Trucks of sugar at the Mombasa port. FILE PHOTO | NMG The sugar sub-sector is a key factor in Kenya’s economy. Apart from providing food security, the sector employs millions that rely on it directly or indirectly through sugarcane farming, distribution, retail services and other upstream and downstream supply chain activities.
The genesis of poor performance of State-owned sugar millers began when the State took over the running of these companies from among others Mehta Group, Booker Tate, Magahbhai D. Hindocha,Devjibhai K. Hindocha and George Russell Mayers and other expatriates. Political appointees ruined their management.
Muhoroni Sugar Company has been under receivership for more than 20 years and many creditors are yet to be paid.
Efforts to revive these companies have proven futile with endless court battles intrigued by behind-the-scenes political machinations.
The primary legislation governing insolvency in Kenya is the Insolvency Act of 2015. Insolvency comes about when a business cannot raise enough funds to meet its obligations as they fall due.
Prior to the enactment of the Insolvency Act on September 11, 2015, liquidation was often the creditor’s only recovery option.
The Insolvency Act improved the options by providing additional alternatives such as administration, and company voluntary arrangements.
The current Insolvency Act stipulates that a receiver manager has a role first to assess the ailing company’s viability, creditors investments, and debt to develop a repayment strategy without completely liquidating the company. The ultimate goal is financial recovery as quickly as possible.
The insolvency regulation underscores the need for repayment of debts, including unpaid benefits to laid off employees, suppliers, farmers, transporters, distributors and to negotiate with creditors to secure lower interest rates, enforce compliance with government standards and regulations where necessary, and to hire new management.
The state of ‘Receivership’ has caused many pains and woes to the employees, businesses, and farmers.
A good number of the former employees have died leaving behind their benefits. So sad.There is need to revisit the insolvency law to put a cap to a period for a receiver to recover its debt. If it is too long, then it undermines the legal positivism philosophy upon which the insolvency statute is embedded.In Kenya, only a few companies under receivership have been revived.Kenya Commercial Bank (KCB) Group has proved instrumental over the past years in reviving these ailing companies. This has been demonstrated with the successful acquisition of National Bank, speedy resolution of Imperial Bank of Kenya and successful resuscitation of Chase Bank […]
