A record 26 firms went into administration in the year to June 2024, records show, underlining the increasing struggles for companies to stay afloat in a tough business environment underpinned by stiff competition, high taxation, and increasing interest rates.
Company administration is a process where an insolvency practitioner is appointed to restructure a business by ensuring that it is a going concern with the aim of either turning it into a profitable entity or effecting a sale of the business to preserve its value.
September and May saw the highest number of firms (six each) placed under administration during the financial year 2023/24, according to data from the Business Registration Service (BRS).
October and June each saw four firms placed under administration, one in November and two each in January and February.
BRS, however, did not provide a detailed breakdown of the specific sectors that the firms were operating in.
The last time there were near as many firms under administration was during the financial year 2021/22, when 20 entities were put into the process either by a court order or directly by their own volition.
One of the notable companies that went into administration during the just-ended financial year is Mastermind Tobacco (K) Ltd. The firm was placed into administration in December last year by I&M Bank over an undisclosed debt.
I&M Bank appointed seasoned administrator Ponangipalli Rai to take over operations of the firm, which at the time was Kenya’s second-largest cigarette manufacturer.
Vehicle and Equipment Leasing Limited (Vaell) also met a similar fate in February this year after defaulting on creditors to the tune of Sh1.1 billion.
The running of the affairs of the company was taken over by the Official Receiver. The company had used computers, furniture, motor vehicles, machinery, and heavy earth equipment worth Sh408.3 million as collateral to secure loans.
Sendy Group, a technology-based logistics firm, was also placed under administration in September last year after defaulting on its debt. The High Court appointed Peter Kahi of PKF Consulting to oversee the operations of the firm which had been struggling in the months leading to the court decision.
In May this year, e-commerce firm Copia was also placed into administration by its board of directors after failing to attract capital even as its costs piled.
The rise in companies falling into administration underlines the struggles that many businesses are facing especially the inability to raise capital in an environment of high interest rates.
The process of administration puts a moratorium on all proceedings against a company, giving it some much-needed breathing space to recover.
However, some companies such as Nakumatt Holdings, ARM Cement Plc, and Deacons East Africa failed to recover despite being put under administration
