It is a blow for Royal Media Services chairman S.K Macharia and five others after the court barred them from accessing Directline Assurance Limited offices.
Justice Alexander Muteti issued the orders pending the hearing and determination of a case filed by insurer against Macharia and other board member.
“Pending the hearing and determination of the suit herein, a temporary injunction be issued restraining the 1st to 6th Defendants/Respondents whether by themselves, their servants, agents or any of them from physically accessing the applicant’s offices at Hazina Towers or elsewhere and/or any other premises or property of the applicant,” Justice Muteti ruled.
The court also restrained the defendants, their servants or agents from purporting to act for or on behalf of Directline in any capacity whatsoever.
In addition, a temporary injunction has been issued restraining the 1 to 6th and 12 Defendants from purporting to terminate or hire any new employees or in any other manner whatsoever interfering with the contracts of employment of Directline employees and from issuing any orders, directives or instructions to or regarding any independent contractor working for or with the insurer.
The 1st to 6th and 12 defendants are Samuel Kamau Macharia, Bashir Mburu, Julius Orenge, Kelvin Mogeni, Salome Gitoho, Toy and Suna Holdings Limited and Atanas Maina.
The court further restrained the respondents from interfering in any manner whatsoever with Sh 400 million held at Diamond Trust Bank (DTB) unless so authorized by the majority shareholders of the company and/or its Board of Directors (as duly appointed/elected by the Plaintiff/Applicant’s majority shareholders).
According to the application, Macharia who is fighting to take control of Directline Insurance had transferred Sh 400 million to DTB.
Justice Alfred Mabeya ruled that not only has Directline Insurance established a prima facie case, but has demonstrated that unless the actions of the directors are reversed and they are restrained as sought, Directline Insurance will suffer irreparable loss and damage.
The judge also ordered a temporary joint board to be constituted by by AKM Investments Limited, Janus Limited and Royal Media Services and directed bank signatories to be appointed by the interim board.
The court believes it is essential to establish a caretaker board of directors to ensure that the company’s operations continue smoothly and that it can meet its obligations. Given that a consent had been entered by the parties, the composition of the board should align with the terms thereof.
In addition, the judge allowed the audit of Directline Insurance books of account and report compiled by the interim board is to be undertaken within 90 days.
Justice Mabeya said that the court recognizes the significance of the insurance business and its crucial role in providing financial protection and security to individuals and entities.
He added that an insurance company is a regulated entity. “This means that it operates under strict compliance with the law. Given the margin of risk involved in its operations, it must adhere to regulatory standards that ensure financial stability and protect policyholders. That cannot be said of Directline Insurance due to the unending and ongoing wrangles.
The court noted that there is an ongoing dispute regarding the company’s shareholding that is currently pending resolution.
“The arbitration award is also before the court and is yet to be either recognized and adopted or set aside,” Justice Mabeya added.
However, the judge added that the company must continue as a business.
He added that the allegations levelled against the directors S.K Macharia, Bashir Mburu, Kelvin Mogeni and Salome Gitoho are serious and may have an irreversible impact on the company by the time there is a resolution.
According to the judge, this is the best example of how not to manage or govern a company.
“It is poor corporate governance. The company’s management is currently non- functional. This negatively impacts policyholders who require their claims to be addressed. If this situation persists, the company risks financial distress,” the judge noted.
In the court documents, it is alleged that funds belonging to the company have been privatized by Macharia by using Sh 500 million as security for personal securities advanced to him or companies associated with him.
The judge said that the aforesaid actions complained of are not only unfortunate and go against the known principles of prudent corporate governance, but are a recipe for chaos or collapse of the company.
Other defendants in the case are DTB, Equity Bank Kenya, Family Bank Ltd, I&M Bank Ltd and the Insurance Regulatory Authority.