Kenya: Francis Thuo to Negotiate for Stake At the NSE After Termination of Case

Francis Thuo and Partners will negotiate for recognition as shareholder of the Nairobi Securities Exchange (NSE) following a High Court ruling that advised directors of the failed stockbroker to settle an ownership dispute with the bourse out of court.

High Court judge Lady Justice Cecilia Githua on Friday terminated a case in which owners of stockbrokerage firm Francis Thuo and Partners, which collapsed in early 2007, wanted the High Court to compel the NSE to recognise them as shareholders of the exchange prior to completion of the impending capital restructuring of the exchange.

In her ruling, Lady Justice Githua said the NSE is a limited liability company and is “therefore not amenable to a judicial review,” effectively bringing to an end a five-month lawsuit and paving way for the restructuring of ownership and management (demutualisation) of the bourse.

Mike Rubia, a spokesman for the Rubia family which had a stake in Francis Thuo and Partners, said that the ruling had given the collapsed stockbroker and the NSE space to resolve the issue as an internal problem between shareholders.

“What they are saying is that this is a matter between shareholders and so it is an internal problem. We are inferring that this means we are still shareholders.

If they come back and say that we are not we plan to go back to court, but we should be able to resolve the matter,” he said.

Last year the NSE allocated to other stockbrokers which have been under statutory management – Nyaga Stockbrokers and Discount Securities – stakes in the demutualised exchange, but left out Francis Thuo and Partners which collapsed in 2007 with more than Sh200 million of investor funds. The firm, which is claiming a similar allocation of shares from the Nairobi bourse, went to court in September stopping the demutualisation process from continuing until the case was heard and determined.

“Our argument was that this is not a matter for a judicial review and this is what the court has said but as we have said, we will try to work out a solution with Francis Thuo and Partners,” said Peter Mwangi, chief executive officer of the NSE.

Mr Mwangi said that the demutualization process should be over in the next three months after which the company is planning to list its shares at the bourse. Last year, the bourse changed its name from the Nairobi Stock Exchange, re-registered under the new name and converted from a company limited by guarantee to a company limited by shares.

However in September, a meeting that had been called between stockbrokers and the Capital Markets Authority to iron out any pending issues regarding the demutualisation process was cancelled under the shadow of the court case.

The NSE board also cancelled a meeting scheduled for September 29 that could have seen the demutualisation process come to an end and the listing process begin.