CMA probes new flour firm

A new business dealing in making maize flour, Cembe Millers, is under investigation for inviting the public to buy shares without approval from the markets regulator.

The Capital Markets Authority says it has not approved such a plan despite a legal requirement for a company seeking funds from the public to seek its consent.

Cembe Millers carried an advertisement Thursday, inviting four categories of shareholders with those in platinum category expected to pay Sh2.6 million, gold Sh1.95 million, silver Sh1.3 million and bronze Sh650,000.

“The Capital Markets Authority has not approved the offer, which is, therefore, a breach of section 30A (4) of the Capital Markets Act Cap 485A, which states; ‘Subject to the provisions of this Act, an issuer or an offeror shall not make a public offer of securities unless that issuer or offeror has submitted a prospectus in respect of that offer to the authority for approval’” the authority’s communications department told Nation.

In the advert, the company said it was a new venture specialising in milling grains such as maize and is an incorporated company under the companies Act (Cap 486). It said it would produce superior brands of maize flour that will be sold across East Africa.

“The promoters of the offer are expected to have sought approval from the Capital Markets Authority according to the provisions of the Capital Markets Act, which they did not do. We have written to them to stop the offer with immediate effect and will require them to publish an advertisement withdrawing the offer.”

The company said it was targeting an annual gross margin of Sh570 million, adding that it was inviting ‘pioneer investors’ and the funds would be used to set up the factory, asset acquisition and to meeting the initial business costs.

BREACHING THE LAW

“The investment maturity date is two years and net profits will be awarded to partners based on their shareholding after this maturity period.”

The regulator, however, said the company owners, who have given the deadline for the offer as May 31, would be dealt with for breaching the law on raising capital from the public.

“We will also launch investigations in collaboration with other arms of government to establish the identity of the persons behind the offer and take appropriate action against them. The investigations will establish if indeed any Kenyan had bought the shares.

REFUNDED

“As part of the mandate of protecting investors, we will ensure that any investors who had bought the shares are refunded. We would also like to encourage investors interested in participating in public offers to confirm with the authority or the promoters whether they have been approved before investing any funds,” noted the regulator.