Fight over SportPesa rages as court nullifies directors’ ouster meeting

The fight for control of betting firm SportPesa is far from over after the High Court blocked resolutions passed last year kicking out two directors from the company including businessman Paul Ndung’u.

Justice Alfred Mabeya put on hold plans to adopt resolutions kicking out Mr Ndung’u and Ms Asenath Wachera Maina as directors and shareholders of the popular betting brand, pending determination of a petition in court.

The judge was of the view that it would be a greater inconvenience to Ms Maina and Mr Ndung’u if the injunction sought was not granted. This is because they would lose their shareholding in the company and the rights that come with it.

“On the other hand, if the injunction is granted, the 2nd defendant (Ms Maina) remains a member of the company until the suit is determined but this would not prevent the plaintiff from continuing with its business,” the judge said.

Trouble started on October 8 last year, when a general meeting was held in Dar es Salaam, which was convened under a special resolution to expel errant members.

According to the company, the two were expelled from membership of Pevans East Africa Ltd for various reasons including waning fortunes of the company including its shares.

The court was informed that failure of the company to get its betting licence renewed by the Betting Control and Licensing Board (BCLB) was directly attributable to the action of the duo of making false accusations against the firm.

Further, directors including Ronald Karauri and Robert Macharia sought from the court, orders stopping Mr Ndung’u and Ms Maina from filing any case on behalf of the company, saying they have no authority having been expelled.

SportPesa was launched in Kenya in 2014 by Pevans, a company whose shareholders included Ms Maina with a 21 per cent stake, Mr Ndung’u (17 per cent), Mr Karauri (seven per cent), and Mr Macharia (three per cent) and a group of Bulgarian investors.

It quickly morphed into the most popular brand in the lucrative sports betting industry, drawing annual revenue of Sh150 billion at its peak in 2018 before its licence was withdrawn a year later.

The gaming company’s profits have grown steadily over the years from a low of Sh44.2 million in 2014 to Sh2.8 billion four years later, underscoring the popularity of betting especially among the youth.

Mr Karauri would later emerge with a controlling 54.4 per cent stake in Milestone in the roundabout deals.

A fight ensued among shareholders, a move that saw the duo removed and their stakes diluted.

Attempts to take over the brand by a company known as Milestone Gaming sparked a flurry of cases.

Betting is popular among many young people- who besides seeing it as a game-like thrill, offers them an opportunity to make quick cash.

Mr Macharia told the court that the BCLB did not grant the company a licence to carry on the betting business in 2019, for reasons attributable to the ousted shareholders.

He said before they were expelled, Mr Ndung’u and Ms Maina held 170 and 210 shares, respectively, and were both directors until their alleged resignation on November 14, 2019. 

Read:An angry president and how the SportPesa takeover was plotted

He said the two have no legal capacity either by law or by the Memorandum and Articles of Association of the company to commit, enjoin or enter into any binding contractual agreement with any person or make any representations for or on behalf of Pevans without the express authority of the firm.

Mr Macharia said the pair has filed frivolous and vexatious suits, purportedly on behalf of the company, against the business partners and the regulators.

He maintained that they had been expelled from the membership of the company and, therefore, have no right or locus standi whatsoever to maintain and or continue any suits or institute any proceedings on behalf of the company.

Mr Ndung’u opposed the application stating that the resolution to expel him and Ms Maina from the company was passed in contravention of the provisions of section 257 of the Companies Act, which requires at least 75 per cent shareholding to vote yet only 40 per cent of the shareholding was represented at the meeting.

Further, he argued that the meeting was held in Dar es Salaam whereas the registered office of the company is in Nairobi and no reason was given to justify the hosting of the meeting elsewhere than in the registered office. 

Also Listen: Sportpesa - A gamblers' paradise

Mr Ndung’u added that even though the agenda of the meeting would have been to discuss their conduct, they were not allowed to defend themselves.

He threw back the accusations on the downfall of the company to Mr Macharia and Mr Karauri saying any losses incurred by the SportPesa can be attributed to their decisions.

Ms Maina supported the same saying she raised concerns including a request to have the meeting held in Kenya or to have the meeting on a hybrid basis, incorporating both online and physical one, but the request was ignored.

She added that the resolutions purportedly passed in the meeting were invalid as the notice of the meeting and the resolutions were not given by the Act and the company’s Articles of Association.

In the ruling, Justice Mabeya said a derivative claim is a right that is statutorily established to enable a minority shareholder to bring a suit for the benefit of a company where, due to the nature of the claim, the majority members of the company may not bring such a claim. 

Read: Sh208m SportPesa jackpot winner elected Bomet Speaker

The judge said such a suit is meant to protect the rights of the company.

He said Ms Maina’s right to attend the meeting, even virtually, was denied. “The irresistible conclusion is that the 2nd defendant has established a prima facie case,” the judge said.

Justice Mabeya said although the company submitted that their shares would be sold and the two given a fair value of the proceeds, the duo would suffer irreparable loss if the order is not granted.

[email protected]