Kenya Commercial Bank (KCB) move to own National Bank of Kenya has faced a legal battle challenging the 10 billion acquisition deal.
This is after two civil activists filed application in court seeking to suspend the intended acquisition of National Bank of Kenya by the Kenya Commercial Bank .
In a certificate of urgency, Evans Aseto and John Kiptoo want the court to suspend any deliberation or negotiation in relation to the intended acquisition of NBK, pending the hearing of their petition.
Through lawyer Duncan Okatch, the two also want orders compelling both banks to furnish them with documents and information in respect to the intended acquisition.
They further want an order to conduct independent audit of the assets of NBK, to be done by an independent audit firm and the costs of the said audit be borne by the respondents.
The activists said the Banks have embarked on a share swap transaction that will see NBK duly acquired by KCB.
“The share swap or transfer is irregular on the basis that the same has been conducted in contravention of the basic tenets of the constitution, in that the National Treasury and the national Social Security Fund have up to 50 percent shareholding at NBK making it a public entity and thus the public ought to have been involved by way of comprehensive public participation process which has not been done,” said the activists.
hey added that the public has not been afforded a chance to air its views which would have subsequently given the transaction the green light after giving the sentiments of the Kenyan citizen considerations.
“Public participation in a transaction of this nature is couched in mandatory in the constitution and in its absence, the share swap/transfer is null and void,” they added.
They said to make the matter worse, both banks have not obtained authorizing order by Central Bank of Kenya and competition Authority of Kenya which is the entity mandated to oversee such transaction and subsequently grant or deny approval to such transactions after careful consideration of the effect of the same would have on competition in the market.
Supporting affidavit by Evans Aseto, he said that the planned share swap follows the offer made by KCB Group on April 18 2019 to acquire 100% of the Shares of NBK by way of a share swap of 10 ordinary shares of NBK for every 1 ordinary share of KCB.
The said application for approval by CBK and CAK would entail submissions of an extensive report on the effect of the intended acquisition such as details on the fate of the employees of National Bank once the acquisition is completed. “In absence of such a report, the fate of the employees remains uncertain as some might end up losing their jobs.”
The activists added that in the view of the fact that both banks are listed companies trading on the Nairobi Stock Exchange, KCB has since issues a notice on the intended acquisition to the Capital Markets Act, is a clear indication that the firms are hell bend on pursuing the acquisition, the glaring irregularities not withstanding.
They said they are apprehensive unless the court intervenes, the banks will proceed with the transaction which is being conducted in defiance and contravention of fundamental statutory and constitutional provisions.
“Unless this court intervenes, due to the clandestine manner in which the transaction is being conducted there is imminent risk that the acquisition of NBK (which is a public property) by KCB will proceed unchecked and the same right lead to pilferage and laws of public funds,” urged lawyer Okatch.
They added that the National Bank books have not been audited by the Auditor general and therefore not tries status or financial health or value is not clear and therefore it is hard to tell whether National Treasury is getting commensurate value for the intended swap.
The civil activists further said various attempts by public investment committee have been futile as several summons to the directors of the NBK to appear before the committees have not been honoured and it therefore clear beyond peradventure that the banks are not willing o shed light on the intended acquisition.
“The petitioners are apprehensive the the acquisition of National Bank by KCB will occasion loss of jobs to many Kenya s under the employ of the Bank and there is high likelihood that various positions will be declared redundant,” they said.
They added thee information regarding the acquisition is opaque, intentionally scanty as it is being released very economically which is a clear demonstration that the transaction is being conducted in a clandestine manner to avoid public scrutiny which is a direct contravention of the Constitutional principles outlined under Article 1 (2).
“The actions by the Respondents are illegal and against public interest bearing in mind that the principles of inclusiveness and public participation are being contravened,” added.
They further said that, the time is of the essence since the shareholders of the 2nd Petitioners have already given the transaction the go ahead during their Annual General meeting held on the 3st day of May 2019.
Justice Weldon Korir certified the application urgent and directed the suit to be served to KCB, National Bank ,Central Bank of Kenya and competition Authority of Kenya.
The case will be mentioned on Thursday for further directions.
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