Companies

Reprieve for Uchumi as court stops KRA bid to seize assets

uchumi

Uchumi Supermarkets branch in Nairobi. FILE PHOTO | NMG

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Summary

  • Justice David Majanja put on hold plans by the taxman to demand the amount, pending a report on the status of Company Voluntary Agreement.
  • Under the CVA signed in 2020, the retailer and 121 suppliers were to form a committee and agree on how to settle the debt.
  • The collapsed retailer had lost the case before the tax appeals tribunals and rushed to the High Court to stop the taxman from enforcing the award.

The High Court has temporarily stopped Kenya Revenue Authority (KRA) from attaching assets of collapsed Uchumi Supermarkets over tax liability of Sh64.3 million.

Justice David Majanja put on hold plans by the taxman to demand the amount, pending a report on the status of Company Voluntary Agreement (CVA), in which the collapsed retailer was to agree on the mode of settling its debts, which amount to more than S4.2 billion.

Under the CVA signed in 2020, the retailer and 121 suppliers were to form a committee and agree on how to settle the debt. The CVA was subject to review every six months through a meeting of creditors. Before the cases were put on hold, Uchumi revealed that it was fighting a record of 45 legal suits.

“In the circumstance, I adjourn the application to enable the Appellant (Uchumi) to provide the necessary information for the court to make an informed decision. The status quo in force shall be maintained until then,” the Judge said.

KRA is demanding the amount from Uchumi arising from capital gains tax since 2017. The collapsed retailer had lost the case before the tax appeals tribunals and rushed to the High Court to stop the taxman from enforcing the award.

Uchumi informed the judge that the court had ratified the CVA stopping all pending execution proceedings including proclamations of attachment, sequestrations, the exercise of the statutory power of sale, distress for rent, or evictions.

Justice Majanja said KRA did not deny Uchumi’s affairs are under the CVA. He added that to allow execution or direct the retailer to provide security would likely upset the arrangement in place to the detriment of all creditors.

“In view of the objects of the Insolvency Act, that is to enable the company to continue to operate as a going concern so that ultimately it may be able to meet its financial obligations to its creditors, this court would rather err in caution,” the judge said.

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