https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/12424

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT NAIROBI** **COMERCILA AND TAX DIVISION** **INSOLVENCY PETITION NO. E001 OF 2024** **RE: IN THE MATTER OF INSOLVENCY OF ROSE WOOD CAPITAL LIMITED** **RULING** 1. Before this court for determination is the Notice of Motion dated 11th July 2025, brought under section 1A, 1B, & 3A of the civil Procedure Act, Section 426, 522(1), 523(a), 531,532(1)(c) and 533(1)(a) of the Insolvency Act and Article 159(2)(e) of the Constitution of Kenya. The Applicant seeks the following orders: 2. *An order for the non-interference with the company’s records domiciled at Pioneer House, 4th Floor.* 3. *An order to issue requiring the company’s directors to submit all the company’s records in their custody.* 4. *An order placing the company under administration in lieu of a liquidation order and appointing an insolvency practitioner as an administrator.* 5. *Costs of the application be in the cause.* 6. The application is grounded in the facts on the face of the record and is supported by the annexed affidavit of Kevin Safari, sworn on 11th July 2025. He deposes that he is authorized by the other 42 interested parties to swear this affidavit on their behalf. He avers that the company was engaged in lending to its customers and that the interested parties herein were investors in the company. 7. That the company was a going concern, and upon the demise of the managing director, the surviving director, without consulting the investors, proceeded to file the liquidation petition. At the time of filing the petition, the company owed the interested parties a total sum of Kshs. 233,052,246/=. However, the surviving director misrepresented the facts by indicating the company’s liability at Kshs. 110,000,000/=, thereby concealing the company’s total liability. 8. He contends that unless the court intervenes, the records held at the company will be wasted or lost as the company used to advance secured credit to its customers, secured by logbooks; as such, there exist recoverable debts owing to the company and which can be utilized to pay the interested parties herein. 9. The application is not opposed, and the Plaintiff filed written submissions dated 11th December 2025. 10. At the hearing of the application, Mr. Tole informed the court that Mr. Benedict Omollo was appointed as a provisional liquidator, who compiled an interim report on the company’s records and books and presented it to the official receiver and which was filed in court. 11. The Provisional liquidator reports that Rosewood Capital Limited (in Liquidation) is insolvent, has ceased operations, and its status as a going concern is doubtful. Although the company's assets and records have been secured, the review of its financial records revealed accumulated losses exceeding **Kshs.101,850,044/=,** a largely non-performing loan portfolio, depleted cash reserves, incomplete accounting records, and significant discrepancies between verified investor claims and those lodged in the insolvency proceedings. 12. The report further notes that while the loan portfolio is largely secured and debt recovery may realize between **60% and 70%** of its value, such recoveries would be insufficient to satisfy verified investor claims. It recommends aggressive debt collection, verification of investor claims, restructuring investor obligations, possible conversion of investor claims into equity, and board reconstitution. 13. The Provisional Liquidator concludes that substantial fresh capital would be required to revive the company, although it remains uncertain whether administration would produce a better outcome for creditors than liquidation. **Analysis and determination** 1. I have given due consideration to the application, the supporting affidavit, the submissions by counsel and the Provisional Liquidator's Report filed pursuant to the orders of this court of 13th October 2025. The singular question for determination is whether the Company should be placed under administration in lieu of a liquidation order. 2. It is not in dispute that a liquidation petition dated 10th November 2023 was filed and Mr. Benedict Ongollo appointed as a provisional liquidator, to take custody of and preserve the assets and records of the company pending the determination of the liquidation cause. The Provisional Liquidator has since assumed office and discharged his statutory mandate by securing the company's premises, books of account and records, reviewing its financial affairs and filing a comprehensive report before the Court. In my view the company is therefore already under the protection and supervision of this Court through the Provisional Liquidator. 