Stay for Uchumi as court halts KRA attempt to seize assets

Companies

Stay for Uchumi as court halts KRA attempt to seize assets


Branch of Uchumi Supermarkets in Nairobi. FILE PHOTO | NMG

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Summary

  • Judge David Majanja suspended plans for the tax authorities to demand the amount, pending a report on the status of the company’s voluntary agreement.
  • As part of the CVA signed in 2020, the retailer and 121 suppliers were to form a committee and agree on how to settle the debt.
  • The collapsed retailer had lost the case in the tax appeals courts and rushed to the High Court to stop the tax authorities from enforcing the award.

The High Court has temporarily prevented the Kenya Revenue Authority (KRA) from seizing the assets of the collapsed Uchumi supermarkets due to a tax liability of 64.3 million shillings.

Judge David Majanja suspended the tax authorities’ plans to demand the amount, pending a report on the status of the company voluntary agreement (CVA), in which the collapsed retailer had to agree on the method of settling its debts, which amount to more than 4.2 billion dollars.

As part of the CVA signed in 2020, the retailer and 121 suppliers were to form a committee and agree on how to settle the debt. The CVA was subject to a six-monthly review through a meeting of creditors. Before the cases were put on hold, Uchumi revealed she was fighting a record 45 lawsuits.

“In the circumstances, I adjourn the application to allow the appellant (Uchumi) to provide the information necessary for the court to make an informed decision. The current status quo will be maintained until then,” the judge said.

The KRA has been claiming the amount resulting from capital gains tax from Uchumi since 2017. The collapsed retailer had lost the case in the Tax Appeals Courts and rushed to the High Court to prevent the Inland Revenue. to enforce the sentence.

Uchumi informed the judge that the court had ratified the CVA stopping all pending enforcement proceedings, including foreclosure proclamations, sequestrations, exercise of statutory power of sale, garnishment or evictions.

Judge Majanja said the KRA did not deny that Uchumi’s cases fall under the CVA. He added that allowing enforcement or ordering the retailer to provide security would likely disrupt the arrangement in place to the detriment of all creditors.

“Given the purposes of insolvency law, which is to allow the company to continue to operate as a going concern so that it may ultimately be able to meet its financial obligations to its creditors, this court prefers to exercise caution,” the judge said.

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