Tribunal resets control of Directline, impacting Kenyan media mogul SK Macharia

Tribunal resets Directline control, impacting SK Macharia and reinstating the insurer’s February 2023 ownership structure.

Tribunal resets control of Directline, impacting Kenyan media mogul SK Macharia
Tribunal resets control of Directline, impacting Kenyan media mogul SK Macharia

A ruling by the Insurance Appeals Tribunal has restored control as well as the ownership structure of Directline Assurance, including stakes held by Kenyan media mogul SK Macharia, thus overturning a regulator directive that sought to nullify earlier shareholding changes and reinstating the company’s structure as of February 2023.

In a letter dated Mar. 5, 2024, the Commissioner of Insurance had declared all share transfers since the company’s founding void arguing that they lacked formal approval from the Insurance Regulatory Authority (IRA) and other shareholders. The directive sought to revert the insurer’s ownership to its 2005 structure.

However, the tribunal found that the commissioner and his predecessors had long been aware of the share changes and had continued to issue licenses to the company. “It is our finding that from the correspondence and reports adduced, the Commissioner of Insurance had knowledge of the share changes — some of which were undertaken following his own circular on increasing paid-up share capital,” said the tribunal chaired by Gichinga Ndirangu.

Inside Directline’s evolving ownership structure

Directline was founded in 1998 with its shares distributed among AKM Investments Ltd (48 percent), Janus Ltd (32 percent), and Royal Media Services Ltd (20 percent). In 2005 records indicated that Royal Credit Ltd, SK Macharia, Purity Macharia, and Dan Karobia held minor stakes, while AKM, Janus, Royal Media Services Ltd and Triple A Capital Ltd owned the majority of shares.

The company registry document dated February 12, 2023, reflected the new ownership distributions: AKM Investment held 10.36 percent, Stenny Investments (in trust for AKM) held 20 percent, Triad Networks Ltd and Sureinvest Ltd each held 20 percent, Janus Ltd held 20 percent, and there were smaller holdings by Macharia, his family, and Royal Media.

The letter from the commissioner, which has now been quashed by the tribunal, instructed that ownership be restored to the structure established in 2005. The tribunal disagreed noting that public officials are bound by lawful decisions made by their predecessors — citing principles of legitimate expectation, institutional continuity and good governance.

Macharia maintained that he co-founded the company with his wife, Royal Credit Ltd, and Karobia, later entrusting its management to his late son, John Gichia Macharia. After his son’s death in 2019, he said he discovered irregularities in Directline’s ownership and accused other directors of fraudulently altering share records.

He argued that the IRA had a duty to correct the situation, saying his rivals had positioned themselves as majority shareholders without paying for their stakes. Moreover, he cited the Insurance Act, which requires written approval from the IRA for any party seeking more than 10 percent ownership in an insurer — a step he claims was never taken.

IRA orders shareholders to fix ownership

In response, the IRA confirmed receiving multiple complaints about alleged shareholding violations. The commissioner launched a review and found that certain changes had been made without the regulator’s approval. The review also highlighted that Triple A Capital had been wound up and that AKM Investments held more than 25 percent of paid-up shares, thus breaching Section 23 of the Act.

The authority’s letter instructed shareholders to regularize the firm’s ownership within 45 days therefore warning that the company could face regulatory action. The IRA later clarified that the letter was not a final determination but rather an administrative step to align records with statutory requirements.

AKM Investments and Janus Ltd countered that the dispute only arose after Macharia sought to reclaim control of the company following his son’s passing. They argued that the regulator had always been informed of share changes and had never raised objections during the transfer process. The shareholders also warned that undoing the transactions would cause major financial losses, given the substantial investments made under legally binding share sale agreements.

High Court bars Macharia interference

Now 83, Macharia is best known as chairman of Royal Media Services and Royal Credit Ltd. He remains a shareholder in Directline, which was formally licensed in 2005 to provide public service vehicle coverage. The insurer, founded by his late son, is one of Kenya’s most recognized motor underwriters, reporting Ksh4.1 billion ($31.7 million) in income in the 2022–23 financial year.

Earlier this year, the High Court barred Macharia from interfering with management. Judges issued injunctions preventing him or associates from signing cheques, issuing instructions, or directing contractors without board approval. Court filings show that on Sept. 22, Macharia forced entry into Directline offices, announcing leadership changes including Stella Kinoti as finance head, Wilson Wambugu Maina as principal officer, and James Mari as head of IT. Security footage captured him issuing instructions in the reception area.

Consequently, Justice Francis Gikonyo ordered the removal of security guards Macharia had stationed at Directline’s Nairobi headquarters. The court ruled that the guards were obstructing interim directors from performing their duties, marking the latest turn in a dispute that has simmered for years and reignited earlier this month.

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