Samuel Kamau Macharia, the owner of Royal Media Services (RMS), has been making headlines for all the wrong reasons over the past few days. The media mogul is at the center of a heated controversy following an announcement on Citizen TV, an RMS-owned station, that he had dissolved Directline Assurance, Kenya’s largest insurer of public service vehicles – a company previously owned by his late son John Macharia.
“The board of Directline has been dissolved and all the assets taken over by Royal Credit Ltd. All employees have been dismissed, and Directline will no longer issue insurance services,” Citizen TV reported.
The sudden move sparked panic and concern among Directline’s policyholders, who stood to lose $15.4 million (KES 2 billion) in unpaid claims. In response, the Insurance Regulatory Authority (IRA) moved to court, blocking the closure of Directline and terming Macharia’s announcement null and void.
Court documents seen by businessempires.africa alleged that Macharia shut down the company to avoid a probe into a $3 million (KES 400 million) transfer to a company listed as Toy and Suna which the businessman purportedly owns.
The regulator claimed that the funds were meant to illegally finance the construction of stalls and low-cost housing at Toy Market, in contravention of existing regulations.
“Section 191(2) of the Act prohibits insurers from engaging in any business other than the business for which they are registered. It is apparent on the face of the record that the subject transaction is not insurance business and is, therefore, a breach of the insurer’s license terms,” IRA said in its application.
The case has ignited speculation and concern as IRA and Mcaharia battle it out while Directline’s employees hang in the balance.
This is not the first time Directline has had run-ins with the IRA or the law. Over the past few years, the company has been embroiled in several legal battles with the regulatory authority.
Where it started
The trouble began after Macharia’s son, John Macharia, died in a tragic road accident in 2018. John was the founder of Directline Assurance, and his death left the company’s ownership in limbo.
About two years after John’s death, a bitter battle between Macharia and the IRA ensued, with the main bone of contention being Directline’s ownership.
In September 2019, Macharia staged what could be termed a “coup” at Directline. In an official letter dated September 3, 2019, Macharia disclosed that he had taken over leadership of the insurance company, acting as a representative of the majority stakeholders.
“I write to you in my capacity as a representative of the majority shareholders, namely Royal Media Services, Royal Credit Limited, S.K Macharia, P.G (Purity Gathoni) Macharia, and the estate of the late Dan Karobia,” Macharia said. “I take over the position of director and chairman. All staff should report to their respective offices and continue with their duties as normal.”
The media magnate suspended Ms Terry Wijenje as managing director, CEO and principal and appointed Isaac Ngaru in an acting capacity.
However, a few days after Macharia’s coup, the IRA hit back, ordering the businessman to keep off the affairs of Directline. The regulator asked all shareholders to cease involvement in the insurer’s operations immediately.
Macharia’s takeover was termed irregular and in contravention of the provisions of the Insurance Act. The regulator maintained its right to approve any person in the positions of CEO, chair, and other directors before they could take up the job.
That was just the beginning of Macharia’s row with the IRA. The IRA and Macharia went to court battling for the insurer’s shares.
The regulator described Macharia as a minority shareholder with a 10% stake through RMS which did not give him the right to stage a coup and declare himself the chairman, ousting the previous management.
However, Macharia vehemently disputed the IRA’s claims as well as their shareholder register, insisting that he and his associates were in fact the majority shareholders. He added that the IRA’s register was a fabrication by the firm’s directors, who he said had no power to allocate shares.
Macharia claimed that he and his family own a 20% stake, AKM investments (48%) and Janus Limited (32%). The tycoon said that this made him the majority shareholder earning him the right to stage the “coup.”
The case has been in court since then and is still being reviewed. The latest development, which saw the regulator contest Macharia’s dissolution of Directline, is part of a row that has been running for years.
