By Ablud Ochieng and Otlato Guguyu
A law that could have saved Uchumi from being shut down by its creditors came 24 hours late.
Kenya’s oldest supermarket chain is now set to wind up over its debts, after it lost the first round of a court battle, whose success was hinged on the said law.
The new legislation, the Insolvency Act No. 18 of 2015, which would have effectively stopped the creditors from proceeding with a winding up case against the retailer, is yet to be fully operationalised. The new Companies Act cannot be used to wind up a company until Parliament passes procedures to shut down a firm under the Insolvency Act of 2015.
The procedural rules are the ones that would enable, or invoke the court’s jurisdiction to hear and determine such disputes.
Parliament is required to enact the procedural rules and guidelines required under the Insolvency Act No. 18 of 2015 for liquidation of companies. Until that happens, creditors today have been placed in limbo by the lawmakers as far as filing winding up cases is concerned.
Uchumi was banking on a precedent set by the winding up petition for Blue Bird Aviation Ltd.
In the case, High Court judge Eric Ogola ruled that the old Companies Act cannot be used to wind up a company until Parliament passes procedures to shut down firms under the Insolvency Act of 2015. However, High Court judge Farah Amin has found that the retailer cannot rely on that precedent because the creditor, who has sought to wind it up for its failure to pay debts, had actually commenced the process a day before the law changed.
San Giorgio Ltd, while relying on Section 220 of the Companies Act Cap 486, now repealed, issued a statutory demand to Uchumi, dated November 5, 2015, stating that unless it is paid the outstanding sum of KSh53,106,754 within three weeks, it will petition the High Court for a winding up order without further notice. “The creditor was entitled to rely on the law then applicable.
Uchumi had due notice of the outcome and the procedure that would be applied. Payment was not made and the subsequent steps followed,” said Justice Amin
