulator over alleged conflict of interest and financial impropriety was unlawful and unreasonable.
In a submission filed at the High Court, the directors maintained that the entire process was not fair and did not meet the constitutional requirements of right to fair hearing.
The directors are Nicholas Ng’ang’a, Graham Harold McLean, Andrew Ndegwa Njoroge, Ketan Rameshchandra Shah, Daniel Ndonye, Christopher John Flowers, Stephen Waruhiu and Dr John Kimani.
They submitted that they were within their constitutional rights to not only request information concerning the allegations raised against them, but also the evidence and materials relied upon by the Capital Markets Authority (CMA).
They added that the regulator did not state why it withheld the particulars of the alleged financial impropriety or give reasons for the failure to provide the nature of the complaints received from alleged third parties.
The directors further faulted the CMA tribunal, which cleared the regulator in September last year to proceed with the inquiry, over the failure to agree with them that they could not be condemned for failing to provide that which does not exist.
“The Appellants (the directors) submit that the Respondent’s (CMA) conduct of the inquiry was unconstitutional, procedurally flawed, unreasonable and unlawful,” the directors said in the appeal.
Justice Anthony Mrima will give his judgment on the matter on September 18.
The regulator asked the court to dismiss the appeal arguing that it was still in the process of conducting investigations.
The CMA said it had not reached any adverse finding against the directors.
“Therefore, the Respondent submits that the appeal by the Appellants was filed prematurely. The Appellants as well as this Honourable Court ought to wait for the Respondent to render a determination in this matter in order to entertain an appeal as provided for under Section 35 of the Act,” CMA said.
The regulator maintained that it had sufficient cause to conduct the investigation, which centered on Management and Operational Services Agreements signed between Robertson Bois Dickson Anderson Limited and Kakuzi on December 11, 2017 as well as the Management and Operational Services Agreements signed between Eastern Produce Regional Services Limited and the agricultural firm.
The regulator also intended to probe business dealings and agreements with related companies including Robertson Bois Dickson Anderson Limited, Eastern Produce Kenya Limited, EPK Empowerment Company (Kenya) Limited, Lintak Enterprises (K) Limited, Linton Park (Kenya) Limited and Siret Tea Limited.
“In light of the foregoing, the Respondent deemed it fit to conduct an inquiry into the affairs of the 11th Appellant (Kakuzi) and ensure that the interest of investors in the business of the 11th Appellant is protected,” the regulator added.
In the September 19 decision, the tribunal chaired by Paul Lilan said they were persuaded that the summons issued to the directors of Kakuzi on June 14, 2021 and September 1, 2022 were given within CMA’s statutory powers.
The tribunal added that it saw no bias, procedural impropriety, ulterior motive, failure to take into account relevant matters, abuse of discretion or unreasonableness as alleged by Kakuzi directors.
“At the point of lodging the appeal, the entire inquiry process was generally fair to the appellants and met the constitutional threshold,” the tribunal said, adding that no basis had been established to enable us to set aside the summons.
In the company’s view, the issues raised had been dealt with in the corporate governance assessment report which gave them an overall weighted score of 72 percent.
