Wanjama v Registrar of Companies & another; Cytonn Investment Partners Eleven LLP & 16 others (Interested Parties) [2025] KEHC 3644 (KLR)

Wanjama v Registrar of Companies & another; Cytonn Investment Partners Eleven LLP & 16 others (Interested Parties) (Miscellaneous Application E877 of 2023) [2025] KEHC 3644 (KLR) (Commercial and Tax) (24 March 2025) (Ruling)

Neutral citation: [2025] KEHC 3644 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts)

Commercial and Tax

Miscellaneous Application E877 of 2023

H Namisi, J

March 24, 2025

Between

Patricia Njeri Wanjama

Applicant

and

The Registrar of Companies

1st Respondent

The Official Receiver

2nd Respondent

and

Cytonn Investment Partners Eleven LLP

Interested Party

Cytonn Access Way LLP

Interested Party

Cytonn Investment Partners Twelve LLP

Interested Party

Cytonn Active Strategies LLP

Interested Party

Milimani Havens LLP

Interested Party

Cytonn Investment Partners Seven LLP

Interested Party

Cytonn Investment Partners Eight LLP

Interested Party

Cytonn Investment Partners Twenty-One LLP

Interested Party

Cytonn Education Services Limited LLP

Interested Party

East African Forum for Alternative Investments LLP

Interested Party

Cytonn Investments Distribution LLP

Interested Party

Ololua Estates LLP

Interested Party

Mystic Plains LLP

Interested Party

Seriton Construction Company Ltd

Interested Party

Cytonn Investment Partners Eighteen LLP

Interested Party

Cytonn Centre for Affordable Housing LLP

Interested Party

Cytonn High Yield Solutions LLP

Interested Party

Ruling

1. Before the Court is a Notice of Motion dated 4 October 2023 filed under section 103 of the Companies Act, No. 17 of 2015, seeking the following orders:i.Spentii.That the Honourable Court be pleased to direct the Registrar of Companies to register in the companies registers, the resignation of Patricia Njeri Wanjama as Company Secretary, Director, Statutory Manager and or Partner as the case may be from the following companies:Company Name Reg. Number Position

