NAIROBI, Kenya, Jan 17- The Capital Markets Authority has suspended East African Portland Cement Company (EAPCC) shares from trading at the Nairobi Securities Exchange (NSE) for 60 days.
The suspension follows an interim halt on trading that was imposed by the NSE on December 27, last year and is designed to give EAPCC time to address all the outstanding corporate governance issues and boardroom wrangles facing the firm.
While delivering the directive, CMA chairman Kung’u Gatabaki said their decision was informed by the protracted disputes that are now being played out in court but which do not augur well for the capital markets.
“We thought that the issues would be resolved within a short period but the prolonged dispute about the structure of the board; about the shareholder interests; about the employees… we have stepped in now to suspend the trading of the shares,” he said adding that the action would protect the shareholders interests, particularly those with a minority stake.
The cement firm has been in the news since December 22 last year when accusations and counter accusations stemming from the suspension of the board by acting Industrialisation Minister Amason Kingi were played out in public.
The board challenged the decision to fire them in court saying the minister, under whose docket the company falls, had no authority to hire or fire directors.
Since then, it is now emerging that the action to suspend the directors was done without the knowledge of the regulator which has a say in the running of the cement manufacturer because it is a listed company.
This action has incensed CMA which has reprimanded the minister and the main shareholders for interfering with the board’s affairs consequently prolonging the dispute.
“The appointment and removal of the board of directors of a listed company must be done in accordance with the Companies Act and the Capital Markets Act at all times to ensure the interests of all the shareholders of the listed company are adequately protected,” he stressed.
During a media briefing, Gatabaki disclosed that the authority would summon all the main shareholders for a meeting to resolve the contentious issues that largely revolve around ownership and control of the multi-billion shilling firm.
The government holds a 25.3 percent stake, the National Social Security Funds (NSSF) 27 percent while French conglomerate, Lafarge’s shareholding is 41.7 percent.
The public holds the remaining six percent through the NSE.
Operations at the Athi River-based firm have been paralysed since Friday last week after EAPCC workers joined the fray and declared that they would not go back to work unless a new board is constituted.
Since then, both the staff and the board have been unable to access the premises where about 100 riot police have been deployed to keep watch.
The downside, according to MD Kephar Tande, is that the company is currently incurring losses amounting to Sh50 million per day and no party is willing to take responsibility for this.
Although it would like to see a quick resolution of this matter, the CMA acknowledged that its efforts to restore order and have the issues addressed was being hampered by the court cases.
Gatabaki however emphasised that the authority would not hesitate to extend the suspension if the disputes continue.
The suspension means EAPCC becomes the second listed company in three months to have its shares banned from trading on the bourse. This has shone the spotlight on the role of the regulator in safeguarding the interests of the shareholders.
But while vigorously defending CMA over accusations of ‘sleeping on the job’, Gatabaki stated that they would put their foot down and ensure that listed firms play by the set rules.
He revealed that they were seeking additional powers that would enable them for instance to prosecute directors of listed companies who do not adhere to the regulations.
Further, they are seeking changes in the structure and composition of these boards to ensure compliance. If implemented, such changes would see two or three independent directors appointed to boards of quoted firms to oversee the running of their companies in a prudent manner.