Fresh documents filed in court have revealed that Nakumatt Supermarkets is nearly wholly owned by a Mauritius-registered company, pointing to a potential complication in filing claims for suppliers and creditors who are owed billions of shillings by the struggling retailer.
The documents filed in the High Court and before the Competition Authority of Kenya (CAK) have offered a fresh insight into Nakumatt’s ownership, asset base, liabilities and other closely guarded secrets.
Nakumatt CEO Atul Shah solely owns the retail chain through a holding company registered in Ebene Cybercity, a suburb in Indian Ocean island nation Mauritius, which has over the years gained global reputation as a tax haven.
Mauritius-registered Nakumatt Group Limited is wholly owned by Mr Shah, documents filed with the CAK indicate.
The firm in turn owns 99.999 per cent of Kenya’s Nakumatt Holdings Limited. Mr Shah individually owns the remaining 0.001 per cent.
The documents have also revealed that Nakumatt’s Kenyan operation owned assets worth Sh14.7 billion as at August 31, 2017. The value of its assets dropped by more than half from February 28, 2017, when they were worth Sh32.9 billion.
The majority of Nakumatt’s assets have been used as security for loans, leaving little room for creditors to pursue the struggling retailer’s property to recover their dues.
Pursuit of payment
The documents before the CAK and the High Court do not indicate whether the Mauritian entity has any assets in its name.
The revelation of Nakumatt’s Mauritian registration, however, means that even if the retailer’s holding company has any recoverable assets to its name, suppliers, landlords and other unsecured creditors would still have quite a mountain to climb in their pursuit of payment.
Jacqueline Munyaka, a Nairobi-based advocate, says that even if the struggling retailer’s assets were not tied up in loans creditors would first have to succeed in liquidating Nakumatt’s Kenya operations before pursuing its parent firm.
“Legislation in Mauritius is difficult. Creditors would after liquidating the assets in Kenya have to go to court and apply for lifting of the corporate veil then seek a court order to attach the assets in Mauritius.
The process is, however, very difficult as the level of proof in such cases is very high,” said Ms Munyaka in an interview.
Nakumatt is currently seeking the appointment of an administrator to run its affairs until it gets back on its feet.
High Court judge Joseph Onguto will on Thursday rule on whether to appoint an administrator or proceed with the insolvency petition that has attracted 90 creditors.
Tuskys had initially indicated that it would purchase a 51 per cent stake in Nakumatt, but has since instead applied for a merger of the two retail chains.
Should the transaction go through, Tuskys will each month pocket one per cent of Nakumatt’s gross monthly turnover.
The CAK application shows that Nakumatt owes banks and other secured creditors Sh11 billion. The documents also indicate that Mr Shah and his Mauritian firm have pumped Sh18 billion into the retailer through shareholder loans.
Opposed to merger
Tuskys’ attempted rescue mission has, however, hit a stumbling block as one of its shareholders, Yusuf Mugweru, has moved to the CAK to object the proposed merger with Nakumatt.
Mr Mugweru in his objection says he has never been consulted or provided with information regarding the proposed merger, yet Kenyan laws require all shareholders of a firm to unanimously consent to such a transaction.
Mr Mugweru has through Murgor & Murgor Advocates said in the objection that Tuskys itself is in a worrying financial state hence cannot afford to bail out Nakumatt.
“The financial affairs of Tuskys continue to be shrouded in secrecy and not disclosed to our clients who notify you that it is no longer profitable as the last dividend was paid out to them in 2012.
Recently, a purported dividend of Sh8.75 million was paid out to Mugweru Investments Limited, without any accompanying financial statement of declaration of the entire profit and resolution for distribution.
“Our clients’ opinion is that this paltry amount was forwarded to the impoverished shareholder simply to forestall any opposition to the proposed merger with Nakumatt. In the circumstances it defies logic that Tuskys with its marginal financial state can purport to bail out, support, merge, manage or assist Nakumatt to get out of its multi-billion shilling problems,” Mr Mugweru’s lawyers say.