The Capital Markets Authority has disqualified seven current and past directors of troubled motor dealer CMC Holdings from sitting in its board or of any other listed company.
Former chairman Peter Muthoka, Charles Njonjo, Jeremiah Kiereini, Richard Kemoli and Andrew Hamilton - who were non-executive directors - and former CEO Martin Forster and finance director Sobakchand Shah have been disqualified under Section 25 of the CMA Act. The regulator has also suspended Joseph Kivai from directorship at CMC Holdings but he will be allowed to sit in any other board if appointed.
CMA chairman Kung'u Gatabaki said: "The action was taken pursuant to findings of the investigations by Webber Wentzel and the CMA team. The actions were delayed due to myriad court cases with regard to the company, particularly the suits by Peter Muthoka and Andy Forwarders Ltd." Muthoka's suits had questioned the powers of CMA to appoint an interim board, while Andy Forwarders filed a contempt application against CMA barring it from interfering with the composition of CMC Holdings board.
The eight were found to have flouted the capital markets legal and regulatory requirements in the matter regarding the motor dealer. "It is in our view that Kivai may have sat in the CMC board innocently but he will be disqualified from sitting in it even though his role may not have been of equal scale to that of the others," said Gatabaki.
An ad hoc committee appointed by the CMA-comprising three independent members and two members of CMA board and chaired by Hon. Justice (Rtd) Aaron Ringera - invited all current and past directors to appear before it but Muthoka, Kemoli, Kivai and Kiereini did not present themselves. Gatabaki said the whole CMC saga is a case history of corporate governance gone sour, where a chief executive became "too big for his own board that his own directors could not question details of what was happening." "Martin Forster realised that directors were not keen and picked out Kiereini with whom he started manipulating various fund channels of the company including operating foreign accounts."
He said CMA was concerned that most of the people who appeared before the regulator's ad hoc committee pleaded ignorance of the requirements of their roles as directors of a listed company. "Ignorance, as is always the case, is no defense. This was also a pointer of the low levels of awareness and embracing of corporate governance by directors of the listed companies," he said.
The CMA has now introduced new long-term reform measures to curb similar crimes. An age limit of 75 years will now be the maximum for a person to serve as a director of a listed company. All directors of listed firms will also be required to prove that they have attended recommended corporate governance training as a prerequisite for nomination and must attend similar training every three years, compliance of which must be stated in the annual report.
Listed firms will also be required to comply with the gender requirements as per the Constitution and the capital markets legal framework. They will also be required to embrace diversity in nomination of directors to their boards.