The troubles facing Cytonn Investments have worsened after a judge ordered the liquidation of its investment arms to recover over Sh14 billion owed to some 4,000 investors.
Justice Alfred Mabeya ordered the liquidation of Cytonn High Yield Solutions and Cytonn Real Estate Project Notes. He also ordered for preservation of the company’s assets and housing projects identified as “the Alma, Applewood/Miotoni, Riverrun, Ridge and Taraji” until the liquidation is concluded.
In the judgment, the judge noted that over 3,000 individuals had put in excess of Sh11 billion in Cytonn High Yield Solutions (CHYS) and 886 others over Sh4 billion in the Cytonn Real Estate Project Notes (CPN).
He said the decision was because the court was sensitive to the plight of the individuals who invested their money.
The decision paves the way for sale of Cytonn properties by the liquidator to recover the sums owed to the investors, who have been complaining for over five years of frustrations and delayed returns for their investments.
Justice Mabeya said liquidation appoint a liquidator who will have the interests of the creditors at heart was the only viable option.
“There is evidence on record that the monies paid by the creditors of CHYS and CPN was sank in these projects and all that CHYS and CPN has in possession are mere pieces of paper called Loan Notes. There are no securities held by way of charges for what the investors sank in CHYS and CPN, who in turn sunk the same into these projects,” said the judge.
He also noted that there is no likelihood of turning the company around to enable it roar back and sort out the anxious investors and creditors.
While the investors have been demanding their money from the company, the firm has been blaming its woes on Covid-19 and asking for more time to restructure its business.
Court documents indicate that the total clients’ liability for the two investment arms as at August 31, 2021 was Sh14 billion. A court-appointed administrator, Kereto Marima, had told the court that there are not sufficient assets to settle the liabilities. All that was in his possession were loan notes that he has been unable to enforce.
The administration process of the two troubled investment funds started in October 6, 2021. Asking the court to extend the administration period for a further one year, Mr Marima said the process was yet to achieve its purpose. But the investors were opposed to the bid and were pushing for the liquidation.
The investors and creditors were therefore relieved when the judge declined Mr Marima’s request for extension of the administration. Justice Mabeya said that a request by the creditors for termination of the administration process and preservation of the assets was merited.
“The Administration of Cytonn High Yield Solutions (CHYS) and Cytonn Real Estate Project Notes (CPN) is hereby terminated and is placed under liquidation,” said Justice Mabeya while sitting at the High Court in Nairobi.
The court also appointed an official receiver following a finding that Mr Marima had links with promoters of CPN and CHYS.
“The administrator to forthwith surrender to the official receiver all the properties and belongings of CHYS and CPN as well as all the administration documents,” said Justice Mabeya.
He further ordered that all other legal proceedings against Cytonn be suspended to await the process of liquidation and that those claims be lodged with and be proved before the liquidator.
Even though both CHYS and CPN were special purpose vehicles that were separate legal entities from Cytonn Investments, the judge said that all of them are “Cytonns”.
