Nakumatt, arguably the largest retail store that has ever operated in Kenya, had its fate sealed on January 7 this year, after being placed under receivership in January 2018. A meeting of the creditors of the beleaguered giant, called by Mr Peter Kahi, the court-appointed administrator, unanimously voted to dissolve the chain of supermarkets.
The total amount owed to various parties is in excess of Sh38 billion, of which Sh4 billion is attributable to commercial paper holders, Sh18 billion to creditors and the rest to commercial banks. The largest amount is attributable to Diamond Trust Bank, which is owed approximately Sh3.6 billion.
Following the dissolution, commercial paper holders will receive nothing. The other harsh reality is that unsecured creditors may not receive a single penny even after the liquidation process is complete.
For starters, Nakumatt didn’t own many assets since most of its establishments were leased. The sale of its branches has yielded slightly over Sh400 million, which will be shared among secured creditors. The bulk of the stocks they kept were on consignment- meaning they only provided shelf space and would remit amounts to the creditors once goods were sold on agreed terms with the suppliers. Going by the level debts, Nakumatt let down a large number of suppliers.
As is normally the case in company liquidations, any residual amounts raised from the sale of the identifiable assets will be utilised in settling any administration and liquidation expenses and the rest utilised in settling secured creditors’ amounts. I doubt the proceeds will be sufficient enough to even settle a fraction of the secured amount.
What has come into sharp focus is the issue of corporate governance. A report by Mr Kahi indicates former Chief Executive Officer Atul Shah and his son Ankoor Shah are among family members who obtained interest-free loans to the tune of approximately Sh1 billion. Mr Shah is also accused of writing off stocks worth Sh18 billion in 2018 in a bid to massage the financials! These irresponsible actions then beg the question: Should such actions by directors be left unpunished?
It is increasingly clear that more attention needs to be taken by relevant watchdogs to curb acts of fraud committed by company executives.
We have already seen the multi-agency teams fighting graft in the public sector in our country taking this approach.
John Orapa, Nairobi. The author is a member of the Institute of Certified Public Accountants of Kenya
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