The High Court has allowed the Official Receiver to take over a 40-acre parcel of land in Ruiru, Kiambu County belonging to investment companies linked to Cytonn, for sale and proceeds be shared to investors who lost billions of shillings.
Justice Alfred Mabeya allowed the application by the Official Receiver after dismissing objections by the firms, arguing that they were different entities from Cytonn High Yield Solutions, which was placed under liquidation.
The judge said the two Special Purpose Vehicles (SPVs) who opposed the takeover, did not give any concrete reasons as to why the property should not be sold for the benefits of the investors.
“The money loaned to the two companies has not been paid up and the only recourse is for the said property to be vested in the Official Receiver for him to liquidate the same for the benefit of languishing investors,” said the judge, adding that the investors have a stake on the said property.
Read: Home buyers locked out of property market
The Official Receiver sought to be allowed to have title documents for the property known as Riverun in Ruiru. He also asked that 40 acres be given to him as the liquidator of Cytonn High Yield Solutions and Cytonn Real Estates projects.
The Receiver further urged the court that 50.08 acres should be registered in the name of Muiruri Laban Limited (MLL).
MLL was the registered proprietor of the property with 50 percent rights while Cytonn Real Estate LLP had the technical knowhow of the property and Cytonn Investment Management Plc (CIMP) was to raise funds for the projects, and each acquired 25 percent rights.
The court heard that Cytonn High Yields Solutions LLP (CHYS), entered into a financing agreement with CIP 12 LLP to loan the incorporated SPVs Sh1 billion with the sole purpose of meeting the needs of the land owner in the joint venture.
Cytonn Real Estate Project Notes LLP then entered into a financial agreement with CIP LLP to facilitate the acquisition of the property in Kiambu.
The project, however, failed to take off and the deal was dissolved on November 11, 2022 between MLL and CIMP.
Cytonn Investment Partners Five (CIP5 LLP) and Cytonn Investment Twelve (CIP 12 LLP) opposed the application arguing that they were separate and distinct legal entities from CHYS.
Read: Investors skip bourses, put cash in real estate
The court heard that CIP5 and CIP 12 were solvent and the official receiver should follow the due process in the recovery of debts.
The judge noted that the promoters of the companies under liquidation are the same ones as those of the partnership LLPs or were closely related.
“And to the extent that the said companies took monies from the public and ‘lent’ the same to the associated Partnership LLPs or SPVs with no security at all, the owners of the collapsed companies as well as those related partnership LLPs or SPVs cannot hide from the court’s torch as it seeks to find the monies of the unsuspecting public that was hoodwinked to invest in the collapsed companies,” said the judge.
The court said it would invoke the doctrine of tracing the creditors’ monies to the properties acquired by the partnership LLPs and SPVs and have the same returned to the public.
