The High Court in Kampala has temporarily stopped the National Social Security Fund (NSSF) from taking-over the majority shareholding of the heavily indebted Uganda Clays until the substantive suit is heard and disposed off.
The order restraining NSSF from the acquisition of the majority shares of 66 per cent of Uganda Clays; was issued by the Deputy Registrar of the court Charles Emuria on Tuesday.
The interim order was issued following an application to court by one of the minority shareholders Habib Sembatya.
Sembatya’s concern is about the high costs involved in the running of the new factory at Kamonkoli, near Mbale Town in Eastern Uganda that he says have in turn indebted the Kajjansi-based factory.
The factory is the leading manufacturer of roofing tiles, maxpans, bricks and quarry floor tiles in the country.
“ An interim order doth issue restraining and prohibiting the 2nd respondent (NSSF), its employees, agents, servants or persons acting under its authority from converting its Shs16.7 billion loan to the 1st respondent (Uganda Clays) into equity and or acquiring a super-majority shareholding of 66% in the 1st respondent’s company until the main application for a temporary injunction which is fixed for the 10th day of November, 2014 at 11:00am is heard and disposed off,” reads in part the interim order.
The debt woes between NSSF and Uganda Clays started in 2010 when the Fund extended a loan of Shs11 billion to the clay factory following its indebtness arising out of the establishment of the Kamonkoli factory.
It’s alleged that Uganda Clays failed to service the Ugx11 billion loan within two years which has now escalated to Ugx16.7 billion.
To that extent, NSSF was planning to convert the accumulated loan of Shs16.7 billion into equity and acquire a super-majority shareholding of 66 percent in Uganda Clays, which move, Mr Sembatya representing the over 2000 minority shareholders rejected by going to court.
He states that should NSSF acquire the majority shareholding of 66 per cent, it will sell the very shares to a strategic investor who will in turn benefit himself and leaving them out.