Old Mutual Holdings has obtained orders stopping insolvency proceedings brought against the insurance firm by businessman Joel Kibe.
The Court of Appeal granted the company the temporary order until October 24, when it shall deliver its ruling in the main application.
Old Mutual, through senior counsel Kamau Karori, told the court that the order compelling the company to deposit Sh500 million – from the proceeds of the sale of Old Mutual Tower – in an escrow account imposes an undue and burdensome financial burden on the firm by depriving it of essential working capital.
Mr Karori added that the order was also “a judicial overreach” as it allowed interference with the internal governance and financial management of the company.
“In the meantime, we direct that pending the delivery of the said ruling, there be a stay of further proceedings and the order made in Nairobi HCCOMIP No. E061 of 2024, Joel Kamau Kibe v Old Mutual Holdings PLC & Others, directing the applicant to deposit the sum of Sh500,000,000 from the proceeds,” judges Francis Tuiyott, Joel Ngugi and George Odunga said.
The insurance firm had disclosed that it intended to sell the building for Sh5.5 billion and use the proceeds to offset loans and other obligations.
Mr Kibe sued the company seeking to compel it to buy his 1.544 million shares, together with interest of 18 percent.
The tycoon also filed the petition seeking protection for what he termed as “oppressive conduct” by the majority shareholders. He is seeking, among other remedies, liquidation of the company under section 424 and 425 of the Insolvency Act.
The application and allegations have been disputed by the majority shareholders and some minority shareholders who claim that Mr Kibe’s suit is prejudicial to their interests and that of the company.
On its part, Old Mutual counters that Mr Kibe does not have legal standing to bring his suit and in any event all the decisions undertaken by the company have been in accordance with international best corporate governance practices, applicable Kenyan laws, and the company’s Articles of Association.
“That contrary to the allegations… the Applicant (Old Mutual) confirms that it holds all its shareholders, including minority shareholders, in the highest regard. However, actions undertaken in accordance with the Company’s Articles of Association and approved by the requisite majority cannot be set aside at the instance of a single dissatisfied person. To do so would undermine established principles of corporate governance and destabilise lawful corporate operations,” Old Mutual stated in documents filed in court.
Mr Karori submitted that the High Court order was erroneous by finding that Mr Kibe was entitled to bring an insolvency petition against the company, allegedly because he is the beneficial owner of the shares held by a nominee.
“On that basis the learned Judge wrongly found that the 1st Respondent (Mr Kibe) is a member of the Applicant under Section 93A of the Companies Act,” Mr Karori said.
The senior counsel said the erroneous interpretation had immediate and far-reaching consequences, as it “impermissibly expands” the category of persons who can initiate a liquidation petition under Section 425 of the Insolvency Act or seek relief under Section 780 of the Companies Act.
“As a result, the Applicant (Old Mutual) has now been compelled to participate in liquidation proceedings by a party who does not meet the statutory threshold to bring such proceedings,” he submitted.
He added that the mere pendency of a liquidation petition against Old Mutual, even if ultimately unsuccessful, not only exposes the company to the potential risk of liquidation but also could lead to a market run, a decline in investor confidence, potential downgrading by regulators, and a liquidity crisis.
He said all these could cause irreversible harm to Old Mutual’s business and stakeholders thereby rendering the appeal useless.
Mr Kibe had told the High Court that he was apprehensive that the intended sale would prejudice him as a minority shareholder and the court should not permit the same as he stands to suffer loss of Sh246.6 million that he invested in the company.
“In recognising that the applicant (Mr Kibe), though through a nominee account, is a shareholder and having moved the court seeking protection as a minority shareholder, I find that the applicant has established that he has rights that are likely to be infringed if this court does not provide the protection sought herein,” Justice Mong’are ruled.
