A Nairobi court has issued an order temporarily restraining Equity Bank from taking over the running of TransCentury PLC over an unpaid debt amounting to Sh4.8 billion.
Sitting in Milimani Commercial Court, Justice Alfred Mabeya issued the order to George Weru and Muniu Thoithi who are joint receiver managers, putting breaks on their intended take-over of the firm’s assets pending hearing and determination of the case. Equity had appointed Weru and Thoithi as receiver managers of the investment firm on June 16.
The order was issued through Nyachoti and Company Advocates who told the court that the appointment of the two receiver managers will deal a blow to the firm’s ongoing projects including the ones being carried out by its subsidiaries.
Some of the projects valued at over Sh4 billion are in Kenya, Tanzania, Uganda, DRC and Zambia, most of them being at an advanced stage, while others have been finalized pending inspection and approval.
Trans Century argues that the running projects will, on completion, generate finances to go towards the offsetting of the outstanding debt.
The firm submitted that it has been liquidating the outstanding debt and has made all the efforts to agree on a workable program with Equity in light of the hard economic situations in the country.
“But the bank has rejected our numerous proposals without any justifiable causes and now intends to completely cripple our operations and entire business investment of many years by the said appointments.” The firm submitted.
“As such the ripple effect and confusion in the management of the said projects will be enormous and will lead to huge financial losses to other contracted companies associated thereto compared to the debt in respect of which Equity has appointed the managers.”
Documents tabled in court point to a forceful takeover of the investment firm’s premises on June 16, throwing operations into a spin.
The firm claimed Equity Bank is aware that it is in the final stages of finalising rights issues to the tune of Sh2 billion, an amount that would be sufficient to offset any outstanding debt, adding that the bank lacks basis to commence any form of insolvency proceedings against them.
The court heard that the appointment of the managers is unnecessary and that the purported debt informing the alleged appointment is disputed.
Equity and the joint receivers were instructed to respond to the matter within 14 days.
Last week, Equity Bank placed Transcentury and the East African Cables under receivership and administration for defaulting on Sh3.01 billion.
In a notice on local dailies, the lender appointed Messrs Muniu Thoithi and George Weru from PricewaterhouseCoopers (PwC) as joint receivers and managers.
Thoithi is a specialist in forensics and business recovery services at PwC.
“The purpose of this is to notify all interested stakeholders that following Receiver’s appointment, the affairs and business of the company shall be directed by the receiver,” PwC said in a statement.
“The powers of the receiver extends to all assets and undertakings of the company,” it added.
The notice also said that the receiver and manager’s representatives are authorized to deal with the assets of the company.
“The Power of Directors in terms of dealing with the company’s business and assets no longer apply,” it stated.
“Any person who purports to hold, receive, use, or attempts to buy, sell, contract, or otherwise deal with the assets of the company or with the company without the prior written consent of the Receivers will be acting in contravention of the law and will be liable to legal action.”
By being placed under receivership, this signals Equity’s target to settle bad debt.
Consequently, TransCentury has moved to court and secured an injunction halting Equity Bank’s June 16, 2023 notice appointing a receiver.
Equity Bank Kenya declined a request to write off over Sh2.8 billion ($20 million) debt owed by TransCentury Plc and instead placed the firm in administration, in a drastic turn of fortune for what was once Kenya’s most promising publicly listed investment firm.
High Court Judge Justice Alfred Mabey temporarily suspended the receivership pending the hearing of the case application, which he also certified as urgent.
