Patricia Wanjama.
A court has upheld decision of the Registrar of Companies to block the resignation of one of the Cytonn Investments bosses, Patricia Njeri Wanjama, pending the insolvency proceedings involving recovery of Sh11 billion collected from investors.
Justice Helene Namisi held that the exit of Ms Wanjama was "an attempt to escape liability and separate herself from the insolvency proceedings".
The court backed the registrar's argument that Ms Wanjama's removal as a director, secretary and manager of the various entities of Cytonn would be detrimental to the members of the public who have invested billions of shillings and are currently on a steady path of seeking justice.
Ms Wanjama had applied for resignation from 17 trading entities linked to Cytonn, where she held various positions such as company secretary, director, statutory manager and partner.
She sued the Registrar of Companies for failing to effect her resignation. The 17 companies associated with Cytonn were special purpose vehicles for investments.
Ms Wanjama wanted the court to compel the registrar to register in the companies' registers, her resignation as company secretary, director, statutory manager and partner, as the case may be, from the said companies.
Principal partner and shareholder of the companies, which were listed as Interested Parties in suit, was Cytonn Investment Management PLC.
In her pleadings, Ms Wanjama said the registrar had delayed effecting her exit since May 2021 despite paying Sh41,000 in government fees to process the applications for resignation.
Questionable timing
However, the court questioned the timing of her intended exit, saying it was surprising that she waited from May until November 2021 to realize that the changes had not been effected. Notably, by this time, the order for administration of Cytonn had been issued.
"Definitely, the timing of it all raises eyebrows. As submitted by the official receiver, any reasonable man presented with the facts and chronology of events, bearing in mind that shortly thereafter the insolvency processes were initiated to recoup over Sh11 billion invested by innocent members of public, would come to the conclusion that this is an attempt by the Applicant to escape liability and separate herself from the insolvency proceedings," said Justice Namisi in the ruling issued on Monday.
The 17 companies include Cytonn Investment Partners Eleven LLP, Cytonn Access Way LLP, Cytonn Investment Partners Twelve LLP, Cytonn Active Strategies LLP, Milimani Havens LLP, Cytonn Investment Partners Seven LLP and Cytonn Investment Partners Eight LLP.
Others in the list are Cytonn Investment Partners Twenty-One LLP, Cytonn Education Services Ltd, East African Forum For Alternative Investments LLP, Cytonn Investments Distribution LLP, Ololua Estates LLP and Mystic Plains LLP.
Also were Seriton Construction Company Ltd, Cytonn Investment Partners Eighteen LLP, Cytonn Centre for Affordable Housing LLP and Cytonn High Yield Solutions LLP.
Dismissing Ms Wanjama's application, the judge said even assuming that the timing of the events was a coincidence, Ms Wanjama could not run away from the legal responsibility in the Limited Liability Partnerships Act.
"The Applicant has not given a satisfactory explanation, or any at all, as to why it took her four months, from November 2021 to April 2022, to pursue registration of the changes upon discovering that the companies had not done so," said Justice Namisi.
"Further, no reason has been advanced why the payments were made six months after that," said the judge.
Court papers indicate that on June 14, 2023, the Office of the Registrar communicated to Ms Wanjama that the Official Receiver had issued instructions stating that no change of records would be effected in the registers of said companies.
The Registrar told the court that according to the records, Ms Wanjama made payments through the e-citizen platform to effect her resignation in October 2022, when Cytonn Real Estate Project Notes LLP and Cytonn High Yields Solutions LLP were already in administration.
It said Ms Wanjama holds senior positions in the entities and allowing her exit would negatively impact the liquidation process as the official receiver would have lost a source in investigating the failure of the partnership.
The court further heard that there were two insolvency petitions concerning Cytonn High Yields Solutions LLP (In Administration) and Cytonn Real Estate Project Notes LLP (In Administration) against the official receiver that were pending at the commercial court.
For his part, the receiver said the insolvency law empowers him to investigate the failure of the partnership and in so doing require officers of the partnership to provide information as required.
"It is in the interest of justice to maintain the status quo, as the official receiver will require critical information, in relation to where the creditors' funds were transferred to and who should be held responsible, which Ms Wanjama, being an officer of the Cytonns, may have," said the receiver.
"The resignations are in bad faith and meant to escape any disclosure obligations on the Applicant's part, thus allowing the removal of the Applicant in the interested parties would undermine the creditors' interests and rights, being members of the public, hoping to recover their investments".
He added that the money collected by Cytonn High Yields Solutions (CHYS) from members of the public to invest on their behalf had been loaned to various Special Purpose Vehicle entities, including some of the companies captured in the list.
jwangui@ke.nationmedia.com
