Old Mutual Shareholder Calls for CMA Investigation Over Asset Sales and Minority Shareholder Concerns

Old Mutual Holdings Plc faces scrutiny after one of its shareholders, Joel Kibe, called on the Capital Markets Authority (CMA) to investigate the firm’s recent transactions, including the disposal of assets and issuance of preferential shares. Kibe, a prominent shareholder with a stake valued at Ksh 246.7 million, has raised concerns about the company’s practices, alleging they have been detrimental to minority shareholders.

Through his legal representation, Gichuki Kinga’ra and Co. Advocates, Kibe has urged the CMA to halt any further sales of Old Mutual’s assets, citing violations of regulations and a lack of transparency. According to Kibe, the company has been disposing of assets listed under Old Mutual Holdings and its subsidiaries without proper disclosure or accountability to shareholders, which is against CMA regulations.

In his letter to the CMA, Kibe detailed how the company’s actions have diluted minority shareholders’ stakes by nearly 40% through the issuance of preferential shares, securing loans without consulting minority shareholders, and failing to pay dividends. Kibe expressed concerns over mismanagement, lack of liquidity, and the overall direction of the company’s governance.

A specific point of contention for Kibe is the recent sale of Old Mutual’s stake in UAP Insurance Tanzania Limited, which took effect on August 1, 2024, following a notice to shareholders dated July 31, 2024. Kibe claims that this transaction, among others, lacked adequate disclosure and transparency, prompting him to request the CMA to provide copies of transactional documents regarding the sale and any takeover approvals. He argues that the lack of communication and involvement of shareholders in these major decisions undermines their rights and the overall integrity of the firm’s management.

The CMA has yet to respond to Kibe’s allegations, but his call for action highlights significant governance issues that could impact the company’s reputation and investor confidence. The concerns raised also reflect a broader issue within corporate governance in Kenya, where minority shareholders often feel sidelined in decision-making processes, especially in cases involving the sale of key assets or restructuring initiatives.

The gravity of the situation was underscored last month when the High Court in Nairobi issued orders stopping Old Mutual from selling further assets following a case filed by Kibe. This legal move indicates the seriousness of the dispute and the potential implications for Old Mutual if the CMA’s investigations validate Kibe’s claims.

Financially, Old Mutual has shown resilience, reversing a Ksh 195 million loss recorded in the half-year period to June last year, to post a Ksh 327 million net profit this year. However, Kibe’s allegations could cast a shadow over this financial recovery, especially if the CMA finds evidence of mismanagement or regulatory breaches.

Kibe’s demands are clear: he wants the CMA to halt any further dilution of shares through the issuance of preference shares without proper consultation and approval from all shareholders. He also seeks to prevent further sales of the company’s assets until a thorough investigation is conducted.

For Old Mutual, this scenario represents a critical test of its governance practices and its commitment to transparency and fairness to all shareholders. The outcome of the CMA’s response and any subsequent investigations will be closely watched by investors and stakeholders alike, as it could set a precedent for how similar cases are handled in the future. The case underscores the importance of adhering to regulatory standards and maintaining open communication with shareholders to uphold investor trust and safeguard the company’s long-term interests.

As the situation unfolds, it will be essential for Old Mutual to address these concerns promptly and transparently to avoid further legal and reputational ramifications.