NAIROBI, Kenya — A simmering shareholder dispute at Credit Bank has escalated into a legal battle involving allegations of insider lending, governance breaches, and preferential treatment linked to the family of former Cabinet minister Simeon Nyachae.
The dispute, brought by minority shareholders, has now been referred to arbitration after the High Court ruled that the matter should be resolved under existing shareholder agreements rather than through court proceedings.
Court filings show that three minority investors, including businessman Ketan Devram Morjaria, accused the bank’s controlling shareholders of breaching regulatory rules and conducting the institution’s affairs in a manner that unfairly prejudiced smaller investors.
Morjaria, who holds a 6.7pc stake in the lender, alongside Jay Rajnikant Karia, who owns about 3.3 percent, argued that they had been excluded from key governance processes, including Annual General Meetings, and had not received returns through dividends.
The petition also raised concerns about alleged irregular insider lending, weak recovery of unpaid loans, and possible regulatory breaches under the Companies Act, the Banking Act, and prudential guidelines issued by the Central Bank of Kenya.
Minority shareholders claim the lender allowed loans to related parties linked to controlling investors, exposing the bank to financial risk while benefiting entities associated with the Nyachae family.
Financial disclosures cited in the case indicate that loans to shareholders and their associates stood at about Sh651 million as of September, down from Sh695 million in December 2021.
The bank’s majority shareholders, represented by Leon Nyandusi Nyachae, denied the allegations and argued that the dispute arises from contractual relationships governed by shareholder agreements signed in May 2022.
They told the court that the issues raised—including governance and shareholder conduct—should be handled through arbitration mechanisms provided in those agreements.
The High Court agreed, noting that the reliefs sought by the minority shareholders, including financial inquiries, declarations, and possible share buyouts, can be determined through arbitration.
The agreements stipulate that disputes be resolved under the rules of the London Court of International Arbitration.
The minority investors had argued that some of their claims involve statutory breaches that fall outside arbitration and should be determined by the court.
Among the remedies sought were orders compelling investigations into the bank’s management, a full accounting of transactions, and a court-directed buyout of their shares.
The dispute comes as Credit Bank has faced financial pressure. The lender reported a loss of about Sh207 million in the nine months to September, compared with a loss of Sh144 million during the same period in 2024.
The case also touches on the bank’s evolving ownership structure following the entry of new investors.
Private equity fund ShoreCap III LP acquired a 20 percent stake in the lender in 2023 as part of a broader capital restructuring aimed at strengthening the bank’s balance sheet.
Documents cited in the proceedings show that a firm known as Shangriles Villas Company Limited holds a 56pc stake in the bank, although its association with the Nyachae family remains unclear.
