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Kenya: Court Halts Stanbic And CFC Bank Merger
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The Nation (Nairobi)
9 May 2008
Posted to the web 9 May 2008
Richard Munguti
Nairobi
THE High Court on Thursday stopped the merger between Stanbic Bank Kenya Limited and the CFC Bank Limited.
Lady Justice Roselyn Nambuye halted the coming together of the two banks pending hearing and determination of a case filed by 15 former employees of SBK seeking over Sh1.1 billion in terminal dues.
Justice Nambuye restrained servants, agents and advocates of SBK from proceeding with the merger with CFC Bank pursuant to the merger agreement or scheme of arrangement dated June 22, 2007.
The judge, further stopped the two institutions from taking any moves to finalise the proposed merger by transferring its banking business, its undertakings or assets, liabilities share or property.
Terminal dues
Former workers of SBK led by Mr Jimmy Kavilu are asking the court to compel SBK to deposit in court Sh1.1 billion as security for their terminal dues if the merger is to proceed.
The court was told that SBK is owned by companies which are not envisaged by Section 13 of the Banking Act and that the merger may result in capital flight.
The company which owns Stanbic Bank, Stanbic Africa Holdings Limited (SAHL), is not licenced or regulated as a financial institution under the Kenyan laws the court was informed.
Lawyer Mathew Oseko, represented the 15 former bank workers.
Bad arrangement
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Mr Oseko said that the proposed merger between CFC and SBK is premised on an irregular arrangement where one partner does not have the legal capacity.
Justice Nambuye was told the complex structure that SBK has designed in its reverse acquisition by CFC Bank Limited, contravenes the ownership restrictions of Section 13(1) (a) to (d) of the Banking Act.
"It is only aimed at camouflaging the true identity of the real owner of SBK. The complex web of ownership structure surrounding the ownership of SBK is designed to defeat the provisions of the Banking Act," Mr Oseko submitted before court. Justice Nambuye fixed the case for hearing on May 21.
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