The High Court has faulted an administrator-led plan to sell assets of Mount Kenya Breweries Limited, a collapsed firm weighed down by Sh5.37 billion in liabilities, citing a lack of transparency.
Raising concerns over secrecy in the court-supervised disposal process, the court said the planned sale by the official receiver breached key transparency safeguards by failing to circulate proposals to creditors and shareholders. It also faulted the process for inadequate stakeholder involvement.
However, the court upheld the administrator’s legal mandate to proceed with the asset sale, affirming that the official receiver is entitled to dispose of the company’s assets where rescue is no longer feasible.
The dispute arose after the company’s directors – Caesar Ngige, Salomon Wahome and Mary Muthoni – challenged a tender issued in November 2025 inviting bids to purchase land, buildings and machinery.
They alleged gross undervaluation and exclusion from the process.
The directors accused the administrator of acting like a liquidator without following the law, saying no valuation was shared, no creditor meetings were convened, and no formal proposal was circulated.
They also claimed assets were removed or interfered with under the administrator’s watch, risking irreparable loss to shareholders and creditors.
Receiver defence
The official receiver rejected the claims, stating it was appointed on June 7, 2025, following default on loans owed to Kenya Development Corporation, the holder of a Sh90.1 million floating charge.
In an affidavit sworn by Sylvia Githungo, the receiver told the court the company had ceased operations years earlier and could not be revived without significant capital injection.
A site visit in July 2025 revealed extensive vandalism, with buildings damaged and equipment stripped. The administrator said the destruction occurred before it took control.
The receiver said that as of December 2025, the company’s known liabilities stood at Sh5.37 billion against assets valued at Sh50 million.
Two valuation reports showed a sharp decline in value, with an earlier estimate placing assets at Sh69 million before a later assessment gave an open market value of Sh50 million.
With liabilities running into billions, the administrator argued there was no realistic prospect of rescuing the company as a going concern.
It added that administration costs had already been incurred and continue to rise, with monthly expenses of Sh200,000 required to preserve and safeguard the premises.
The brewer, based in Nanyuki, was once positioned as a regional manufacturing venture but has remained dormant for years.
Court filings show loan defaults date back to around 2019, with the facility falling into disrepair before administration.
The receiver said it opted to sell the assets for the benefit of creditors, citing Section 569 of the Insolvency Act, which allows disposal of charged property where revival is not feasible.
Court findings
The court agreed that the administrator had the power to sell and was not required to convene an initial creditors’ meeting, given the company’s financial position.
However, it identified a critical procedural failure: although the administrator prepared a proposal within the statutory timeline, it was not circulated to creditors and shareholders.
‘The administrator’s power to sell assets ought to be done in a manner that is transparent,’ the judge said, stressing that circulation of proposals is mandatory even where meetings are not held.
He dismissed the directors’ claims that vandalism occurred under the administrator’s watch, noting there was no supporting evidence, such as police reports.
At the same time, the court rebuked the directors for failing to cooperate, saying they had not provided a statement of the company’s financial position as required.
‘The directors and shareholders should know that the company is in a mess during their watch. Thus, they bear the greatest duty to support measures that ensure the creditors are paid, and the company gets out of the mess,’ the court said.
‘They have no right to take a posture that prejudices the creditors or derives benefits to them at the expense of or before the creditors,’ the judge added.
The court ordered the directors to submit a verified statement of assets, debts, and creditors within 14 days.
The administrator was directed to circulate the proposal within 30 days and secure the company’s assets. Interim orders stopping the sale remain in force until further directions.