Construction work at the site of Tatu City real estate project in Ruiru. A judge declined to order a winding up of the multi-billion shilling project. Photo/File
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Stephen Mwagiru and his mother Rosemary Mwagiru, said they would seek arbitration as the first option for resolving the ownership dispute.
Tatu City minority shareholders have stated that they will either seek arbitration or appeal against the Friday ruling on shareholder wrangles facing the company, indicating that the dispute could drag on for a longer time.
Through their advocate Paul Wamae, the Tatu City minority shareholders Stephen Mwagiru and his mother Rosemary Mwagiru, said they would seek arbitration as the first option for resolving the ownership dispute.
On Friday, Judge Justice Daniel Musinga declined to order a winding up of the multi-billion shilling real estate project, ruling instead that the majority shareholders should buy the minority’s stake at a fair value determined by a reputable firm of accountants.
“We have the option to appeal the ruling or go for arbitration here in Kenya or at the London International Court of arbitration,” said Mr Wamae.
“All along I have been of the view that it is in the best interest of these parties to get together to agree on fair compensation for the petitioners (the Mwagirus),” added Mr Wamae.
His interpretation of the ruling came even as the majority shareholders termed Justice Musinga’s ruling a “conclusion” of the case.
“We are grateful that the High Court has finally heard and determined the winding up petitions. We are even more grateful that justice has been served and this ruling will assist in restoring investors’ confidence in the judicial system in Kenya.
"With the winding up petition behind us, we can now go full steam with the development of Tatu City, which will change the face of urban development in Kenya” said Arnold Meyer, the acting CEO for Tatu City.
The vicious battle for ownership of Tatu City has delayed construction of an estate that is planned to house 22,000 residents on a 1,000 hectare piece of land in Kiambu.
In his Friday ruling, Justice Musinga observed that he did not have jurisdiction to determine the complex web of shareholding of mostly foreign incorporated entities.
“The court has no jurisdiction to make such orders (winding up) regarding foreign registered companies. The petitioners should pursue the alternative remedy, both here in Kenya and at the London Court of International Arbitration,” ruled Justice Musinga.
He added that the chairman of the Certified Public Accountants of Kenya would have powers to appoint a firm to value the minority shareholders’ stake in the project if the parties failed to agree.
Each of Tatu City’s seven individual shareholders own one share in the company each, 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.
Justice Musinga directed that the value of the one share that the Mwagirus own in Tatu City and sister company Kofinaf be determined by an independent arbitrator, saying that the relation between the two parties has been damaged and the only remedy is to disengage them.
“I will not, however, make a winding up order since there is an alternative remedy available and that is acquisition of their shares by the majority shareholders at a fair value,” ruled Justice Musinga.
While accepting that the petitioners have shown that they own some shares in the company through a company incorporated offshore, the judge said the Kenyan court lacks jurisdiction to determine the shareholding in those company since the agreement among the parties was that any dispute should be resolved through English law.
The case which has been pending in court since 2010 has derailed the multibillion real estate project whose value on completion is estimated at Sh240 billion.
In the judgment delivered on his behalf by High court Judge Jacqueline Kamau, the appeal court Justice Musinga said the shareholders intentionally entered into a complex ownership structure and declined to consider the shares owned in the company other than the one (1) share record held at the company’s registry.
“All these other foreign companies where the petitioners have some interest in and all of which converge at cedar IV are not parties to these petitions and this court has no jurisdictions to make any orders regarding their shareholding,” said the Judge.
The Mwagirus claim they own 14.4 per cent shares in Cedar IV with Rosemary Njau Mwagiru owning 13.9 per cent and Stephen Mwangiru having 0.5 per cent in the company.
Cedar IV owns majority shares in Tatu City, and its main shareholder is the Renaissance group.
However, their stand was disputed by the majority shareholders who held that the two owned only (1) share each in the two companies, and the ownership dispute of the other companies is not before the court.
