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Kenya: Court Order Adds Fresh Twist to Portland Row

Business Daily (Nairobi)

Moses Michira

9 January 2012

State lawyers are on Tuesday expected to seek a reversal of a court order seeming to reinstate four suspended East African Portland Cement Company (EAPCC) directors.

The four directors on Monday obtained the orders barring the acting Industrialisation minister, Amason Kingi, from interfering in the management of the firm but lawyers representing the ministry vowed to argue for setting aside of the orders.

Commercial Judge Joseph Mutava issued the orders covering up to January 19, pending the hearing of a case in which Portland directors are challenging the suspension of the entire board. The ruling also bars Peter Korir, appointed by Mr Kingi as acting managing director, from assuming office until a ruling on whether the firm is a state corporation or not is made.

But Fredrick Ngatia, the lawyer representing the Industrialisation Ministry, said he would seek a reversal of the orders today when the Commercial Court will continue hearing of the first suit filed by the directors seeking their reinstatement. The four directors are Titus Naikuni, Hamish Keith, chairman Mark ole Karbolo and CEO Kephar Tande.

“We are going to apply for that order to be discharged immediately tomorrow morning,” Mr Ngatia said.

“The EAPCC directors remain suspended. The ex-parte order (based on arguments of one party) only prohibit the minister from interfering with operations of the company but does not reverse the directors’ suspension,” Mr Ngatia insisted, alluding to allegations that the court order had reinstated the directors.

Mr Kingi dissolved the board of EAPCC on December 22, citing mismanagement and dubious procurement deals which he claimed had pushed the cement maker into loss-making.

Drama at the firm started last month after shareholders voted to have its status changed to a private limited company following NSSF’s announcement that it had cut its shareholding by four per cent to 23 per cent.

This meant that the company legally ceased being government controlled because the 50 per cent-plus-one minimum government stake threshold had been breached since Treasury controlled just 25.3 per cent.

Though it has since been determined that the said share transfer did not happen, the legal status of the company has emerged as the centrepieces of the legal battle pitting the government against the board of directors.

Lawyers representing the directors have argued that the ouster of the board could only be possible through an extra-ordinary general meeting of shareholders, not the approach taken by Mr Kingi.

So far, Attorney- General Githu Muigai has advised that EAPCC is not a state corporation because the government does not have direct controlling stake in the cement maker.

The AG’s position contradicts views held by Mr Kingi who maintains that the second largest cement maker is a parastatal, meaning that the executive has control over the internal affairs of the company including the right to hire and fire.

Prof Muigai last week said that the workers’ pension scheme and the Treasury were two different entities, meaning that their combined stake of 52.3 per cent does not qualify EAPCC as a state corporation.

In defence of his actions, Mr Kingi argued that the company was placed under the Ministry of Industrialisation by a presidential circular and hence the State has power to hire and fire the board.

He added that the ousted chairman, Mark ole Karbolo, and the managing director, Kephar Tande, were appointed by the President and the Minister of Industrialisation under the State Corporation Act.

Mr Sean Omondi, a lawyer representing the directors, told a commercial court on Friday that the identity of the firm is hazy but added that various legal provisions do not allow the kind of decision taken by the ministry.

“The company has been operating both as a private company and as a parastatal. The root of our argument is that the orders by the minister and the PS are illegal,” Mr Omondi said.

He said that EAPCC was exempted from provisions of the State Corporations Act through a legal notice in 1997, which was later repealed by another legal notice in 2002.

EAPC shares remain suspended from trading at the Nairobi Securities Exchange since December 27.

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