By NLM Writer
The year was 2005. As one of Equity Bank’s major shareholders, Africap Fund, was leaving, a decision was made that instead of floating the shares at the Nairobi Securities Exchange, employees would be given the chance to own a part of one of the most profitable banks in the country.
“I am pleased to inform you that we successfully concluded the purchase of shares from Africap Fund at the modest price of Sh136 per share. The total purchase price was paid to Africap Fund who have transferred the shares to the trust. Equity Bank Employee Share Ownership Plan (EOP) was successfully registered as a trust,” Equity Group CEO James Mwangi told staffers in a communication of December 22, 2005.
Through EOP, staffers were going to own 5.52 percent of the total shareholding. The trustees of the EOP were to be Mwangi, the bank’s heads of Credit, IT and Operations and the Company Secretary.
It was not just the chance of owning a part of one of the biggest retail banks in Kenya and the region that could have been enticing to the staff. To encourage staff to invest their money into the scheme, a plan was mooted where for every share bought one would get a bonus of five, later reduced to a bonus of two after the 2006 annual general meeting. Then in 2009, there was a share split at a rate of one share for 10, meaning that a person who held 10 shares before the split ended up with 100 afterwards.
In total, some 353 employees signed up to the scheme. But the noble plan to give staff a piece of Equity has turned into misery for hundreds of staff especially those who have left the service but who have spent years and resources battling against the might of the blue-chip company to have their rightful dues paid.
Claims of abuse and commission of economic crimes have been levelled against Mwangi and the trustees. Four cases brought against the trustees have been concluded, all of which the bank has lost.
Also, there have been claims of some people attempting or actually succeeding at compromising some staff in the Judiciary to make sure files disappear, or to have proceedings inordinately delayed.
Under such scheme regulations, such shares are non-transferable and staff who bought them are required to surrender them as soon the exit employment, at prevailing market rates.
The ex-employees who bought the shares accuse the bank of refusing to pay them back at prevailing market rates.
It means that Equity could be withholding money in the region of Sh3 billion in the form of accumulated dividends, accrued interest and the difference between the prevailing market rates and the value the shares were when they bought them.
In a letter to the Ethics and Anti-Corruption Commission (EACC) dated September 6, 2018, some 53 former employees say that the trust deed required the trustees to “compute and pay their redemption proceeds within 30 days” of staff exiting the service.
Section 5(1) of the Trust Deed reads, “Unless otherwise agreed by the Trustees with the consent of the Company, a unitholder who, in accordance with the ESOP Rules, ceases to be employed by the Group shall, upon such cessation, be deemed to have applied for redemption of the units registered in his name on the register, whereupon the trustee shall within 30 days pay the balance standing to the credit of the Unitholder’s account to the unitholder.”
In the alternative, the Trust Deed provides that in order to implement redemption, the trustees may, at the request of the unitholder, transfer the shares corresponding to the units redeemed to the unitholder.
“This has not happened to date. For those who left the bank in 2005, it is a whole 13 years and for those who left in 2009, it is nine years. The trustees have been evasive and unable to justify their inordinate delay in releasing the units to the rightful owners,” the letter to outgoing EACC CEO Halakhe Waqo reads in part.
In the petition to EACC, the ex-employees say that Equity Bank has continued to declare and pay dividends since 2005 yet the trustees “have deliberately failed to transmit the same to the said beneficiaries.”
The 53 ex-employees who signed the letter claim to hold 14.5 million shares which at the current market value of Sh50 a share translates to Sh725 million while accrued dividends not paid stand at Sh200 million.
Though the ex-staff have filed four cases and won all of them against the trustees and the bank, they allege that Equity Bank, in an effort to implement the court orders has kept on filing numerous applications to frustrate the course of justice.
In one such filing on July 25, 2018, through Ochieng’ Onyango, Kibet & Ohaga Advocates, Equity Bank, Mwangi and two other trustees who have been sued by ex-employees asked the court to strike out the plaintiff’s action.
“The plaintiffs’ suit is time-barred in view of the express provision of Section 20(2) of the Limitation of Actions Act, Chapter 22 of the Laws of the Republic of Kenya,” the say in the notice of motion, adding that the ex-employees demand to be paid what is due to them is an abuse of court process.
Equity Bank and Mwangi did not respond to inquiries by The Nairobi Law Monthly on two occasions, despite having had more than a month between when the inquiries were sent and the publication date. In the meantime, three ex-employees, two on their own and Muriithi Imanyara suing as the legal representative of the estate of Winnie Kathurima Imanyara, have notified the court of their intention to oppose the bank’s application.
Through Kipkenda & Company Advocates, the ex-employees say the bank’s attempt to apply Section 20(2) of the Limitation of Actions Act to deny the ex-employees their rightful benefits is “incompetent, frivolous, vexatious and an abuse of the court process.”
“The Trust has not been revoked and the bank is still trading on the plaintiffs’ shares to date,” the plaintiffs through their lawyer state. The application is ill-advised and made in bad faith solely to delay the process and to frustrate the plaintiffs. The Trustees had an obligation to ensure that the unitholders redeemed their shares in accordance with the Capital Markets Authority Act and the Trust Deed of August 25, 2005,” the plaintiffs argue.
The ex-employees have approached all the relevant regulatory and investigative agencies to get justice but according to them, there is always a roadblock so that their complaints are not acted upon.
Other than the EACC, the employees on August 15, 2018 also wrote to the Capital Markets Authority (CMA), with Imanyara as the legal representative for her deceased mother, Winnie Kathurima, asking the Authority to “investigate this matter and confirm that there was impropriety on the part of the Trustees and order immediate sale of 3.9 million shares at the latest price prevailing at NSE.”
Imanyara also wanted CMA to order Equity Bank to pay the late Ms Kathurima’s family some Sh50.1 million in accrued dividends.
The ex-employees have also written to Chief Justice David Maraga.(