Imperial Bank shareholders block NIC’s takeover bid

The NIC Bank deal is backed by Kenya Deposit Insurance Corporation (KDIC) who have been the receiver managers of Imperial Bank since October 13, 2015 when the lender collapsed.  

By DAVID HERBLING, hdavid@ke.nationmedia.com

In Summary

• The High Court has temporarily stopped the CBK and the deposit protection fund from moving on with the deal.
• Imperial Bank directors had rushed to court arguing that allowing NIC Bank to take over a portion of Imperial Bank’s loan book and deposits amounted to liquidating the bank despite an earlier order stopping it.

The Central Bank of Kenya’s (CBK) bid to set in motion the process of transferring troubled Imperial Bank’s assets and liabilities to NIC Bank Wednesday suffered a major setback after the collapsed lender’s owners got a court order stopping the regulator’s actions.

High Court judge George Odunga issued temporary orders stopping the CBK and the deposit protection fund from moving on with the deal that Governor Patrick Njoroge announced on Tuesday.

“Pending hearing and determination … conservatory orders do issue barring the respondents (CBK and KDIC) from transferring, assigning, disposing of, dissipating or alienating any of the assets of Imperial Bank,” the judge ordered.

Imperial Bank directors had rushed to court arguing that allowing NIC Bank to take over a portion of Imperial Bank’s loan book and deposits amounted to liquidating the bank despite an earlier order stopping it.

The NIC Bank deal is backed by Kenya Deposit Insurance Corporation (KDIC) who have been the receiver managers of Imperial Bank since October 13, 2015 when the lender collapsed. The matter was fixed for hearing on Friday.

The court also ordered the CBK and KDIC not to implement the joint agreement announced on Tuesday – effectively stopping NIC Bank from making payments to depositors, taking over Imperial Bank branches and staff as stated in the deal with the CBK.

Imperial Bank owners told the court that transferring assets and liabilities to NIC Bank amounted to winding up the lender and would nullify an ongoing court case where they are seeking to stop any actions that may lead to liquidation of the bank.

“This act by the respondents (CBK and KDIC) is an enhancement of the exclusion and transfer process commenced by them, which process ultimately culminates in the liquidation of the bank,” the directors said in an affidavit filed in court.

READ: Imperial Bank owners lose out as NIC prepares to acquire assets

The list of shareholders who are battling the CBK in court includes Imperial bank chairman Alnashir Popat, who controls a 14 per cent stake in the lender through Imaran Ltd, Hanif Mohamed Amirali Somji (10 per cent ), Jinit Shah (12.5 per cent), and Anwar Hajee (14 per cent).

Judge Odunga’s orders nips in the bud NIC Bank’s plans to conduct a due diligence and acquire Imperial’s ‘good bank’, which they planned to separate from the ‘bad bank’.

NIC Bank was to resume disbursements to distraught depositors capped at Sh1.5 million each, subject to the High Court lifting a freeze on payments.

A High Court ruling on the freezing of payments to Imperial Bank depositors is expected on July 4.

Acting KDIC boss Mohamud Ahmed Mohamud, who is Imperial Bank’s receiver manager, responded to the latest suit, saying the bank’s directors were aware of the grand heist at the bank but did nothing to address the situation.

Mr Mohamud says in an affidavit that emails retrieved by FTI Consulting - the American firm carrying out a forensic audit at Imperial Bank - show that the bank’s directors were aware of a whistleblower’s letters which lifted the lid on happenings at the distressed lender but chose not to act.