Business tycoon S.K. Macharia has filed a legal petition to reclaim control over Directline Assurance Company, alleging the company was unlawfully seized through fraudulent means. Through his lawyer, Danstan Omari, Macharia seeks to have himself and his wife officially recognized as the rightful owners of the insurance firm, which he claims was taken from them through the use of a forged CR12 form—a document used to authenticate ownership of a company in Kenya.
The legal dispute, now before the Milimani Law Courts, involves serious allegations of corporate fraud, including the unlawful transfer of shares. According to Omari, an investigation by the Insurance Regulatory Authority (IRA) confirmed that the CR12 form, which shifted the ownership of Directline Assurance to new shareholders, was falsified. Macharia now seeks justice for what he describes as a scheme to defraud him of a company he founded with his wife. The businessman has demanded accountability for over Ksh.8 billion in premiums, which he claims were swindled from policyholders under the pretense of insurance coverage.
Allegations of Fraudulent Takeover
In the petition, Macharia’s legal team asserts that the original shareholders of Directline Assurance were unlawfully replaced through the use of the fraudulent CR12 form. Martina Swiga, another lawyer representing Macharia, stated, “S.K. Macharia is the one who started the company with his wife. But it has come to the attention of the original shareholders that the original CR12 has been altered and shares moved. ILRA has done its investigation and confirmed that the CR12 is forged.”
The case highlights a deeper issue within the insurance sector, as Macharia has warned that 98% of users of public service vehicles (PSVs) may be unknowingly uninsured. Directline Assurance holds a near-monopoly in insuring PSV vehicles in Kenya, handling 98% of all PSV premiums. This places millions of commuters at risk, as they believe they are covered by insurance that may not be valid.
“S.K. Macharia and his legal team have moved with speed to compel the Registrar of Companies to register the rightful owners of Directline Assurance,” Omari said. He emphasized the urgency of the situation, as the public is being misled into thinking they are insured while, in reality, the company is embroiled in a legal battle over its true ownership.
Directline Assurance Halts Insurance Operations
This legal battle escalated shortly after Directline Assurance announced it would cease issuing new insurance policies. On September 10, 2024, the company issued a statement indicating that further transactions would only be conducted through its original shareholders. The statement also discredited a competing CR12 document that purported to have other shareholders in control of the company, labeling it as fake and “obtained through the backdoor.”
The company’s decision to halt insurance operations came as a surprise to many in the industry. Directline Assurance issued a formal notice to the Association of Kenya Insurance Companies (AKI), instructing them to stop issuing insurance certificates or stickers in the company’s name. This cessation of operations has left the future of PSV insurance coverage in uncertainty, with the public questioning the validity of policies already in effect.
Royal Credit’s Response
In response to the Insurance Regulatory Authority’s (IRA) statements, Royal Credit Limited, a firm closely associated with S.K. Macharia, publicly dismissed the claim that Directline Assurance is still operational. In a statement signed by Macharia, Royal Credit confirmed that Directline ceased all insurance operations on September 10, 2024, making it a non-existent entity.
“The IRA cannot purport to regulate a non-existent entity,” the statement read, challenging the authority’s oversight and highlighting the inconsistencies in communication between Directline Assurance and the regulatory body. This development has created confusion among policyholders, insurers, and the general public, particularly regarding the status of existing PSV insurance policies.
Legal Action and the Way Forward
Macharia’s legal action has set the stage for a significant corporate showdown. In addition to seeking recognition as the rightful owner, Macharia is pushing for the prosecution of the fraudulent directors responsible for the alleged takeover. He is also demanding the immediate registration of the true owners to restore confidence in the company and the safety of PSV insurance.
As this case unfolds, the insurance industry in Kenya watches closely, with policyholders hoping for a swift resolution. Should Macharia succeed, it will mark a pivotal moment in Kenya’s business and legal landscape, emphasizing the importance of transparency, integrity, and due process in corporate governance.
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