Resolution Insurance shareholders are locked in a bitter court fight over Ksh692 million that the founder, Mr Peter Nduati, says was not paid upon acquisition.
Nduati accuses Linkham Services Ltd, the majority shareholder, of breaching a share purchase deal blamed for the collapse of the insurer.
UK-based Linkham Services acquired 55 percent stake in Resolution in 2020 for $6million (Ksh691 million) and court documents show it paid half of the purchase price with the promise of injecting the remaining share by January last year.
The suit was filed in March 22, just two weeks before the Insurance Regulatory Authority (IRA) placed Resolution under statutory management on failed rescue efforts.
Also roped in the tussle include directors of UK firm Michael Cranfield and Dominic Persad, who now want the dispute referred for arbitration.
“Pine Creek and Peter Nduati pray for orders and judgment against Linkham Services Ltd, Michael Cranfield and Dominic Persad. An order of specific performance compelling the defendants to meet the terms of the share purchase agreement dated the 18th day of September 2020,” the suit papers say.
Resolution was placed under statutory management over Ksh6.5 billion in client cash, insurance claims, and creditor funds after its shareholders failed to recapitalise the business.
Mr Nduati claimed the company was supposed to inject $6 million (Ksh692.8 million) into the business after purchasing 55 percent stake from LeapFrog, which got the shares in 2014 after buying the majority ownership for KshSh1.7 billion.
This suggests the Ksh692.8 million was an additional cash injection into the business after Linkham Services paid LeapFrog undisclosed amount for the stake.
Mr Cranfield tabled in court a sale agreement of September 18, 2020, that shows shareholder and board differences must be settled through negotiations and referred to arbitration after 28 days if the talks collapse.
“The parties herein have irrevocably and unconditionally agreed, pursuant to clause 15 of the share purchase agreement dated 18th May, 2020, to have any dispute arising out of or in connection with the said agreement, resolved through amicable negotiations and failing settlement, through arbitration to be conducted in Nairobi pursuant to the rules of the London Court of International Arbitration,” Mr Cranfield said in court documents.
On completion of Linkham Services deal, the ownership of the group would have been spread to his group, Pine Creek ltd, (20 percent), five percent to the management of Resolution and 15 percent stake to John Mwangi, the founding CEO of Equity Bank.
The remaining 55 percent was left in the hands of Linkham Services.