[2025] KEHC 6808 (KLR)

In re Red House Group Limited (Insolvency Cause E128 of 2023) [2025] KEHC 6808 (KLR) (Commercial and Tax) (26 May 2025) (Ruling)

Neutral citation: [2025] KEHC 6808 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts)

Commercial and Tax

Insolvency Cause E128 of 2023

F Gikonyo, J

May 26, 2025

Ruling

1. The official receiver filed the notice of motion dated 16th October 2024, under Sections 427, 437 and 441 of the Insolvency Act, seeking its appointment as the provisional liquidator of Red House Group Limited pending the hearing and determination of the liquidation petition. It also sought that leave be granted for service of the petition upon creditors and any other relevant parties to be done by way of substituted service through advertisement in a newspaper of wide circulation.

2. The application is premised on the grounds in the annexed affidavit of, Diana Mumo, Advocate and senior assistant official receiver.

3. Ms. Mumo deposed that on 28th September 2023, the company’s directors appointed the official receiver as the company's administrator through a notice of appointment of administrator. In effect, the company was placed under administration and its assets and affairs vested with the administrator for one year from the appointment date. The directors indicated that the entry into administration was due to financial constraints which affected the running of its day-to-day activities.

4. Ms. Mumo also deposed that without funding, the administrator has been unable to revive the company or maintain it as a going concern. Therefore, the administrator formed the opinion that the best possible outcome is the realization of the company’s assets as per Section 522(1) (c) of the Insolvency Act. The company’s known creditors made formal demands against the company and filed proof of debt forms, but the administrator was unable to satisfy any of those claims. The administrator was not able to pay creditors, including preferential creditors, since the process of collecting other assets of the company to make substantial instalments is yet to be concluded.

5. Ms. Mumo asserted that the company is insolvent with no likelihood of being turned around, given its current conditions. She highlighted that the administrator’s term automatically ended on 28th September 2024. She argued that the company ought to be placed under liquidation to undergo an orderly winding up of its affairs and to achieve the best possible outcome for the creditors. She further expressed that under the liquidation process, the liquidator or provisional liquidator shall trace, collect and/ or preserve the company’s assets, including trade receivables to realise the remainder of those assets and make a distribution to creditors under the Insolvency Act.

6. The application is unopposed.

Analysis and Determination. 7. The issue for determination is whether the official receiver has made a case for its appointment as provisional liquidator pending the hearing of the liquidation petition.

8. The official receiver’s term as the administrator ended on 28th September 2024. It then filed the instant application. It also filed a liquidation petition that is pending hearing and determination.

9. Section 437 of the Insolvency Act provides: -“(1)The Court may appoint a provisional liquidator either on or after, or at any time before, the making of a liquidation order in respect of a company.”

10. The official receiver relied on Section 441 (1) of the Insolvency Act, which provides that:-“441. (1)If a liquidation order is made immediately on the appointment of an administrator ceasing to have effect, the Court may appoint as liquidator of the company the person whose appointment as administrator has ceased to have effect.”

11. The official receiver produced a copy of the notice of appointment of an administrator dated 5th October 2023, confirming that it was appointed as the administrator of Red House Group Limited according to a notice of appointment dated 28th September 2023. It also produced a statement of affairs of the company as of 31st August 2023 and an administrator’s interim report and proposal for the company’s liquidation.

12. The official receiver also filed an affidavit of service sworn by Andrew Maxe Smollo confirming that he served the creditors with the instant application through their known and usual email addresses on 30th January 2025.

13. From the evidence, I am satisfied that there is a prima facie case for the filing of a liquidation petition for the company’s liquidation. Accordingly, the official receiver should be appointed the interim liquidator of the company pending the determination of the liquidation petition.

14. Accordingly, prayers 3, 4 and 5 of the official receiver’s application dated 16th October 2024 are allowed in the following specific terms: -1. The official receiver is hereby appointed as provisional liquidator of Red House Group Limited pending the hearing and determination of the liquidation petition;2. The official receiver is granted leave to serve this application and petition together with any consequent order upon creditors by substituted service through advertisement in the Kenya Gazette and a newspaper of nationwide circulation.3. Costs are to be borne from the company’s assets.

DATED, SIGNED AND DELIVERED AT NAIROBI THROUGH MICROSOFT ONLINE APPLICATION THIS 26TH DAY OF MAY, 2025F. GIKONYO MJUDGE