Media mogul SK Macharia has suffered a legal setback after the High Court upheld an arbitration decision confirming him as a minority shareholder at Directline Assurance Company.
Mr Macharia had been embroiled in a protracted dispute over the company’s shareholding, with rivals accusing him of unlawfully taking control while the matter was pending in court.
The dispute was later referred to arbitration, and in January 2022, the arbitrator ruled that Macharia’s rivals were the majority shareholders, holding 90.336 percent of the company’s shares, while the Royal Media Services owner held 9.66 percent.
The arbitrator also found that Mr Macharia and his group had unlawfully occupied the company’s offices at Hazina Towers and denied access to other shareholders.
While Mr Macharia sought to quash the award, his rivals petitioned the court to recognise and enforce it.
“Given the said circumstances, this Court is satisfied that the Arbitral Tribunal was properly constituted, and its assumption of jurisdiction cannot be impeached at this stage outside the statutory framework,” the court said.
The court added that Mr Macharia was attempting to re-litigate issues already decided by the arbitration tribunal.
“This court cannot therefore entertain claims of factual or legal error by the Arbitrator or interfere with such findings,” said the court.
Mr Macharia signalled his intention of appealing the decision.
Directline Assurance, established in 1998, initially had its shareholding split among AKM Investments Ltd (48 percent), Janus Ltd (32percent), and Royal Media Services Ltd (20 percent).
Mr Macharia argued that the company’s Articles of Association included a pre-emption clause requiring existing shareholders to be given priority before any transfer of shares to outsiders.
He claimed that from 2007, his late son John Gichia Macharia and Janice Theresa Wanjiku Kiarie excluded him from management and falsely asserted that their shares were held in trust for him.
A 2005 shareholder register showed Royal Credit Ltd with 997 shares (0.01 percent), Mr Macharia, Purity Macharia, and Dan Karobia with one share each, AKM Investments Ltd holding 4,978,108 shares (40.6 percent), Janus Ltd 2,318,738 (20 percent), Royal Media Services Ltd 1,448,212 (11.83 percent), and Triple A Capital Ltd 3,500,000 (28.58 percent).
A more recent register dated February 12, 2023, indicated AKM Investments had a 10.36 percent ownership, SK Macharia at 0.0000000067 percent, Royal Media Services at 9.7 percent, and other holdings distributed among Stenny Investments, Triad Networks, Sureinvest Ltd, Janus Ltd, and others.
Mr Macharia also challenged the arbitrator’s impartiality, arguing he was biased, redefined parties and issues improperly, and denied him a fair hearing. He said he participated under protest.
The court, however, observed that he submitted written evidence and participated in procedural directions issued to all parties.
Other shareholders defended the arbitration process, saying it complied with Section 19 of the Arbitration Act.
They also accused Mr Macharia of resisting the handover of company premises, issuing threats, and mismanaging the company, exposing it to execution proceedings totalling about Sh1 billion.
The court found the allegations of bias unsubstantiated and upheld the arbitration award. “In the premise, this Court is satisfied that the impugned Partial Arbitral Award is valid and enforceable pursuant to the provisions of Section 36 of the Arbitration Act and to the extent of the Correcting Memorandum dated 8th June 2022,” the court said, allowing the majority shareholders to enforce the decision.
