A commercial court has rejected a request from shareholders of the defunct Fidelity Commercial Bank (FCB) to compel SBM Holdings Limited to deposit Sh2.5 billion as security amid concerns of SBM potentially exiting the Kenyan market.
Shareholders, led by Sultan Khimji, expressed fears that SBM might sell SBM Kenya and leave the Kenyan banking sector, which could negatively impact their ongoing court case.
However, the judge ruled that the shareholders did not provide sufficient evidence to justify the requirement for security. “There is no proof that the defendants are disposing of their assets in Kenya. The plaintiffs’ fears alone are not adequate to warrant the court’s intervention to order security,” the judge stated.
Additionally, the judge denied a request to suspend the case while an appeal filed by SBM Bank Holdings is pending. The bank had sought to halt the case, arguing that it should proceed to arbitration as stipulated by a Share Purchase Agreement (SPA) that requires disputes to be resolved through arbitration if they cannot be settled within 30 days.
Justice Mabeya ruled against suspending the proceedings, noting that such orders should be granted sparingly to avoid delaying justice and affecting the right of parties to a fair hearing. “A stay of proceedings can lead to case backlogs, adversely impacting the right to access to justice,” Justice Mabeya explained.
Fidelity Commercial Bank was reportedly acquired by SBM Holdings for Sh100 in May 2017, with the deal brokered by the Central Bank of Kenya. The bank was renamed SBM Bank, and SBM Holdings is accused of undervaluing Fidelity in the takeover.
Khimji, the largest shareholder, alleges that there were deliberate misrepresentations during the acquisition, resulting in Fidelity being undervalued. The shareholders are seeking Sh2.5 billion in compensation based on the bank’s market value as of December 2016.
