Kenya: Minor Supplier Jumps Queue to Rout Banks in Fight for Carcass

Kenya: Minor Supplier Jumps Queue to Rout Banks in Fight for Carcass

In western Kenyan villages, children are traditionally given chicken legs or wings, sometimes even soup as they fall behind the line in the pecking order of the family meal.

The best they can do is steal eggs and eat them but that comes with nasty consequences.

Small suppliers have always ended up with the shorter end of the stick as banks rush in to secure their interests by placing collapsed firms under receivership.

Covid-19 has pushed several businesses into insolvency sparking a fight to recover debts from lenders, suppliers, the taxman and even pension institutions.

Several companies have been placed under receivership including General Printers, Kaluworks, Phoenix Publishers, Britania Foods, Nakumatt Holdings, Midland Energy, ARM Cement and Deacons East Africa, Mumias Sugar, Karuturi and Multiple Hauliers.

Under the new Insolvency Act 2015, those under financial distress have been using the legislation to ensure they remain a going concern as opposed to an outright liquidation.

But once the company is liquidated, secured creditors are paid first, which means banks usually get their money ahead of smaller creditors.

General Printers

The tide may be turning after a small creditor stopped I&M and NCBA from placing General Printers under receivership for a Sh2.7 billion loan in a fight over the property of the distressed company.

Desbro Kenya, which is owed Sh36.4 million wants to appeal a court decision that stopped it from auctioning assets of the company. Desbro had obtained orders to sell nine vehicles belonging to General Printers before banks realised the company was in trouble.

The two lenders rushed to court to stop the auction and won a case arguing the firm’s movable property is attached to their loans as secured creditors.I&M appointed a receiver but Desbro Kenya wants its appeal heard before the banks can sell off the property and pay themselves arguing that this case preceded the appointment of a manager."Desbro Kenya noted that the administrator appointed herein may proceed to dispose of the previously proclaimed goods in the exercise of his statutory powers so as to settle the secured creditors’ debts and it will be left without any other way to recover the decretal sum due to it from the Defendant," Judge Ngenye-Macharia said."In the upshot, I find that the plaintiff’s application dated 25th May, 2021 is meritorious," he said.Once a receiver is appointed, no creditor can attach a company’s property allowing for stock to be taken before assessing whether a firm can be revived […]

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