The High Court has cleared the way for Nairobi Hospital to hold its Annual General Meeting (AGM).
Justice Peter Mulwa in a ruling on November 4 directed the AGM be held within 30 days from the date of the decision, and a report made in court.
And in a blow to more than 400 members who had called for an Extra-ordinary General Meeting (EGM), Justice Mulwa issued an order restraining it, saying the EGM might be impactful and consequential in the management and business affairs of the ailing hospital.
The judge added that the EGM might affect the hospital in a manner that cannot be reversed, if there were to be institutional and individual harm to the hospital and its directors, which could be difficult to compensate by way of damages ‘considering the personal reputations of some Board members and the Hospital as a whole are at stake’.
“As such, prudence demands that an injunction do issue against the proposed EGM requisitioned by the Defendants (members of Kenya Hospital Association),” ruled the judge.
The judge noted that the parties agree that the hospital had called for the AGM in a notice issued on August 30, 2024.
“The importance of an AGM cannot be over emphasized. It is through such a meeting that a company accounts to its shareholders, discusses its challenges and comes up with resolutions in the running of its affairs,” ruled the judge.
“As such, I find that it will be in the interest of justice and progression of this matter, that the AGM proceed as set out in the notice of August 30, 2024 where the issue of rotation and election of directors is part of the agenda,” ruled the judge.
A group of members led by Mr Robert Shaw had requisitioned for the EGM, with plans to remove the board members including the chairman Chris Bichage and the appointment of a caretaker committee to run the hospital for six months, pending the appointment of a substantive board.
The board opposed the EGM arguing that the letter from Ahmednasir Abdullahi Advocates contained various allegations against some of the members of the Board, including conflict of interest, tribalism, nepotism, cronyism and dereliction of duty.
The board further said the requisitions made false statements, which were injurious to their reputation and the convening of an EGM where the said statements would be debated and any resolution made, would therefore in contravention of Section 277 (6) (b) of the Companies Act.
The court heard that the board had allegedly received complaints from some of its members, that they had not signed the said requisition notices yet their names and signatures were on it.
In the circumstances, the board said it was unable to authenticate the persons making the requisition as required by the Companies Act.
While calling for the EGM, the 400 KHA members argued that one of the East Africa’s premier medical services providers has been brought to its knees.
They also opposed plans by the board to borrow a loan of Sh4.2 billion, which they argued was likely bankrupt Nairobi Hospital.
The Board of Managers in its June meeting resolved to spend Sh2.4 billion on purchase of medical equipment, Sh970.4 million on maintenance of equipment, Sh501.2 million on software, Sh215.8 million on furniture and fittings, Sh50.1 million on software, Sh41.8 million on vehicles and Sh19.2 million on infrastructure improvements.
Their lawyer Wilfred Mutubwa held that operations would grind to a halt, and that the orders blocking the borrowing opened Nairobi Hospital to the risk of being sued by suppliers and other contractors.
Dr Mutubwa maintained that the borrowing had been lawfully approved by the board and that Symbiafric Ltd was already on the hunt for a financial institution.
The court was informed that the hospital serves over 182,500 patients annually with a bed capacity of over 450 and over 400 doctors with admitting rights.
Nairobi Hospital occupies a uniquely critical and important role, though not a parastatal, it is a national institution, whose operations resonate with public interest and that its optimal functioning is accordingly a matter of great public interest, the board argued.
The members who had called for the EGM through Mr Abdullahi had opposed the blocking of their meeting arguing that the court was being invited to the centre of boardroom wars as the members issued a notice, paid for the venue and were ready to proceed with the meeting for the removal of board of management.
The lawyer said the AGM seeks to derail the members’ constitutional right to recall a non-performing board of management as stated in the Companies Act and the company’s articles of association.
Mr Abdullahi said the suit was a desperate attempt to use the judicial process as a shield against lawful proceedings and subject themselves either to remove or sustain them.
There are several other cases pending before other divisions of the High Court.
