The government will not collect stamp duty from the merger of the National Industrial Credit (NIC) Bank and the Commercial Bank of Africa (CBA), amounting to at least Ksh350 million.
The two banks announced a merger in January, and it emerges that former Treasury Secretary Henry Rotich had exempted the transfer of CBA shares into NIC Bank from paying stamp duty of one percent.
“The Cabinet Secretary for the National Treasury and Planning, on the recommendation of the Cabinet Secretary for Lands and Physical Planning, directs that the instruments executed in respect of the transactions relating to the merger of NIC Group PLC and Commercial Bank of Africa shall be exempt from the provisions of the Act,” said Rotich in a notice.
In the merger, CBA did not declare the value of its shares, which would have attracted an automatic stamp duty of one percent for their transfer. In the merged entity, NIC shareholders will own 47 percent of the merged entity and CBA shareholders 53 percent.
Despite not declaring the value of its shares, it is estimated that CBA shares are worth Ksh35 billion based on the book value of Ksh65 billion when the deal was announced, hence the stamp duty could be at least Ksh350 million.
If CBA had declared the value of its shares, it could have been exempted from the duty, putting to question what criteria Rotich used in exempting the lender from paying the tax.
The merged entity is majority-owned by the Kenyatta family and the Phillip Ndegwa family who own 24.92 percent and 25 percent stakes respectively. Naushad Merali will end up with a 2.9 percent.