Directline Assurance Company has told Treasury Cabinet Secretary John Mbadi that Royal Credit did not and has never transferred its shareholding to anybody, including all those persons and companies shown in the current CR12.

According to the company, several investigations have been conducted by various agencies, and they have all concluded that the purported changes in shareholding and directorships were null and void ab initio.

The company came out to set the record straight while disputing what has been put on Hansard after CS Mbadi appeared in Parliament for the hearing of the Directline Assurance proceedings.

According to Directline, Royal Credit Limited paid in cash share capital of Ksh.100 million, or 5,000,000 shares of Ksh.20/- par value, in the year 2000, and in 2005 capitalized shareholder loans of Ksh.148 million, or 7,250,000 shares.

Directline has further clarified to the CS that several investigations have been conducted, and all have concluded that the purported changes in shareholding and directorships were null and void and in violation of Section 166(1A) of the Insurance Act.

In the statement, Directline says the CS is well advised to acquaint himself with a multi-agency investigation report (that brought together DCI, AG, IRA, ODPP, and OP) that reviewed the investigations done by DCI, as it lays bare the fraud surrounding Directline's shareholding.

On the breach of the Insurance Act Cap 487, Directline says since 2005, and with changes made in January 2012 when capping was introduced for ownership of insurance companies, former directors breached Section 166(1A) and Section 23 by transferring Triple A Capital first to Directline, then to themselves, and creating trusts to companies owned by themselves.

They further allotted Ksh.100 million, or 5,000,000 shares originally put by Royal Credit, to AKM, Janus, and Royal Media Services without written authority from IRA. IRA has declared the said transfers null and void ab initio. It is noteworthy that no money was paid for these shares by the purported allottees.

On litigation, CS John Mbadi referred to various cases on ownership. Directline now says the CS is the enforcer of the Insurance Act, which is very clear on violations and their consequences. He holds records that show who became a shareholder, when, and how. If in doubt, he can also invite each party to prove how and when they paid for their shareholding.

Directline Assurance adds that the shareholder disputes litigated over the past six years, and the open bias displayed by the regulator, have made it very difficult for Directline to operate.

Directline now wants CS Mbadi, who is responsible for implementing the Insurance Act, to decide how to deal with those who have ignored and continue to violate the Act. Directline should not be issuing any policy without first and foremost correcting the current fraudulent CR12.

Directline also wishes to clarify the Ksh.400 million which the CS said had been removed from Directline by Dr. S. K. Macharia. Two years before John Macharia died, Directline had participated in an international tender to undertake the development of market stalls and low-cost housing at Toy Market.

Agreements had been entered with the County Government of Nairobi, power of attorney vested in the late John Macharia, and a full project team constituted. After John died, Dr. S. K. Macharia came in to complete the project and entered into a joint venture agreement with the County Government of Nairobi.

The Ksh.400 million was transferred to offset initial project costs and secure funding from a local bank. Failure to perform the project will incur heavy penalties. Instead of the CS Treasury concentrating on legitimate business transactions, he is advised to assist Directline recover billions of shillings taken by former directors.

It is noteworthy that insurance companies, just like banks, are regulated entities. In case Directline continues issuing policies and collecting money from the public while continuing to violate Section 166(1A), Section 71, and Section 23, it is effectively cheating the public. The CS Treasury carries ultimate responsibility for not taking corrective action. That’s what Directline is doing.

It is not for the courts to resolve matters that squarely belong to the CS Treasury.