Directors of troubled Savannah Cement illegally sold the company’s apartment in Nairobi for an unspecified amount soon after the firm fell into administration, increasing the exposure of creditors in the firm.
The latest administration report on the affairs of the company shows the flat was being carried in Savannah’s books of accounts as an investment property before the illegal sale.
“We have been informed that an asset of the company —a flat in Parklands owned by the company and Savannah Heights— had been sold by the directors during the course of the administration. This matter is being investigated,” reads the report prepared by Peter Kahi, the administrator.
Mr Kahi’s report shows the only other asset left as investment property is a parcel of vacant land in Kitengela measuring about 2.5 acres, which the 2022 Knight Frank report valued at Sh750 million.
Mr Kahi’s report says as of May 5, 2023, Savannah was funded by two shareholders—Savanah Heights Limited and Seruji Limited—and had eight directors.
The directors of the company were Donald Kiboro Mwaura, Peter Mukiza, Allan Ofisi Paul, Benson Sande Ndeta, Igor Vishnevskiy, Martin Erich Bachmann, Yvonne Katusime Ndeta and John Gachanga Kaiganaine.
The sale of assets during administration is considered illegal. Business Registration Services, the State Corporation that administers policies and laws relating to the registration and operation of companies, states on its website that a moratorium is placed on all proceedings against a firm under administration.
Savannah went into administration in November 2022 over debts. It owes creditors Sh18 billion, with Sh8.89 billion and Sh5.23 billion owed to KCB Group and Absa Bank Kenya, respectively.
Administration is an alternative to liquidation where an administrator is appointed to run the distressed company. An administrator is appointed either by the court, directors of the company or creditors or holders of a qualifying floating charge.
An administrator usually takes over the affairs of the troubled company, investigates its affairs and develops a proposal that best safeguards the interests of creditors.
“Immediately on being appointed as administrator of a company, the administrator shall assume control of all the property to which the administrator believes the company is entitled,” reads the Insolvency Act of 2015 in part.
Mr Kahi was appointed as Savannah administrator on November 6, 2023, following the resignation of Harveen Gadhoke.
Mr Gadhoke had been appointed as the administrator on November 24, 2022, when Savannah was put under administration, but resigned on November 6, 2023.
This was after months of legal tussles over the appointment and being blocked from accessing the premises of Savannah.
Mr Kahi has struggled to get information from the directors. Section 564 of the Insolvency Act 2015 requires directors of a company in administration to furnish the administrator with a statement of affairs (SoA) as at the date of the appointment of the administrator.
The administrator says he requested the directors of Savannah to prepare and submit an executed SoA of Savannah as at July 21, 2023. However, this was not provided, forcing the administrator to apply to the court to, among other things, compel the directors to submit the statement.
Mr Kahi obtained a court order on October 4 last year and served the directors eight days later. However, he says, the directors did not comply “or offered any sort of co-operation whatsoever.” This forced Mr Kahi to obtain the status of company affairs from the finance manager using company records.
