Africa-Press – Malawi. The High Court of Malawi has delivered a landmark judgement against the National Bank of Malawi (NBM), ruling that the bank acted illegally and unfairly in taking control of Carbon Dioxide and Allied Products (CDAP) through a controversial debt-to-equity deal.
In a strong decision, the Court upheld the rights of minority shareholders and warned powerful lenders against abusing their position at the expense of small business owners.
The case was brought by the Crispin Ng’oma Trust and the Kamoza Trust, who are minority shareholders in CDAP. They challenged NBM and an administrator appointed by the bank, Mr. Lowani Munkhondia, over how the company was taken over after falling into financial distress.
In 2022, CDAP owed NBM billions of kwacha. To prevent the company from collapsing, the debt was converted into shares, giving NBM a 46 percent stake and making it the single largest shareholder. The minority shareholders later went to court, arguing that the process was unlawful and oppressive.
Speaking after the judgement, the petitioners’ lawyer, Bentry Nyondo, said the ruling was a victory for the rule of law and minority investors.
“This case was never about refusing to pay debts,” said Nyondo. “It was about stopping a powerful bank from using an illegal process to seize control of a private company while pushing aside the people who built it.”
The petitioners argued that the debt-to-equity arrangement was illegal because it was never approved by a court, as required under Malawi’s Companies Act and Insolvency Act. They also argued that Mr. Munkhondia was never lawfully appointed as an administrator under insolvency law.
They further told the Court that NBM ignored a direct instruction from the financial regulator in December 2022, which ordered the bank to reduce its shareholding in CDAP to 35 percent. Instead, NBM maintained a 46 percent stake.
The minority shareholders also challenged decisions by the new NBM-controlled board to increase the company’s shares from 106 million to 5.5 billion, a move they said was meant to dilute their ownership and cement the bank’s control.
NBM defended its actions, arguing that the deal saved CDAP from collapse and that the shareholders had initially agreed to the arrangement. The bank maintained that it acted in the best interests of the company.
However, delivering judgement, Justice Dr. Chifundo Kachale firmly rejected the bank’s arguments.
The Court ruled that the debt-to-equity deal was a “compromise” under the law and therefore required court approval. By skipping this step, the Court said, the process was illegal. The judge stressed that private agreements cannot override clear legal requirements.
The Court also described it as “alarming” that a regulated bank ignored a directive from the financial regulator. Justice Kachale ordered the regulator to investigate NBM’s conduct and report back to the Court within 60 days.
On the role of Mr. Munkhondia, the Court found serious failures in accountability. The judge noted that he did not properly report to all shareholders and ordered him to provide a full written account of his management of CDAP within 45 days.
The Court cancelled the board resolution that increased the company’s shares, calling it “prejudicial and outright oppressive” to minority shareholders. It also cancelled earlier board changes that handed NBM effective control of the company.
Reacting to the ruling, lawyer Bentry Nyondo said the judgement sends a strong message to the banking sector.
“The Court has made it clear that banks are not above the law,” he said. “You cannot ignore regulators, bypass courts, and then claim commercial convenience. The law exists to protect fairness, especially for minority shareholders.”
While criticising the process, the Court acknowledged that the 2022 deal helped save CDAP from collapse. For that reason, it did not cancel the entire transaction. Instead, it ordered all parties to re-negotiate the deal within 90 days and return to court for proper approval.
NBM and the other cited parties were also ordered to pay the legal costs of the minority shareholders.
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