When the government introduced the Insolvency Act 2016, its main intention was to overhaul the handling of companies that were facing insolvency.
Under the previous laws, companies that faced insolvency would be placed under receiver managers whose main course of action was to sell off the company’s assets. This was aimed at recovering the creditors’ funds, collecting the receiver fees and closing the company.
The Insolvency Act 2016 was, therefore, put in place to protect companies facing insolvency from this state of affairs. This was to be achieved by placing the companies under administration managers whose priority is to get the company back into operations while keeping the creditors at bay as the companies find their footing.
In August 2018 ARM Cement was placed under administration with PwC’s Muniu Thoiti and George Weru appointed as the joint administration managers. However, not everyone is happy with this development. A section of ARM Cement stakeholders is of the view that Muniu Thoiti is not the best person for the job.
Doubts over his suitability mainly stem from a falling-out he had with the management of the Karuturi flower farm back in 2016 when it was placed under receivership.
When Karuturi could no longer meet its financial obligations to its suppliers and creditors, the company was placed under receivership with Muniu Thoiti and Kuria Muchiru as the administration managers.
The directors at Karuturi were not comfortable with the duo charged with the responsibility of turning the company around. They accused the two receivers of operating without a license in compliance with the newly introduced Insolvency Act 2016, an offense that can attract jail time or a fine of up to KSh5 million.
In his response to the allegations, senior principal state counsel Mark Gakuru confirmed the fears. “We would wish to confirm that neither Thoiti Muniu nor Kuria Muchiru has applied or has ever applied to the official receiver for an authorization to act as an insolvency practitioner, nor has the official receiver issued any license to them,” states Gakuru in a letter dated May 17, 2016.
The duo was also accused in a sworn affidavit through Kimani & Michuki Advocates, by the Chairman and Managing Director of Karuturi Limited Mr. Sai Ramakrishna Karuturi, of not tending to the company’s main asset flower crop.
Mr. Sai Ramakrishna Karuturi also said some of the fraudulent acts and misconduct by the receivers and managers included failing to file VAT returns that continued to expose the company to unwarranted and highly punitive VAT liabilities.
“The receivers also carried out the malicious and wanton destruction of the Plaintiffs properties in particular, they demolished a large invaluable farm house facing Lake Naivasha and christened “Masdam” which house was not part of the assets secured by the debentures and is wholly owned by me,” the affidavit reads.
Keeping in mind that the new Insolvency Act 2016 has been hailed as a breath of fresh air in the handling of Kenyan insolvency laws, concerned ARM cement stakeholders feel that individuals like Muniu Ithoti still carry the burdens of the old laws and are not suited to implement the new laws. After all is said and done, an old patch cannot mend a new wineskin.