Mwalimu Sacco could take a hit of 11.1 billion shillings in the liquidation of Spire Bank, according to a High Court petition to stop the process.
A complaint filed by Mr. Keneth Otieno, a Siaya County teacher and Sacco member, says the co-op failed to disclose all of the immediate financial implications of Spire Bank’s exit.
The petitioner accuses Sacco of relying on “material non-disclosure” to convince its delegates and members to pass the resolution to voluntarily liquidate the loss-making bank.
He wants the Kisumu High Court to halt the process, potentially offering a lifeline to Spire’s existence but a blow to the Sacco, which wanted to exit the lender by the end of March.
According to the lawsuit, Mwalimu Sacco failed to inform members that he would be legally obliged to inject around 2 billion shillings to make Spire Bank solvent before going through the process of voluntary liquidation as required by the 2015 Banking Act. ‘insolvency.
Mr Otieno alleges that the liquidation would result in Sacco absorbing a loss of 9.1 billion shillings as authorized and issued share capital of shareholders.
“The decision of Defendant 1 (Mwalimu Sacco) to voluntarily liquidate No 2 (Spire) by March 31, 2022 is reckless and premature in addition to being unlawful, and furthermore, the financial ramifications thereof n ‘have not been sufficiently taken into account by defendant 1. to the detriment and prejudice of its members,’ the lawsuit states.
The authorized and issued share capital of Mwalimu in Speyer stood at 5.77 billion shillings in September 2021, but rose to 9.1 billion shillings after converting deposits of 3.4 billion shillings into share capital. “(Mwalimu) will ultimately be forced to take a huge hit to his finances once these losses are recognised, creating further losses for his members,” Mr Otieno said.
The lawsuit was filed on March 17 and the court ordered the respondents, Mwalimu Sacco and Spire, and interested parties Central Bank of Kenya and Sacco Societies Regulatory Authority to file responses within seven days of an April 11 mention.