Court rejects bid to stop sale of Spire Bank

Spire Bank, Chester House branch. Teachers fear the lender will sink with their hard-earned savings. [Wilberforce Okwiri, Standard]

The High Court has dismissed a motion to block the liquidation of Spire Bank, clearing the way for the struggling lender to be sold.

Judge Fred Ochieng recently dismissed a petition filed in the Kisumu High Court to prevent Mwalimu Sacco from liquidating the bank which failed to find a buyer or strategic investor to inject new capital.

The plaintiffs, Kenneth Odhiambo Otieno and Joshua Odhiambo Nyamori were suing in the public interest and on their behalf and brought the Central Bank of Kenya (CBK) and the Sacco Societies Regulatory Authority (Sasra) as interested parties to the suit.

The two petitioners said that Mwalimu Sacco failed to inform his members of the legal proceedings for the winding up of Spire Bank or the financial implications of members’ funds of 9.1 billion shillings in the form of share capital.

The petition also claims that members were not told that Mwalimu Sacco would be required by law to inject around 2 billion shillings into Spire Bank to pay off outstanding debts and pave the way for its voluntary liquidation.

The conversion of Mwalimu Sacco’s share capital of 3.4 billion shillings following the company’s extraordinary general meeting held on December 7, 2021 was also in dispute. Mwalimu Sacco.

Customer deposits

Data from the Central Bank of Kenya (CBK) indicates that Spire Bank reported 3.8 billion shillings in assets and 1.7 billion shillings in customer deposits in December 2021.

The bank also recorded losses of 1.1 billion shillings, a loan book of 3.4 billion shillings, including 2.5 billion non-performing shillings and 21,927 deposit accounts.

The latest figures also indicate that the bank has 313 million shillings in outstanding mortgages on just 16 mortgage accounts, of which 243 million shillings are non-performing.

According to Spire Bank, the options available to fill this hole included debt and equity financing, finding a strategic investor or injecting additional capital from the existing major shareholder.

None of these options have so far borne fruit. In his judgment, Judge Fred Ochieng said the court was unable to determine whether equity or debt financing options were viable and could not impose a time limit on Mwalimu Sacco or Spire Bank to ensuring that the appropriate resolutions were adopted. .

“Just as the members of the Sacco had initially taken the decision to invest in the bank without seeking the opinion of the CBK, even if the members have decided to divest themselves of the said investment, they only have to ensure that they follow the required procedures as provided by law,” Judge Fred Ochieng said in his ruling.

The court also found that the petitioner’s allegations of obstruction, sabotage, coercion and threats were not specific to any particular person and lacked sufficient evidence.

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