The High Court in Kisumu has halted the planned sale of teachers-owned Spire bank.
Justice F. Ochieng on Monday issued conservatory orders against Mwalimu Sacco and several other parties in the matter from engaging in any steps to wind up the cash strapped lender following a case filed by a Siaya teacher.
Keneth Nyanjom and lawyer Joshua Odhiambo Nyamori, who is suing in public interest, are challenging the legality of the process to wind up the bank.
Justice Ochieng, while holding that substantive steps of any of the parties, prior to the hearing of the parties, may have the effect of rendering the proceedings merely academic, appreciated and acknowledged that there is a need for the parties to continuously engage one another in discussions, meetings and other engagements which are intended to find the most appropriate resolution to matters in issue.
The order will be in force until April 28 when the matter will be mentioned again for further directions.
The judge granted counsel for Spire Bank, Mwalimu Sacco Society, Sacco Societies Regulatory Authority and Central Bank of Kenya — the respondents in the case — seven days to file their submissions upon being served by the petitioners.
Early last month, Mwalimu Sacco CEO Kenneth Odhiambo confirmed that they had reached an agreement with an undisclosed financial institution to buy the bank. He said the Sacco executives were waiting for approval from Sacco Societies Regulatory Authority and the Central Bank of Kenya to close the deal.
He made the declaration days after a delegates’ meeting where the Sacco affirmed its commitment to sell the troubled lender and exit non-core businesses.
However, there are fears that the teachers are being tricked into signing an agreement that could see the country’s largest Sacco lose Sh11 billion in assets.
In court papers, the petitioners argue that Mwalimu Sacco is not concerned about protecting the interests of members.
According to the petitioners, the deal will see teachers not only lose their bank for a song but also force them to pay the mysterious “buyer” a further Sh11 billion.
The Sacco, Otieno details, will be forced to write off Sh9 billion from their assets and re-capitalise the bank to a tune of Sh2 billion before it can be wound up.
The petitioners further allege attempts by the Sacco executives to arm-twist the banks’ leadership with threats of closure unless the directors issue a statutory declaration of solvency, key in closing the deal.
Apparently, the board of the bank has declined to sign liquidation papers due to lack of money to cover all its liabilities.
According to the petitioners, their hope is that when the teachers finally decide to sell their bank, the sale should be conducted in a lawful, open and transparent manner, with full disclosure to the teachers and the public, to enable the teachers make the best bargain from various offers in a free market and to protect the public from a bank run, as happened in 2015 during the takeover of Chase Bank Limited.