eBusiness Weekly
Business Writer
The Supreme Court has stripped Government of its majority control of pharmaceutical giant, CAPS Private Ltd, following a legal battle initiated by CAPS Pharmaceutical Trust challenging an arbitration award granting the state ownership of the firm.
The ruling follows a three year-protracted legal battle initiated by CAPS Pharmaceutical Trust, which had challenged the Government’s appointment of the company board.
The conflict began in 2020 when the Ministry of Industry and Commerce, acting on behalf of the Government, appointed five board members to CAPS Private Ltd, a move which sparked outrage from the CPT, which claimed to be holding a 52 percent majority stake in the company.
It argued the appointments were unilateral and violated shareholder agreements, essentially side lining their role in governance.
On the other hand, the Government claimed that by virtue of the sale of shares agreement between the Government and businessman Fred Mutanda, it had acquired nearly 68 percent majority shareholder of CAPS and was entitled to appoint the directors.
The trustees of the CPT contentiously claimed a 52 percent shareholding in CAPS Private Ltd.
This claim was based on their interpretation of Section 124 of the Health Professions Act, which they believed obliged qualified health professionals to hold a controlling interest in pharmaceutical companies.
However, even if their interpretation was accurate, obtaining a controlling stake through donation required a ratification of CAPS Holdings shareholders at an annual or extraordinary general meeting.
In such a scenario, CAPS Holdings shareholders would have needed to donate their 12 percent to give CPT a 52 percent stake CAPS Private Ltd.
The arbitration
The case proceeded to arbitration, presided over by a retired Supreme Court judge.
The initial award, issued in November 2021, favoured the Government, with Justice Ahmed Ebrahim reasoning that CAPS Private Ltd, the drug-making unit of CAPS Holdings, had been purchased by the government through an agreement with the Mutanda Trust.
He further deemed CAPS Private Ltd a public entity with significant Government control.
The CPT, led by its trustees, a group of pharmacists contested the arbitration award granting the Government control of CAPS Private Ltd. They challenged it in the High Court, but the July 2023 ruling was unfavourable, leading CAPS Holdings escalating the case to the Supreme Court where the arbitration award was overturned.
While the full implications of this case are still unfolding, one thing is certain: the Supreme Court’s decision has delivered a major blow to the Government’s ambitions.
The initial agreement, brokered by the RBZ envisioned the Government acquiring 68 percent of CAPS Manufacturing and CAPS Healthcare through a demerger process.
However, the Ministry of Industry and Commerce allegedly misled the arbitration process by presenting a distorted picture, claiming the Government had already purchased CAPS Holdings itself.
This misrepresentation formed the basis for the November 2021 award, granting the Government control of CAPS Holdings. However, the Supreme Court has deemed the award arbitrary and set it aside.
Prior to purported takeover, CAPS Holdings owned 80 percent of ST Annes Hospital, 100 percent stake on Geddes, 60 percent on CAPS Private Ltd and 100 percent on QV Pharmacy.
