The High Court has allowed the official receiver to take over three properties in Nairobi’s Kilimani area belonging to Cytonn, which was placed under liquidation in January.
In a ruling on November 30, Justice Alfred Mabeya allowed the official receiver to take over the properties linked to Cytonn High Yields Solution (CHYS) despite opposition from Cytonn Investment Partners and another creditor who argued that regulated investors stood to suffer.
The official receiver argued that Cytonn-affiliated firm CIP 16 LLP was holding the titles on behalf of creditors yet the court had allowed it to trace the properties for the benefit of the investors.
“I find that in tracing the assets to the Special Purpose Vehicles (SPVs) aforesaid, the Official Receiver is well within his mandate as set out in the Insolvency Act,” the judge said.
Justice Mabeya added that unless the amount advanced to the entities is paid to the official receiver with interest as per the agreement between the CHYS and CIP 16 and 15, respectively, the receiver has the right to recover the same from the identified properties for the benefit of the creditors.
The court also allowed the receiver to take over 12.5 percent shares (250,000,000 ordinary shares) in Superior Homes (Kenya) held by CIP 15.
Justice Mabeya was informed that CHYS advanced CIP15 a loan of Sh500 million on February 2, 2017, and half of the amount was used to purchase the 12.5 percent ordinary shares held by CIP 15 in Superior Homes.
According to the official receiver, there was a clear and direct link between the funds deposited advanced by the CHYS to the purchase of the said shares in Superior Homes. Justice Mabeya said the official receiver is at liberty to value the said property and shares with a view to realise them.
Evidence tabled in court showed that CHYS had loaned CIP 16 Sh3 billion to acquire the Kilimani property.
The court further heard that even though the two entities, CHYS Company and CIP 16 were distinct, the creditors were entitled to trace their investments in CIP 16, even though the parent firm was still dealing with the said property after the preservation orders were granted.
In January, the court placed CHYS under liquidation and allowed the receiver to trace the assets linked to the firm in an effort to recover more than Sh14 billion the firm owes 4,000 investors.
Justice Mabeya also ordered the preservation of the company’s assets and housing projects identified as “the Alma, Applewood/Miotoni, Riverrun, Ridge and Taraji” until the liquidation is concluded. The court noted that more than 3,000 investors sank in excess of Sh11 billion through CHYS.
Cytonn Integrated Project LLP (CIP) had pleaded with the court to lift the preservation order and allow purchasers who had bought into the project known as ‘the Alma’, before the order was issued, to complete the transfers and receive their titles.