Bishop Abraham Simama, one of the shareholders of National Bus Company (NBC), wants the courts to remove the firm’s majority shareholder and chairperson Leston Mulli following his conduct which allegedly resulted in the company being owed K267.3 million (about $809 696).
Simama is also seeking a refund of the money with interest to the bus company, court documents show.
In his summons at the High Court of Malawi in Blantyre dated December 21 2012, Simama claims Mulli was in breach of his “fiduciary duty and is unfit to be chairman and/or director of the bus company having presided over a situation and transactions leading to the company being owed the said sum of K267 262,501.37 by [another] company in which Mulli was a majority shareholder [Mulli Brother Limited] without the approval of the bus company’s board when there were inter-company transactions.”
Notes the affidavit: “These transactions could in usual corporate practice and under the articles of association be entered into with the approval of the [bus company’s board].”
Simama has dragged to court the embattled business magnate, his company Mulli Brothers Limited (MBL) and Leston Ted Mulli as first and second defendants and NBC as third defendant to, among others, seek a declaration that Mulli is unfit to be chairperson of the bus company.
NBC shareholders, structured under a Public Private Partnership (PPP), are as follows: MBL (68.52 percent stakes), Abraham Simama (19.72 percent) and Malawi Government—representing taxpayers—controls 11.76 percent.
Simama has been aggressive against Mulli since a reconciliation audit the NBC Board commissioned in July 2012 to investigate irregular transactions at the bus company recommended that MBL pay back at least K267.2 million to NBC.
The money was suspected to have been incurred during inter-company transactions involving the bus company and other subsidiaries owned by Mulli who fellow shareholders accused of withdrawing funds from NBC without their knowledge.
On December 28 2012, Simama also obtained a court injunction stopping the 16th meeting of the directors of NBC scheduled for January 3 2013 from discussing some agenda items during their meeting. One of the items was a proposed appointment of four new directors by Mulli.
Reads the order: “It is ordered that the defendants [MBL, Leston Mulli and NBC] by themselves or through their agents or servants or otherwise be and are hereby restrained from adopting and/or deliberating as agenda item or in any was confirming or authorising the proposed appointment of four new directors or any director at all for the 3rd defendant and/or calling for fresh audit of the 1st and 3rd defendants’ inter-company transactions for the period between November 2008 and 31st May 2012 and/or transferring the 1st defendants shares in the 3rd defendant to any person or at all pending a further order of this court or the determination of this matter.”
After obtaining the injunction, Simama went further to file originating summons under Commercial Cause No 209 of 2012 in which he is asking the High Court, Commercial Division, to also direct MBL to pay NBC K267 262 501.37 with interest at the bank lending rate.
Among others, Simama is also asking the court to declare and order that:
- · An order of restitution directing the first and second defendants to pay to the third defendants the sum of K267 262 501.37 and interest thereon at the National Bank of Malawi’s base lending rate from time to time plus four percent per annum from June 1, 2012, until full payment.
- · An order providing for the purchase of the first defendant’s [MBL] shares by the third defendant and due reduction of the third defendant’s capital or by any of the other members of the third defendant and/or an order regulating the conduct of the third defendant’s affairs in future as the court may deem fit and proper in the circumstances hereof.
In the law suit, Simama justifies his application, saying the grounds were that MBL withdrew K267 262 501.37 or part of it and that withdrawal was occasioned by MBL and its owner “in abuse of the 1st defendant’s majority membership control and the 2nd defendant’s chairmanship of the 3rd defendant to the unfair prejudice of the plaintiff and/or in disregard of his interest as member entitled to dividends from due returns of the 3rd defendants business.”
Simama further argues that Mulli, as chairperson of NBC and majority shareholder, was in a position of conflict of interest in the transaction that led to the said loss and failed to provide leadership of the bus company consistent with the generally accepted principles of corporate governance.
In recent months, MBL—the country’s largest family owned conglomerate and multinational with strong ties to the former Bingu wa Mutharika regime—has faced a number of financial pressures from its creditors.
Mulli’s other lawsuits
Recently, the group avoided closure of its subsidiary, Chitakale Plantations Company Limited, after it paid K18 million (about $54 545) to Mulanje-based orphanage owner Mary Woodworth who had petitioned the Commercial Court to wind up the company.
A few weeks ago, the Malawi Savings Bank dragged MBL to court claiming K3.3 billion (about $10 million) after the company, which allegedly obtained a K3.2 billion overdraft, reportedly failed to service it after it was converted into a loan. But the company, through lawyers Ralph and Arnold Associates, are challenging the bank’s claim.
Mulli’s financial woes
Two weeks ago, at the memorial ceremony of his father and the group’s founder, Mulli made a public confession that his company is facing financial challenges because government was refraining from doing business with them.
Said Mulli: “We are in problems financially and there are several hands playing a role to bring MBL Holdings down, the government inclusive. A lot of people are suffering; the company is currently retrenching staff while others have gone for three to four months without pay. Our suppliers are also being affected.”
But government spokesperson Minister of Information Moses Kunkuyu denied the allegations that the current administration has a hand in the financial problems facing MBL, saying there is no deliberate policy to squeeze Mulli Brothers.
MBL Holdings was also left out of a multi-billion deal to participate in the distribution of fertiliser and other farm inputs under the government’s Farm Input Subsidy Programme (Fisp). During the Mutharika administration, Mulli participated in every Fisp programme since 2006.
The company has stakes in transport, agriculture, tourism, pharmaceuticals and telecommunications, among others, and enjoyed multi-billion government businesses under the Mutharika regime.