Economy

Shadowy firm link deepens confusion over railway tender

registrar

Registrar of Companies Bernice Gachegu (right) with her deputy Jane Joram at a past event. Ms Gachegu told the Public Investment Committee on Thursday about the existence two local firms with similar names to the Chinese company awarded the standard gauge railway tender. FILE

Two Kenyans registered a company with a name that is similar to the firm at the centre of the controversial Sh448 billion tender to build a standard gauge railway between Mombasa and Nairobi, deepening the confusion as to which company has the contract to undertake the works.

Parliament Thursday heard that the two companies — China Road and Bridge Corporation (CRBC) of China and China Road and Bridge Corporation Kenya Limited (CRBC-K) — have not filed annual accounts or returns since incorporation as required by the Companies Act.

The Registrar of Companies Bernice Gachegu told Parliament’s Public Investment Committee (PIC) that the Chinese firm, which is incorporated in China, was issued with a certificate of compliance on December 28, 1984 pursuant to Section 366 of the Companies Act while CRBC-K was registered on December 23, 2008, around the time discussions on building a standard gauge railway began.

Ms Gachegu said whereas the Chinese CRBC has nine directors all of Chinese origin, the local firm has only two directors Peter Mwangi Gatere and Leonard Mwangi Ndungu.

Ms Gachegu said she discovered the existence of the Kenyan firm with the Chinese name when the PIC wrote to her 10 days ago seeking to know the directorship of the Chinese company.

“This matter came to light after we received your letter dated February 3. In preparing a brief based on your questions, we discovered the existence of CBRC-Kenya Limited. I have since written to the directors of the local company asking them to change their name or be deregistered,” she said.

Ms Gachegu said she had written to China CRBC informing them of the existence of a local company with similar names but they have yet to respond.

READ: MPs probe Chinese firm over railway deal

The revelations came as the Auditor-General Edward Ouko extended his forensic audit of the tender to include international aspects.

“A meaningful audit cannot be concluded until we interrogate the international aspect of the standard gauge railway. We are focusing on the international aspect. I don’t want to reveal more at this stage,” Mr Ouko told the committee’s hearing session chaired by Kabete MP Kamau Inchung’wa.

Dr Ouko sought to be given one and a half months to finalise the investigations.

Parliament has asked the Auditor-General to prepare a special audit report on the procurement of the tender for construction of the 609 kilometre railway line from Mombasa to Nairobi.

President Uhuru Kenyatta commissioned the project in November last year and has insisted it must go on despite rising concerns over its cost and the integrity of the contractor.

READ: Uhuru defends railway project

On Thursday, Ms Gachegu read out a letter from Harrison Hamilton and Morris advocates who are acting on behalf of the Chinese firm questioning the registration of a local company with similar names.

“I received this letter yesterday and I have not responded to them. They said they learnt from the media the presence of a local company with similar names as that of their client,” she said.

Ms Gachegu was hard-pressed to explain how the law firm knew of the existence of a local company and demanded to know if she was aware of any such media reports.

“If you have written to both CRBCs and they have not responded to your concerns, including failure to file returns or accounts, how come they have known a local company exists?” Mr Ichung’wa asked. 

Ms Gachegu said she was not aware of any media reports indicating the presence of two CRBCs.

“To the best of my knowledge, I am not aware. But we are investigating how the two companies were registered,” she said.

The registrar said her office has since detected other cases where companies are registered with similar names “and we write to inform the company registered last to change its name or face deregistration.”

Most have complied, she said.

Ms Gachegu said discovery of the double registrations have been made possible by the automation of registry that began in 2009.

Committee members demanded that the registrar explain how double registration could occur when her office requires a person seeking to register a company to conduct a search and provide more than two names to get registered.

Francis Nyenze, the minority leader in the National Assembly, termed the double registration “a smokescreen by powerful individuals to secure lucrative tenders.”

“The whole thing was choreographed, concealed and tailored to fleece the taxpayer. Who are these two local CRBC directors’ aliases for?” asked Mr Nyenze.

Igembe South MP Mithika Linturi said “the more the committee looks into this matter, the more it reads like the script of another James Bond movie.”

Ms Gachegu said there is no provision in law requiring foreign companies to have local directors but noted that such companies are expected to indicate local contact persons.

Foreign companies must file accounts with registrar according to Section 368 of the Companies Act while local companies are required to file returns.

Penalties for non-compliance include a Sh1,000 fine and an additional Sh100 for each day the company remains in default.

The committee directed the registrar to furnish it with memorandum and articles of association for both companies and to appear before it on Monday.