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Flower Farm / Courtesy

Finance

Karuturi directors challenge appointment of PwC liquidators

Flower Farm / Courtesy

Flower Farm / Courtesy

NAIROBI, Kenya, May 20 – Directors of the troubled Karuturi Limited have moved to court under a certificate of urgency urging the court to appoint an independent and qualified liquidator to immediately take over the operations of the company from the present liquidators.

In an application filed at the Milimani Commercial Court, the directors claim that the current liquidators from PriceWaterHouse Coopers Limited (PWC) are not independent and have no insolvency practitioners license as provided for under the Insolvency Act 2015.

This position has also been confirmed by the office of the Attorney General in response who say only one person – Ponangipalli Venkata Ramana Rao- has been licensed so far in Kenya under the new insolvency law to operate as a liquidator adding that Thoithi Muniu and Kuria Muchiru who were appointed by PWC could be prosecuted for their role in Karuturi liquidation.

The fine for practicing without a license is up to Sh5 million.

This, according to the suit papers, is greatly prejudicing the company’s and creditors’ position and will adversely affect the ongoing liquidation.

But in an email response to Capital Business, Muniu says the High Court appointed the duo as joint liquidators pending further orders in order to safeguard the assets of the company.

According to court papers, Muniu and Kuria made it clear to the Court and the creditors that their acceptance of the appointment was primarily to plug the gap in the active management of the Company following the winding up order to avert a possible crisis and loss.

“Muniu and Kuria were validly appointed by Court Order and hope to be replaced by a formal resolution of the creditors…through a meeting convened for 28 May 2016,” reads the email from Muniu.

Furthermore, the receivers say the winding-up order was made under the old Companies Act and the that the liquidation is correctly proceeding under the old Companies Act in line with the transitional provisions contained in the new Act.

CFC Stanbic placed Karuturi Ltd, one of Kenya’s main flower farms, under receivership in 2014 over debts allegedly owed to lender amounting to Sh400 million.

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Kieran Day and Ian Small of the Business Advisory Group were appointed receiver managers by CFC Stanbic as security group G4S took control of the farm’s assets.

Surya Holdings and Rhea Holdings guaranteed the company’s borrowing from CfC Stanbic Bank.

On March 30, 2016, the Milimani Commercial Court made an order to wind up the operations of the company. In effect, the Receivers and Managers agency for the company were terminated on the same day.

Thereafter on April 5, 2016 CFC Stanbic obtained a temporary order appointing Muniu and Muchiru from PWC, as liquidators of the bank until further orders of the court.

In the application filed on May 11, 2016 Samora Owino, Advocate representing the Directors as well as Karuturi’s Guarantors Surya Holdings and Rhea Holdings says the order will create further liabilities that the bank intends to lump on the Guarantors and Directors.

In a sworn Affidavit through Kimani & Michuki Advocates, the Chairman and Managing Director of Karuturi Limited Sai Ramakrishna Karuturi says the appointed liquidators are not tending to the company’s main asset flower crop which is now quickly wilting due to lack of irrigation.

“Guarantors have made various applications and sworn various affidavits that demonstrate that the bank and its appointed joint Receivers and Managers acted against the company’s interests and were only intent on hiving down the company’s business, they are bent on selling the Guarantors charged properties despite various offers to settle,” he stated.

He says some of the fraudulent acts and misconduct by the Receivers and Managers of the firm include failing to file VAT returns that continue to expose the company to unwarranted and highly punitive VAT liabilities.

“The former receivers also carried out malicious and wanton destruction of the Plaintiffs properties in particular, they demolished 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.

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