The multi-billion real estate project, Tatu City, escaped winding up after a Nairobi court ruled that the minority shareholders be compensated their stake in the company as an alternative exit strategy. The two minority shareholders, Stephen Mbugua Mwagiru and Rosemary Wanja, will be compensated the direct one share they each own in Tatu city and sister company Kofinaf.
Justice Daniel Musinga directed that the value of the one share each be determined by an independent arbitrator saying that the relation between the two parties has been damaged with the only remedy being disengagement.
“I will not however make a winding up order since there is an alternative remedy available and that is acquisition of their shares by the majority shareholders at a fair value,” ruled Justice Musinga.
This is a blow to the two, who petitioned the court to dissolve the firms so that they could take their share of investment. Mr Mwagiru and Ms Wanja claimed that they own 14.5 per cent in Tatu city and 15.8 per cent in the Kofinaf, which is disputed by majority shareholders.
While accepting that the petitioners have shown that they own some shares in Tatu City through companies incorporated offshore, the Judge said the Kenyan court lacks jurisdiction to determine the shareholding in those firms since the agreement among the parties was that any dispute should be resolved through English law.
The case which has been pending in court since 2010 has derailed the multi-billion real estate project which is estimated at Sh240 billion.
In the judgment delivered on his behalf by High Court Judge Jacqueline Kamau, Justice Musinga said the shareholders intentionally entered into a complex ownership structure and declined to consider the shares owned in the company other than the one share records held at the company’s registry.
“All these other foreign companies where the petitioners have some interest in and all of which converge at Cedar IV -one of the foreign firms- are not parties to these petitions and this court has no jurisdiction to make any orders regarding their shareholding,” said the Judge.
The Judge said the petitioners have manifested desire to exit from Cedar IV and other foreign companies through which they own the Tatu City and as such they should seek remedy at English courts and London Court of International Arbitration which has the exclusive jurisdiction to handle the dispute.
Source: Business Daily
