Court dismisses bid to stop sale of Spire Bank

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

The High Court has dismissed a petition seeking to block the winding up of Spire Bank, paving the way for the sale of the troubled lender.

Justice Fred Ochieng recently threw out a petition filed at the High Court in Kisumu seeking to block Mwalimu Sacco from winding up the bank that has failed to find a buyer or a strategic investor to inject in fresh capital.

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

The two petitioners stated that Mwalimu Sacco had not informed its members about the legal processes towards the winding up of Spire Bank or the financial implications of Sh9.1 billion members' funds in form of share capital.

The petition also argues that members were not informed that Mwalimu Sacco would be required by law to inject about Sh2 billion into Spire Bank to pay outstanding liabilities and pave way for its voluntary winding up.

Also in dispute was the conversion of Mwalimu Sacco's Sh3.4 billion share capital following the company's extraordinary general meeting held on 7th December 2021. Following the meeting, 680 million shares valued at Sh5 were created amounting to Sh3.4 billion that was subscribed to by Mwalimu Sacco.

Customer deposits

Data from the Central Bank of Kenya (CBK) indicates that Spire Bank reported Sh3.8 billion in assets and Sh1.7 billion in customer deposits as of December 2021.

The bank also reported Sh1.1 billion in losses, a loan portfolio amounting to Sh3.4 billion out of which Sh2.5 billion were non-performing and 21,927 deposit accounts.

The latest figures also indicate the bank has Sh313 million in outstanding mortgages on just 16 mortgage accounts out of which Sh243 million are non-performing.

According to Spire Bank, the options available for plugging this hole included debt and equity financing, seeking a strategic investor or an additional capital injection from the existing main shareholder.

None of these options has so far borne any fruit. In his judgment, Justice Fred Ochieng stated that the court is not in a position to determine whether or not the equity or the debt financing options were viable and could not impose a time frame on either Mwalimu Sacco or Spire Bank for ensuring appropriate resolutions were passed.

"Just like the members of the Sacco had initially made a decision to invest in the bank without seeking the advice of the CBK, so too if the members decided to divest from the said investment, they need only ensure that they follow the requisite procedures as laid down by statute," said Justice Fred Ochieng in his judgment.

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