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Published On  Nov 13,  2011
   
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Awash Bank Back in Controversy

Five shareholders sue bank over the appointment of three to the board of directors 

 

 

It seems yet another controversy is brewing at Awash International Bank (AIB) just as one started a year ago that saw Leikun Berhau fired from the president ship and in legal battle is abating. Five shareholders have sued the bank at Lideta Federal First Instance Summery Procedure Court ahead of its general assembly to be held in the coming weeks.

The suit claims that the bank has infringed both the commercial code and the bank’s working procedure by illegally appointing three individuals to the board and illegally transferring shares to them.

The suit was filed on October 27, 2011, by Gemechu Guta, Wondimu Umeta, Merga Afeta, Mulatu Gurmu and Mualtu Gemech. They claimed in their charge that three individuals – Biniam Terfa, Girma Boshe and Elias Bedada – were appointed to the board of directors of the bank while they were not legal shareholders.

This fact was not communicated to the general assembly held in November 2010, which elected them, and the central bank, which accepted them, the charge claims.  They were elected to the board as shares of the bank were illegally transferred to them in contravention to the commercial code and the working procedure of the bank, it further states.

The five shareholders claimed that the bank has violated the right of choice of shareholders to buy old or new shares issued before they were offered to outsiders. Even if the shares were transferred legally, their position as a shareholder could only be affirmed if the general assembly to be held this year approves it, the charge further read.

As the names of these individuals was not among those new shareholders approved during previous year general assembly, they cannot be considered shareholders let alone board members, the charge signed by Hailu Burayu, lawyer of the five shareholders, reads.

Hailu in the charge also wrote that no administrative measures were taken despite repeated appeals to the central bank.

“However, it is the main responsibility of Awash to rectify the problem,” the charge says.

However, it is not only the election of the board members that the shareholders are contending in their suit but also the composition of the board as well.

Although the article of establishment dictates the board should have 12 members, it has less than the requirement they claimed.

“It should be filled by taking the next in line with the highest vote to fill the gaps,” the charge, which asked the court to order the Board of Directors of the bank to do so, reads.

The shareholders also asked that the shares, which they say were transferred illegally to be cancelled and offered to existing shareholders. 

The court adjourned the case to December 10, 2011, to commence the preliminary hearing while AIB is ordered to submit its response five days before the hearing.   

Among the list of witnesses of the five shareholders is Bekele Nedi, former board chairman of the bank and Leikun Berhanu, former president of the bank. Leikun had been involved in the controversy that saw him fired and sentenced along with other bank officials charged with misdemeanour in handling letters of credit (LCs).

Although Leikun was sentenced to a one year and three months prison time and a fine of 10,000 Br, he is out on bail now appealing his sentence to appellate court of the Federal High Court. The final verdict in the appeal case is scheduled for two days after the case he is called to testify is to be heard.

 

By EDEN SAHLE
FORTUNE STAFF WRITER

 
 
 

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