Authority
Equity Bank
ESOP
Francis Tuiyot
High Court
Kamiti
Mr Tuiyot
Nairobi Stock Exchange
Samuel Gachie Kamiti

Equity Bank ordered to pay ex-worker Sh79m for Esop

The ruling last Friday also opens doors for other former Esop members who may have also forfeited cash after the bank applied a contested law. Equity had introduced Esop in 2005, a type of employee benefit plan intended to motivate employees through ownership of the company.Samuel Gachie Kamiti claimed he had invested in shares that would have seen him walk away with Sh103,274,010 at the time of leaving in 2010 but the bank refunded him only Sh24,330,000 through a credit transfer into his account.

Equity Bank has been ordered to pay a former employee nearly Sh79 million, which was part of the cash he was to receive after leaving the lender’s Employee Stock Ownership Plan (Esop) eight years ago. The ruling last Friday also opens doors for other former Esop members who may have also forfeited cash after the bank applied a contested law.Equity had introduced Esop in 2005, a type of employee benefit plan intended to motivate employees through ownership of the company.Samuel Gachie Kamiti claimed he had invested in shares that would have seen him walk away with Sh103,274,010 at the time of leaving in 2010 but the bank refunded him only Sh24,330,000 through a credit transfer into his account.

High Court judge Francis Tuiyot has faulted the bank and the trustees for changing the rules governing Esop which effectively cut Mr Kamiti’s entitlement without informing him in advance.Under the amended rules he could not get market value for his units if he resigned from the bank. The lender and trustees were well aware that the decision he was making to leave the company would have a huge impact on his investment in the units.“The bank and trustees did not advise him on the implication. They were at the very least cynical. They watched a unitholder make a decision that would substantially reduce the value of his redemption without telling him that the rules have changed,” said Mr Tuiyot.The judge said the trustees failed to act in the best interest of Mr Kamiti and watched him make a decision that was obviously detrimental to his interest.“This is not how responsible and well-meaning trustees ought to act,” said Mr Tuiyot, adding that the deed of variation was invalid.The bank had explained that the variation was necessary to advance retention of employees and that it had been agreed upon the inception of Esop.The variation had the effect of wiping out part of the accrued value of any unit holder’s rights who ceased to be employed before a certain duration.Mr Tuiyot, upon evaluating the evidence before the court, concluded that the deed of variation had not been approved by March 2, 2010, when Mr Kamiti resigned and sought to redeem his units.“As there is no evidence that the deed of variation was submitted to the Authority and approved before March 2, 2010, the terms, therefore, could not be effected as against Mr Kamiti,” he said.There was evidence that one unit in the ESOP was equivalent to one share in equity bank. Over time, Mr Kamiti purchased 6,557,080 Esop units, which was translated to 6,557,080 shares in the bank. As at the close of business on March 2, 2010, one share of Equity Bank traded at the Nairobi Stock Exchange at Sh15.75.

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