Court ruling casts cloud over National Bank of Kenya board membership

A judgement by the late High Court judge Joseph Onguto has left the future of National Bank of Kenya’s (NBK) board hanging in the balance, opening a loophole for possible litigation on its legality.

Justice Onguto, in the judgement delivered on the last day of February before he collapsed and died on March 2, found that National Social Security Fund (NSSF) did not have a board at the time it elected two members to serve in the NBK board.

He said Joseph Keri and Linet Mirehane had been seconded by NSSF without following due process - but he at the same time declined to declare the NBK board improperly constituted.

The Kenya Council of Employment and Migration Agencies, together with one Evans Nyambega, had moved to the High Court arguing that the NSSF Board of Trustees was not duly constituted at the time it nominated Mr Keri and Ms Mirehane to sit in the NBK board as non-executive directors.

Onguto, who apologised to the parties for the delay in rendering his judgment for a petition filed in August 2015, said it was absurd for employees or managers of NSSF to take orders and directions from themselves and perform duties of the NSSF board.

“It follows that the nominations of persons to the board of directors of NBK could only be done by the NSSF Board of Trustees as duly constituted and not by the fund’s management or any other person for that matter,” he said.

“In doing so, purporting to nominate directors in absence of the board of trustees, the fund certainly transgressed. It usurped the powers of the board contrary to all acceptable principles of governance and contrary to the Act.”

Onguto added that there was no evidence presented before him to prove that urgency and necessity dictated that NSSF acts as it did without waiting to have a board.

The judge’s action seemed to spare NBK the agony of having to start afresh the process of constituting a board at the lender with majority ownership by NSSF and the National Treasury.

He said that he could not declare NBK board as “improperly constituted” since there was no evidence to show that, as currently constituted, the board fell below the threshold prescribed in its guidelines.

“I make no mandatory orders and will leave it to the duly constituted NSSF board to take appropriate corrective measures, if at all,” he said.

Unconstitutional

The petitioners had told the court that the nomination and appointment were illegal and unconstitutional and also argued that it was wrong for NSSF acting managing trustee Anthony Omerikwa to sit on the NBK board.

However, Kimutai, Mirehane and Onerikwa dismissed the claim that their appointment was in violation of the law.

They told the court that the procedures adopted in elections leading to their appointment were well above board and that the petitioners would not suffer any prejudice since NBK is regulated by both Central Bank of Kenya and Capital Markets Authority.

The petitioners had also argued that the appointment of the three violated their various rights and freedoms as well as constitutional obligations.

However, Onguto’s view was that this was “half-heartedly pleaded,” with no detail at all on the nature, manner and extent of violations.