, NAIROBI, Kenya, Feb 6 – The Nairobi Securities Exchange (NSE) will now proceed with plans to separate the private ownership of the bourse from the management, after the High Court dismissed a case seeking to stop the process.
Justice Cecilia Githua terminated the judicial review proceedings instituted by stockbroker Francis Thuo and Partners which had moved to court in September 2011 seeking allocation of a stake in the exchange once the demutualisation process was completed.
“She (the judge) held that the Nairobi Securities Exchange is a Limited Liability Company and that therefore the NSE is not amenable to judicial review. This ruling effectively marks the end of the five-month legal process,” said NSE Chief Executive Officer Peter Mwangi while welcoming the ruling.
The NSE had declined to recognise the broker, which collapsed in 2007 with Sh200 million in investor funds as a shareholder but allocated shares to Nyaga Stockbrokers and Discount Securities that are under statutory management.
This effectively means that Francis Thuo and Partners would not get a seat at the bourse and would consequently miss out on one million shares that were given out to each of the 21 brokers before transfer of ownership to the public was effected.
Although the ruling did terminate the case, Judge Githua did not preclude an out of court settlement between the broker and NSE; something that Mwangi was keen on pursuing.
“The NSE remains committed to settling any outstanding issues with Francis Thuo and Partners Limited,” the CEO stated.
The negotiations are likely to revolve around the collapsed broker’s seat which was sold to Russian investment bank Renaissance Capital in 2009 at a cost of Sh251 million despite an assurance by the bourse that the vacant seat would be secured for them. Some Sh150 million was used to compensate the broker’s clients.
The negotiations notwithstanding, the court ruling now paves way for the demutualisation process, which has been in the works for the last seven years and which is expected to instil corporate governance in the bourse.
The bourse has since mid last year been gearing up for the privatisation which at some point will also see its shares listed on the securities exchange.
For instance in August 2011, the bourse changed its name from the Nairobi Stock Exchange to Nairobi Securities Exchange.
On September 21 2011, the NSE converted from a company limited by guarantee to a company limited by shares and adopted new Memorandum and Articles of Association reflecting the change.
Once effected, the demutualisation process will also help unlock shareholder value and broaden the shareholder base at the NSE and it will also be a catalyst to transform the bourse business model to facilitate a more effective response to a competitive environment.