Tatu City to go on as court throws out suit

INVESTORS who have put their money in the multi-billion Tatu City project were all smiles yesterday after the High Court rejected pleas by minority shareholders to wind up the company.

Instead, Justice Daniel Musinga asked the majority shareholders to buy out the two minority shareholders who had sought the winding up of the company after they fell out.

Musinga came to the conclusion that minority shareholders, Stepehn Mwagiru and Rosemary Wanja, were entitled to some relief but no order as to the winding up would be issued.

“I will not 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,” he said.

The petitioners, he said, are acting unreasonably by seeking to have the companies wound up so as to force a buy-out on their terms even where the court has no jurisdiction to make such orders regarding foreign registered companies.

The two shareholders had petitioned the court through Waguthu Holdings Ltd to wind up Tatu and Kofinaf on grounds that other shareholders led by Moscow-based Renaissance Capital have blocked them from the management of the proposed real estate project.

Both claimed to hold 11 per cent shareholding but court documents indicate that majority shareholders transferred their interest to Renaissance Capital as a security for a consideration of $62.5 million (Sh5 billion).

But the Judge stated that the value of the petitioner’s shares in the companies shall be determined by a reputable firm of accountants to be agreed upon by the parties.

Given the complex ownership structure of the two companies, the court also declined the invitation made by the petitioners’ counsel to unveil the corporate veil and assume that the petitioners are beneficial owners of substantial shares in the two companies other than the one share for each one of them as disclosed in the records.

“If this court were to purport to pierce the corporate veil of Cedar 4, Cedarsoc and the other foreign companies as prayed by the petitioners, it would be engaging in an illegality since it has no jurisdiction to do so,” he ruled.

Cedar 4 Ltd, which holds 99 per cent shares of the two companies, is a company incorporated in Mauritius. The two shareholders of Cedar 4 are two other companies known as SCFII Holding Ltd, a company incorporated in Cyprus and Manhattan Coffee Investment Holdings Limited.

The judge said all the other foreign companies where the petitioners have some interest in and all of which converge at Cedar 4 are not parties to the petitions and the court has no jurisdiction to make any orders regarding their shareholding.

Since the petitioners have manifested their desire to exit from the company and other foreign companies where they have financial interest, the judge said that unless an amicable buy-out settlement is arrived at, they should consider commencing arbitrate proceedings at the London Court of International Arbitration

“The petitions before court relate to Tatu City and Kofinaf. And this court has no jurisdiction to make any orders in respect of Cedar 4 or any other company that is incorporated overseas,” he said.

“After all the shareholders of Cedar 4 have an agreement that all the affairs of the company including disputes are governed by the English Law and shall be subject to the exclusive jurisdiction of English courts and the London Court of International Arbitration,” he added.

The petitioners claim to have beneficial shareholding through Manhattan Coffee Investment Holding is owned by Redline Investment Corporation (50 per cent) and Black Holdings (50 per cent).