Former Lancet Kenya CEO Ahmed Kalebi who is seeking Sh3.6 billion from his former French and South African partners was hard-pressed on Tuesday to explain why he should be compensated as the founding shareholder of the company.
The former CEO is demanding among other benefits, sweat equity as the founder of the company, for spending his time, labour and money as well as helping the firm expand in the region.
Dr Kalebi told Justice Chacha Mwita that his former partners rejected his claim for sweat compensation yet Lancet was only present in three countries in Africa, including South Africa but it had expanded to 13 when he left the firm in April 2021.
“Yes there was no provision for bonus in agreements we signed,” Dr Kalebi said when he was being cross-examined by Senior Counsel George Oraro.
Asked why he should be paid yet he did not contribute funds to establish the business, Dr Kalebi told the court his partners agreed to provide funding, material, management and technical support as part of their contribution while he was to set up and growing the laboratory.
Sweat equity is a non-monetary benefit that a company’s stakeholders give in labour and time, rather than a monetary contribution that benefits the company.
Dr Kalebi, who helped establish the firm in 2009, has sued the Kenyan firm and shareholders, French firm Cebra Healthcare and Lancet Service Company of South Africa.
The company in reply says all their investment decisions such as establishing operations in Tanzania, Uganda and Rwanda were informed by the direction and vision of the respective boards of directors and not by Dr Kalebi alone.
The company further says Dr Kalebi’s shareholding was voluntarily transferred sometime in 2016 “on an arm’s length basis, for the full value, the consideration of which was duly paid” to the former CEO.
Lancet has said the former partners owed no obligation to compensate Dr Kalebi as the founder and local founding shareholder, as the alleged roles he is quoting do not exist under the contract signed between the parties.
His former partners also revealed that Dr Kalebi was allotted a 20 per cent stake for free with no obligation for him to contribute any cash for the stake or start-up costs.
Further, Dr Kalebi’s terms were negotiated and agreed upon with the company and there were no additional representations made by the former CEO regarding his remuneration beyond what was provided for, in the contracts.
The company also said dividends were subject to resolution by the board of directors and approval at the members’ general meeting.
“The plaintiff has no automatic rights to dividends in the defendants which in any event have not been declared,” Lancet says in court documents.
It is also the firm’s argument that there was no agreement Dr Kalebi would be compensated based on development, enhancement, protection and exploitation (DEMPE) functions.
Dr Kalebi helped found the firm in 2009 and has sued the Kenyan firm and shareholders, French firm Cebra Healthcare and Lancet Service Company of South Africa, setting the stage for one of Kenya’s largest executive payouts.
He said he played three roles as the managing director, shareholder and chief consultant pathologist. And when he left the firm in 2021, the former partners employed nine people to take up his positions.
“A new managing director was employed as well as a chief consultant pathologist. They also employed three other pathologists (two in Kenya and one in Rwanda), plus a chief operations officer and a marketing agency to do the jobs,” he said.
