25 May 2012

Uganda: Court Okays Sale of National Bank of Commerce Shares

Retired judge Prof. George Kanyeihamba has lost his bid to stop the majority shareholders of the National Bank of Commerce (NBC) from selling shares or carrying out any other transactions.

The Commercial Court noted that the bank has an obligation to recapitalise to ensure steady operations. Rejecting Kanyeihamba's application, Justice Geoffrey Kiryabwire ordered that the bank recapitalises by tomorrow. Kanyeihamba had applied to the court to restrain the majority shareholders from selling shares and carrying out other transactions, pending hearing of the main suit he filed over the bank's ownership.

However, the court also ordered that the bank gets a new board to steer its operations. It was further ordered that a shareholders' meeting be held on June 1, in Kabale. The new board is appointed by the shareholders. "In accordance with the Bank of Uganda statutory provisions, National Bank of Commerce is hereby ordered to appoint a new board," the judge ruled.

The current seven-member board is chaired by Matthew Rukikaire, with businessman Amos Nzeyi as vice-chairperson. In July 2010, Kanyeihamba, together with 320 other minority shareholders, petitioned court over the legality of the bank, claiming that it was wrongfully reconstituted.

Kanyeihamba claims the bank's name was changed from Kigezi Bank of Commerce without his authorisation and that of the 320 other shareholders. The aggrieved accuse majority shareholders, Prime Minister Amama Mbabazi, Information, Communication and Technology minister Ruhakana Rugunda and Nzeyi, of being behind the illegality. Both Kanyeihamba and Nzeyi attended the court proceedings yesterday.

The minority shareholders, who are the plaintiffs, are represented by Godfrey Lule, while the respondents are represented by Dr. Joseph Byamugisha and Fred Muwema. Bank of Uganda was represented by Masembe Kanyerezi.

The NBC bank was founded in 1991 to provide banking services and soft loans to people in Kigezi. According to the bank's share partition, Rugunda, Mbabazi and Nzeyi are the majority shareholders, with 86% shares. Kanyeihamba and the 320 other shareholders, who include former finance minister Ezra Suruma and Rujumbura County MP Jim Muhwezi, own the remaining 14% shares.

The aggrieved further allege that the trio changed shares and share structures of the bank and re-constituted the share structure, saying it was unlawful.

Kanyeihamba also wants court to task the registrar of companies to explain how the purported illegality was carried out without adhering to procedure. The trio are also accused of breaching procedure and disrespecting the minority shareholders when they changed the bank's name without convening a meeting to get their consent.

In October 2009, the Abu Dhabi Group announced they had injected $10m (over sh20b) to capitalise the bank. On March 22, Bank of Uganda, appointed an Adviser to advise NBC on its operations. The Central Bank defended its decision, saying it was intended to protect NBC depositors whose shareholders are in an ownership dispute.

The case was adjourned to July 12.

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