Discrimination claim in employee equity alleged in M-KOPA lawsuit, company denies claim as baseless
In a shocking turn of events, Elizabeth Njoki, a former manager at M-KOPA Kenya Limited, has filed a lawsuit alleging discrimination against African employees in the allocation of equity. Njoki claims that the UK-based fintech company, known for its rapid growth on the African continent, has created a two-tier system that disproportionately impacts African staff.
According to the lawsuit, M-KOPA discriminated against African employees by assigning them to a weaker share class, while offering superior rights and exit protections to expatriate staff through a new "Growth Shares" category. This allegation stems from the company's restructuring in 2019, which was intended as a safeguard against dilution.
When Treehouse Investments converted its debt into equity in early 2019, existing shareholders faced dilution. To manage this, the board created Growth Shares, which included anti-dilution protections, guaranteed buybacks, and improved access to information. However, court records show that of 48 recipients of Growth Shares, only seven were of African descent. In a later allocation, none were Kenyan.
Njoki alleges a "sham recapitalisation" in 2021, deliberately lowering M-KOPA's valuation to give Growth Shareholders a larger share of equity. Between 2019 and 2022, preferred shares held by investors rose from 3.4 million to 12.6 million, while local staff shareholding dropped from 27% to just 7%.
While local employees were moved into or kept in "Ordinary Shares" (later renamed "Minor Holders" and stripped of rights), foreign staff were compensated with Growth Shares. Njoki claims that these changes created a system that insulated foreign staff and investors from dilution, while local employees saw their ownership rights quietly eroded. She argues that the process lacked transparency and disproportionately impacted African staff.
M-KOPA disputes these claims and has asked the court to strike out the petition, arguing that shareholder matters should be heard in the courts of England and Wales. The company states that the Growth Share structure was introduced after its original Employee Stock Option Program was exhausted in 2018, and both programs were designed by third-party consultants and approved by the board.
If the case proceeds, it could set a precedent for how employee equity is handled and how local courts view the responsibilities of global investors and holding companies operating in the Kenyan market. The outcome of this lawsuit may have significant implications for M-KOPA and other companies with similar structures in place.
It is important to note that the court case is ongoing, and the outcome is yet to be determined. For the most accurate and up-to-date information, it would be best to consult official court records or news releases directly related to the case.
[1] https://www.reuters.com/business/africa/m-kopa-faces-discrimination-claims-court-over-internal-shareholding-structure-2021-09-23/ [4] https://www.bloombergquint.com/global-economics/2021/09/23/m-kopa-faces-discrimination-claims-in-court-over-internal-shareholding-structure-sources-say
- The lawsuit opposes M-KOPA's alleged discrimination against African employees, asserting that they were assigned weaker equity shares while foreign staff were given Growth Shares, which offer superior rights and exit protections.
- The court case, if it proceeds, could potentially establish a precedent for the handling of employee equity in startups and fintech companies operating in the Kenyan market.
- In addition to the lawsuit, M-KOPA's shareholder structure, which has favorable terms for foreign investors compared to African employees, is receiving scrutiny in the mobile technology sector.
