{"id":13361,"date":"2020-08-25T20:16:26","date_gmt":"2020-08-25T20:16:26","guid":{"rendered":"https:\/\/www.africa-press.com\/kenya\/?p=13361"},"modified":"2020-08-25T20:16:26","modified_gmt":"2020-08-25T20:16:26","slug":"administrators-should-seek-to-salvage-not-kill-off-firms","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/kenya\/all-news\/administrators-should-seek-to-salvage-not-kill-off-firms","title":{"rendered":"Administrators should seek to salvage not kill off firms"},"content":{"rendered":"<p><strong>AfricaPress-Kenya:<\/strong> Tuskys Supermarket, Kenya\u2019s largest retailer by footprint, recently announced that it will seek a strategic cash injection of about Sh2 billion to keep itself afloat and settle debts to creditors, particularly suppliers.<\/p>\n<p>The announcement came after a meeting of the retailer\u2019s seven shareholders who are\u00a0the offsprings of Tuskys\u2019 founder,\u00a0the late Joram Kamau.<\/p>\n<p>In so doing, the retail chain owners seek to avert the fate that befell Nakumatt Supermarkets, previously East Africa\u2019s largest retailer, which went down under a mountain of unsustainable debt.\u00a0Attempts to rescue it failed\u00a0after the appointed administrator failed to convince creditors to convert their debts into shares and to keep supplying the floundering chain.<\/p>\n<p>In these times of the Covid-19 pandemic, and even before, as the national economy has stuttered, with many businesses going into receivership, administration or even liquidation.\u00a0Tuskys\u2019 and Nakumatt\u2019s stories\u00a0have one thing in common though: they have sought to take advantage of the new Insolvency Act 2015 of Kenya.<\/p>\n<p>The Act, whose enabling regulations came into force in March 2016, introduced new accommodative measures to allow companies to seek ways of staying afloat once they became insolvent without being liquidated. Liquidation is the killing, if you will, of a company after which it ceases to be a legal entity and is purged from the registrar of companies\u2019 records.<\/p>\n<p>Before the Insolvency Act came into force, companies that found themselves unable to pay their obligations when they became due, could only go the path of liquidation.\u00a0However, now companies can go into administration during which they remain a going concern and look for ways to rebound back into health, including injecting fresh capital.<\/p>\n<ul class=\"list-group readmore my-3\">\n<li style=\"list-style-type: none\"><\/li>\n<\/ul>\n<p>Over the past few years, several companies have sought to make use of these new regulations. These include the aforementioned Nakumatt Holdings, apparel retailer Deacons, cement maker ARM and Spencon Ltd, among others.<\/p>\n<p>As fund manager Cytonn noted in a legal note, the Insolvency Act offers a second chance to struggling but viable companies.\u00a0It is for this reason that a tug of war between audit firm PWC and the creditors and minority shareholders of Spencon Ltd, which has been under receivership, has raised troubling legal and ethical questions.<\/p>\n<p>Spencon was a local infrastructure and engineering firm founded by Kenyans that went on to become one of the most successful companies in the eastern African region.<\/p>\n<p>In 2006, an American private-equity firm named Emerging Capital Partners (ECP) bought into the firm with plans to scale up operations, streamline management and take the firm public possibly via an initial public offering on the Nairobi Securities Exchange.<\/p>\n<p>ECP later took over 98 per cent of the firm but ran into financial problems and closed down operations leaving creditors, including financial lenders and employees, high and dry.\u00a0PWC was appointed receiver of the firm and under the Insolvency Act 2015, was expected to find ways to keep the company viable in order to pay off creditors and also keep operations running.<\/p>\n<p><strong>Previous cases<\/strong><\/p>\n<p>One of the lenders, US Exim Bank, was opposed to the appointment of PWC, but the ECP shareholders somehow managed to have their way.\u00a0In 2019, PWC decided to put Spencon into liquidation, a move that had been and is still being opposed by former employees who are owed wage arrears, the original shareholders and other creditors who believe the firm remains viable.<\/p>\n<p>This has then raised the question: In whose interests should an administrator, in effect, an official of the Kenyan courts, be working for?\u00a0The handling of the previous cases of administration cited, including Nakumatt, ARM and Deacons, shows a proper and harmonious working relationship between the administrator, the creditors and even the shareholders.<\/p>\n<p>However, it is creditors who take priority and whose wishes the administrator is supposed to follow.\u00a0In Nakumatt\u2019s case, for example, the firm owed Sh35.8 billion of which only Sh5 billion was secured, meaning it was borrowed from lenders with collateral being given.<\/p>\n<p>The rest about 85 per cent, was owed to suppliers, landlords and employees.\u00a0Despite the administrator\u2019s efforts, the creditors rejected a deal that they felt was designed with influence from the shareholders and did not disclose fully the affairs of the company, according to Cytonn<\/p>\n","protected":false},"excerpt":{"rendered":"<p>AfricaPress-Kenya: Tuskys Supermarket, Kenya\u2019s largest retailer by footprint, recently announced that it will seek a strategic cash injection of about Sh2 billion to keep itself afloat and settle debts to creditors, particularly suppliers. The announcement came after a meeting of the retailer\u2019s seven shareholders who are\u00a0the offsprings of Tuskys\u2019 founder,\u00a0the late Joram Kamau. In so [&hellip;]<\/p>\n","protected":false},"author":84,"featured_media":13355,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,5,8],"tags":[2763,5384,4737,5385],"class_list":["post-13361","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","category-homepage-english","tag-covid-19-pandemic","tag-insolvency-act","tag-tuskys","tag-uchumi"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.1 (Yoast SEO v27.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Administrators should seek to salvage not kill off firms - kenya<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/kenya\/all-news\/administrators-should-seek-to-salvage-not-kill-off-firms\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Administrators should seek to salvage not kill off firms\" \/>\n<meta property=\"og:description\" content=\"AfricaPress-Kenya: Tuskys Supermarket, Kenya\u2019s largest retailer by footprint, recently announced that it will seek a strategic cash injection of about Sh2 billion to keep itself afloat and settle debts to creditors, particularly suppliers. 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