Imperial Bank shareholders handed lifeline as court halts liquidation

Imperial Bank owners have received a major let off after the High Court issued orders prohibiting the sale of the bank’s assets.

Justice George Odunga has directed the Central Bank of Kenya (CBK) and the Kenya Deposit Insurance Corporation (KDIC) to ensure all revival plans are considered.

Justice Odunga however stressed that the shareholders recovery plans have to be reasonable and tangible.

Imperial Bank owners have filed their suit back in February, accusing the banking regulator of failing to consider its recovery plan, instead choosing to liquidate the bank.

In his ruling Justice Odunga argued that liquidation, in his view was the absolute measure of last resort and should only be considered if and when parties involved gave exhausted all available options.

The shareholders have repeatedly indicated that they have drawn up a recovery plan which the CBK and KDIC had failed to consider.

Of concern to the regulator, according to the shareholders, was the clause seeking the bringing on board of a strategic partner to inject capital into the bank, as they raised Sh10 billion to aid recovery plans.

KDIC on its part has argued that the corporation is not obligated by the law to consider any of the proposals presented to them.

But in his ruling, Justice Odunga said that the continued disregard of the proposal and recovery was not in the spirit of ensuring all efforts are made to save the bank from winding up.

“The Respondents (CBK and KDIC) are under an obligation to consider any reasonable and viable proposals or recovery plans put forward by the applicants towards the revival of the normal business of the bank,” Justice Odunga ruled.

Imperial Bank shareholders have been engaged in a vicious legal battle with KDIC and the Central Bank often citing exclusion from the potential recovery of the bank.

Things came to a boil in late September when KDIC moved to court seeking to recover Sh45 billion from the shareholders as part of the recovery process.

Imperial Bank was placed under receivership on October 13, 2015 after the discovery of a decade long Sh38 billion fraud scheme at the bank.

Former Group Managing Director Abdulamek Janmohammed is considered the grand architect of the fraud, but the CBK has indicated that the board and shareholders failed in their fiduciary responsibility to protect depositors’ funds.

The fresh orders give the shareholders a lifeline in trying to salvage the bank.

The CBK and KDIC have further been directed to furnish the shareholders with information with regards to the bank so long as the information does not jeopardize ongoing investigations.

The shareholders have been particularly pushing for findings of the FTI Consulting forensic audit findings which they argue was being used to fix them and cover up the fraud at the bank.