The Capital Markets Tribunal has rejected a bid by Kakuzi PLC (Ticker: KUKZ) and its directors to bar the Capital Markets Authority (CMA) from investigating the listed agricultural company’s financial dealings in a case involving directors and a former employee.
The Capital Markets Tribunal chaired by Paul Lilan, rejected Kakuzi’s application and ruled that CMA was acting within its mandate. The officials under probe include 8 directors of the company, one director who is a secondee to the company and a former employee of the company who retired in 2022.In 2021, the directors of Kakuzi were allegedly involved in financial impropriety against the firm, and conflict of interest, that might have cost investors a significant sum.
“The tribunal upholds the position taken by the respondent (CMA) that the inquiry that was instituted against the appellants (Kakuzi and the directors) and the evaluation of the findings on Corporate Governance dated 15th November 2022 were two separate statutory processes with different legal consequences and the latter could not be held to have determined the inquiry that was still ongoing,” the Tribunal ruled.
“In the upshot, this Tribunal finds no merit in the appeal and the same is hereby dismissed with costs to the respondent.”
What CMA is Investigating: Conflict of Interest, Financial Misconduct
In a conflict-of-interest charge, the company officials are suspected of forming companies and approving payments totaling millions of shillings from Kakuzi, withholding their interests in the entities. In the same charge, an official who doubled as a senior executive and a Kakuzi director, had his board services outsourced through a company which he owns.
According to CMA, between 2018 and 2021, Kakuzi made unsupported payments totaling KSh320.9 million for management services support which three officials who double as shareholders of that management support services company allegedly approved, entering into a management support services agreement that had no end date.
One of the officials allegedly received payments amounting to KSh11.5 million between 2018 and 2021 with payments undisclosed to the company’s board.
In 2023, the regulator dispatched cause letters to all board members of Kakuzi and consequently initiated formal charges against the responsible parties in the suspicious dealings.
Kakuzi directors turned to the Capital Markets Tribunal seeking orders to direct CMA to furnish them with documentation and evidence on the allegations relating to the hearing and inquiry.
“Further, the appellants also sought an order to restrain the respondent from litigating the inquiry in the media or disclosing to any third party the particulars of inquiry, the responses to the summons or any unsubstantiated information whatsoever in connection with the inquiry and this appeal,” the Tribunal noted.