This follows a meeting held on Thursday between the regulator and the directors of CMC over board wrangles that have emerged following proposed changes in the company’s operations.
On Wednesday, CMC Group Chief Executive Officer Bill Lay claimed that two former directors (whom he did not name) had opened ‘illegal’ offshore accounts containing hundreds of millions of shillings in the Island of Jersey, United Kingdom.
Briefing the press after the meeting, CMA Chairman Kung’u Gatabaki said members from the fraud department had already been dispatched to CMC offices to investigate adding that stern action would be taken against offending parties.
“If indeed we suspect that there are instances of fraud, we will not hesitate to even take the directors to court,” Gatabaki said.
Though investigations into the accounts are still ongoing, one of them is said to have over Sh240 million.
CMC’s profitability has been declining over the years forcing a series of changes to the company’s board and management.
Dispute at the board of CMC stems from differences between the directors, representing the interest of major shareholders.
The meeting also comes barely a week after Peter Muthoka was ousted as chairman and subsequently replaced by Joel Kibe sparking off a fresh row.
Muthoka’s removal stems from his involvement as CEO of Andy Forwarders Services, a logistics supplier to CMC that Lay said had overcharged CMC in some instances by as much as 100 times the market rate, making the company uncompetitive in the market.
Gatabaki said that CMA regulations require that the board of a public company be chaired by a non-executive and independent director who is defined, among other criteria, as not having had any business relationship with the company other than service as a director.
“It is the board’s responsibility to balance all those interests and ensure the operations of the company are not governed by the extension of the shareholders but with the infusion of independent directors,” he said adding that had the board been composed of independent directors non of the current issues would have emerged.
Other proposals made by the regulator to CMC were the need to institute strong corporate governance structures as well as appointing independent directors.
CMC is currently implementing a business transformation program, set to take effect on October 1 as it seeks to boost its operational efficiency. Gatabaki said they had endorsed the plan and given the go ahead for it to continue with the process.
Currently ranked the fourth largest automobile dealer in the country, the company is looking to cut down its structural cost by as much as half a billion shillings and grow its market share to 20 percent in the net financial year.