3. **Section 522(1)** of the **Insolvency Act** provides the objectives of administration as follows: 1. ***The objectives of the administration of a company are the following:*** 1. ***to maintain the company as a going concern;*** 2. ***to achieve a better outcome for the company's creditors as a whole than would likely to be the case if the company were liquidated (without first being under administration).*** 3. ***to realize the property of the company in order to make a distribution to one or more secured or preferential creditors.*** 4. It is therefore not enough for an applicant to merely demonstrate that a company possesses recoverable assets. The court must be satisfied that placing the company under administration is reasonably likely to achieve one or more of the statutory objectives set out under Section 522(1). Administration is intended as a rescue mechanism and not merely as an alternative to liquidation. 5. Further, **Section 533(1)(a)** of the **Insolvency Act** provides that: **The Court may make an administration order in relation to a company only if satisfied—** **(a) that the company is or is likely to become unable to pay its debts; and** **(b) that the administration order is reasonably likely to achieve an objective of administration.** 1. Administration is designed to rescue viable businesses and should only be invoked where there exists a realistic prospect of achieving the statutory objectives under the Insolvency Act. Administration is not an end in itself but a means of preserving value where there is genuine prospect of rescuing the company or securing a better outcome for creditors than immediate liquidation. 2. In this case, the Applicant argues that the company holds recoverable loan securities and that recovering debt could help repay investors. However, the Provisional Liquidator’s report presents a different perspective. It states that Rosewood Capital Limited is insolvent, has stopped operating, and its status as a going concern is doubtful. 3. The report also notes that the company has accumulated losses exceeding Kshs.101,850,044/=, maintains a mostly non-performing loan portfolio, has run out of cash reserves, has incomplete accounting records, and shows significant discrepancies in investor claims. While the report recognizes that the loan portfolio is largely secured and that recoveries might amount to 60% to 70% of its value, it concludes these recoveries would still be insufficient to cover the verified investor claims. Furthermore, it indicates that a substantial capital injection would be necessary for the company to resume operations and that it’s uncertain whether administration would be more beneficial than liquidation. 4. The Applicants have not challenged the findings of the provisional liquidator. Indeed, although the application was unopposed, the court is not relieved of its duty to satisfy itself that the statutory threshold for granting an administration order has been met. 5. Based on the material before the court, it cannot be concluded that administration is likely to keep the company as a going concern or provide creditors with a better result than liquidation. The evidence shows that the company has been non-operational for a long time, its financial records are incomplete, its liabilities far exceed its recoverable assets, and any real chance of rescue would need significant new investment, which remains uncertain.. 6. The court acknowledges the Applicant's concern about safeguarding the company's records and loan securities. Maintaining these records aligns with the liquidator's statutory duties under the Insolvency Act and is essential for recovering the company's assets to benefit all creditors. Therefore, it is important to ensure that the company's books, records, and securities are protected, and that any records still in the possession of the former directors are handed over to the Provisional Liquidator. 7. Accordingly, I find that the Applicant has failed to satisfy the requirements of Sections 522 and 533 of the Insolvency Act for the grant of an administration order. The prayer seeking to place the company under administration is therefore declined. However, prayers (i) and (ii), relating to preservation of the company's records and the surrender of all company records in the possession of the directors to the Provisional Liquidator, are merited and are hereby allowed. 8. Consequently, the Notice of Motion dated 11th July 2025 succeeds only to the extent stated hereinabove. **RULING** delivered virtually, dated and signed at **NAIROBI** This **31st** day of **July** 2026. **PETER M. MULWA** **JUDGE** **In the presence of:** *Mr. Tolle* for Petitioner *Mr. Chege* for 43 Interested Parties *Mr. Wekesa* for 37th Interested Party *Ms. Kabura h/b for Ms Kimathi* for 1 Interested Party (Eva) *Ms. Nkonge* for 3 Interested Parties (Michael, Zipporah & Peter) *CPA Benedict Omollo –* Provisional Liquidator Assistant*: Lispa*