Tatu City owners appeal for freeze of asset sales

Minority shareholders of multi-billion shilling real estate development Tatu City have moved to the Court of Appeal to plead for a freeze in the sale of the company’s assets pending determination of an ownership dispute.

The shareholders moved to the court after the High Court declined to stop majority owners of the estate from selling its assets in a July ruling.

“The applicant will suffer substantial loss which is unlikely to be adequately compensated by way of damages if the judgment is not stayed and the injunction sought granted,” say the minority shareholders in the appeal papers.

The court had in January this year ordered majority shareholders of the Tatu City project to buy out the minority, noting that they had irreconcilable differences.

Tatu City was designed as an high-end residential and commercial city is valued at more than Sh240 billion ($3 billion) on completion. It is planned to accommodate more than 22,000 residents on a 1,000 hectare estate.

In the application for injunction against the sale of Tatu City’s property, minority owners Stephen Mwagiru and his mother Rosemary Mwagiru argue that the majority shareholders are in the process of disposing Tatu City assets.

They claim that the judge erred when he gave the orders that they be bought out yet they had not sought the same.

(READ: Tatu City duo seek orders against sale of disputed assets)

In the January judgement, Justice Daniel Musinga ruled that the minority shareholders’ stake that is reflected in the registrar of companies’ records should be bought out at current market rates.

He declined to direct the majority shareholders to buy out the shares held through a company incorporated offshore.

But the petitioners in their appeal said that the judge should have directed winding up of the company. They further claim that the offshore company is just an investment vehicle and all assets of Tatu are in Kenya therefore local courts have jurisdiction to hear the dispute.

But in its response, Tatu City majority shareholders have urged the court to reject the request to freeze the assets arguing that the appeal has little chance of success.

They accuse minority shareholders of trying to force them to buy out on their terms by lodging hurdles which the majority stakeholders said was an abuse of court process.

They further said that there was no need to suspend the High Court judgment by Mr Justice Musinga arguing that only a small portion of the decision is being challenged.

“The allegation the applicants hold 14.5 per cent and 15.8 per cent of the shares in the companies is fanciful and has been dealt with and dismissed by the superior court,” said Alexey Perelman, director of Tatu City in a replying affidavit.

“For avoidance of doubt, it remains the company’s contention that the applicants own one share out of 4,500,000 in Kofinaf Company and two shares out of 1,575,000 in Tatu City Limited,” adds Mr Perelman.

Each of Tatu City’s seven individual shareholders own one share in the company, while the bulk of the shares (1,569,993) are held by Cedar IV, a foreign incorporated entity that is in turn also owned by another complex web of firms.

Besides the Mwagirus, other shareholders of Tatu City include Judith Nyaga, Vimal Shah, B.D. Shah, Tarun Shah and Deepak Shah.

An agreement signed earlier between the shareholders had provided that disputes would be referred to English courts or the London Court of International Arbitration.

The Mwagirus, however, want the Court of Appeal to determine whether Kenyan courts have powers to decide on the disputed shareholding of the numerous foreign-registered entities that collectively own Tatu City.