A giant road construction firm, Put Sarajevo General Engineering Company Limited, which thrived during the era of the late President Daniel Moi, has been placed under liquidation for failing to settle a Sh800 million debt to three creditors.
High Court judge Helene Namisi declared the firm insolvent after it failed to pay the creditors, including law firm Hamilton Harrison & Mathews (HHM), a tyre supplier, and the National Bank of Kenya (NBK).
“On the basis of the evidence, I find that there is sufficient evidence that the respondent (Put Sarajevo) is unable to settle its debts,” said the judge.
The court appointed an official receiver, or a person nominated by the official receiver, as the liquidator of Put Sarajevo’s properties.
Liquidation is the process of winding up a company, selling off its assets and paying off its creditors and shareholders before ceasing operations. Companies liquidate when they cannot meet their obligations as they fall due, resulting in bankruptcy.
In Kenya, the law provides for three modes of liquidation, including voluntary liquidation by members or creditors or by the court.
Liquidation by the court is a compulsory process and is often initiated by a creditor when the insolvent company fails to pay off liabilities owed to such a creditor.
The court has the power to wind up a company in certain circumstances, such as when shareholders decide by a special resolution to have the court liquidate the company, or if the company has not commenced active business for a year after it is incorporated or it has suspended active business for one year.
The court may also liquidate a firm if the company is unable to pay its debts, or if the court considers that justice will be rendered by liquidating a company.
Put Sarajevo handled many big-ticket contracts in the 1980s and 1990s, making it one of the largest contractors in Kenya at the time.
HHM moved to court in 2020 claiming that the construction company was unable to pay a debt of Sh5.8 million arising from legal services it offered to Put Sarajevo.
The law firm said it issued a demand to the former client on March 17, 2020, asking the construction company to pay the amount.
As the case was pending determination, Arrow Cars Limited applied to join the matter as a creditor.
The company said it supplied tyres to Put Sarajevo on a credit basis and that the construction firm had failed to clear a balance of Sh2.98 million.
The court was informed that a suit was determined against the company.
As of January 30, 2023, the supplier said the debt stood at Sh4.8 million.
The National Bank of Kenya also joined the case, saying it had extended credit facilities to the construction firm, comprising of overdrafts, asset finance, bonds and guarantees for the purpose of working capital requirements as the firm undertook various civil construction projects with the Kenya Rural Roads Authority and the Kenya National Highways Authority.
The lender said as of March 12, 2019, the claim stood at Sh876 million.
“Put Sarajevo General Engineering Company Ltd is hereby declared insolvent and is hereby liquidated under the provisions of Section 424 (1) (e) of the Insolvency Act,” Justice Namisi said.