1 Cytonn Investment Partners Eleven LLP LLP/2016/41 Manager

2 Cytonn Access Way LLP LLP/2015/60 Manager

3 Cytonn Investment Partners Twelve LLP LLP/2016/40 Manager

4 Cytonn Active Strategies LLP LLP/2015/95 Manager

5 Milimani Havens LLP LLP/2015/108 Manager

6 Cytonn Investment Partners Seven LLP LLP/2015/55 Manager

7 Cytonn Investment Partners Eight LLP LLP/2015/77 Manager

8 Cytonn Investment Partners Twenty-One LLP LLP/2017/97 Manager

9 Cytonn Education Services Ltd PVT V7UAV8A Director

10 East African Forum For Alternative Investments LLP LLP-6R1LMG Manager

11 Cytonn Investments Distribution LLP LLP-6R1LAZ Manager

12 Ololua Estates LLP LLP/2014/108 Manager

13 Mystic Plains LLP LLP/2015/64 Manager

14 Seriton Construction Company Ltd PVT/2016/033717 Secretary

15 Cytonn Investment Partners Eighteen LLP LLP/2017/21 Manager

16 Cytonn Centre for Affordable Housing LLP LLP-YP18KA Partner

17 Cytonn High Yield Solutions LLP LLP/2014/106 Manageriii.That costs be provided for.

2. The Application is supported by annexed Affidavit of Patricia Njeri Wanjama and premised on the following grounds:a.The Applicant resigned as Company Secretary, Director, Statutory Manager and or Partner of the Interested Parties sometimes in May, 2021. b.In addition to the letters of resignation, the Applicant caused to be drawn and executed the necessary Affidavits to give effect to her resignation aforesaid.c.Through the e-citizen platform, the Principal Partner and Shareholder of the Interested Parties, Cytonn Investment Management PLC has made payments amounting to Kshs 41,000/= (Say Kenya Shillings Forty-One Thousand Only) in government fees to process the applications for resignation to the Registrar of Companies.d.Despite executing the necessary forms/documentation and making requisite payments, the Registrar of Companies has failed to effect the Applicant’s resignation in the Companies’ registers.e.The Applicant has been seeking to register her resignations with the Registrar of Companies since August, 2021 and such resignations have not been registered despite compliance on her part and repeated requests both from the Applicant and the Interested Parties.f.On 14th June, 2023, the Office of the Registrar communicated to the ApplicantThat the Official Receiver had issued instructionsThat no change of records should be effected in the registers of Companies of the interested parties.g.The position taken by the Registrar of Companies and or the Official Receiver is contrary to law, and the Applicant prays for court orders to compel the Registrar of Companies to effect the changes sought by the Applicant.h.The Applicant is held hostage by intriguesThat are beyond the purview of the law on matters of this nature, and the continued refusal, neglect and or failure by the Registrar of Companies to effect the changes sought by the Applicant amounts to infringement on her right to disassociate from the Interested Party companies.i.It is only fair, just and properThat this matter is heard as a matter of urgency and the orders sought issued.

3. The Supporting Affidavit reiterates the grounds on the Application. The Applicant produced copies of letters of resignation, affidavits to give effect to the resignations, payment receipts and email correspondence between the Applicant, 1st Respondent and Interested Parties.

4. The 1st Respondent filed a Replying Affidavit pointing outThat there are two pending matters before the Presiding Judge of the division,That is, Insolvency Petition No E063 of 2021 Cytonn High Yields Solutions LLP (In Administration) v Official Receiver and Insolvency Petition No E064 of 2021 Cytonn Real Estate Project Notes LLP (In Administration) v Official Receiver.

5. The 1st Respondent confirmedThat vide an internal memo dated 20 January 2023, the 2nd Respondent informed the 1st RespondentThat once a liquidation order is issued, liquidation commences, thus transactions in relation to Cytonn High Yields Solution LLP and Cytonn Real Estate Project Notes LLP would be null and void. In its Ruling dated 6 January 2023, the Court heldThat the various Special Purpose Vehicles were related to Cytonn Real Estate Project Notes LLP and Cytonn High Yields Solutions LLP and termed them all as “cytonns”.

6. The 1st Respondent averredThat according to the records held by it, the Applicant made payments through the e-citizen platform to effect her resignation on or about October 2022, when Cytonn Real Estate Project Notes LLP and Cytonn High Yields Solutions LLP were already in administration. The removal of the Applicant as a director, secretary and manager of the various entities will be detrimental to the members of the public whom have invested billions and are currently on a steady path of seeking justice. The 1st Respondent further averredThat the Applicant herein holds senior positions in the various Interested Parties and allowing her exit will negatively impact the Liquidation process as the Official Receiver will have lost a source in investigating the failure of the partnership.

7. The 2nd Respondent filed a Replying Affidavit and averredThat Cytonn High Yields Solutions (CHYS) was formed to make, hold, own and dispose of investments made and engage in such other activitiesThat are permitted or incidental or ancillary thereto, in line with which, it collected money from members of the public, which it was to invest on their behalf. The monies collected were then loaned, on various dates to various Special Purpose Vehicles (SPv) including 1st, 3rd, 4th, 13th, 15th Interested Parties captured in the Application.

8. The 2nd Respondent further averredThat despite the Applicant's claimThat she resigned from the interested parties in her various capacities in May 2021, the required payments were not made until October 2022, by which time CHYS was under Administration. The Applicant is a Manager in CHYS (In Liquidation) and holds various other positions as outlined in her application in other `Cytonns'. The 2nd Respondent contendedThat Sections 433, 434 and 435 of the Insolvency Act empower the Official Receiver to investigate the failure of the partnership and in so doing require officers of the partnership to provide information as required.

9. The 2nd Respondent contendedThat it is in the interest of justice to maintain the status quo, as the Official Receiver will require critical information, in relation to where the creditors' funds were transferred to and who should be held responsible, which the Applicant herein, being an officer of the Cytonns, may have. The resignations are in bad faith and meant to escape any disclosure obligations on the Applicant's part, thus allowing the removal of the Applicant herein in the interested parties would undermine the Creditors' interests and rights, being members of the public, hoping to recover their investments.

10. The Application was canvassed by way of written submissions.

11. The Applicant submittedThat she formed the intention to resign from the Cytonn Companies sometime in 2021. By the time of filing this application, the resignations from the 17 companies on the face of the Application were yet to be effected by the 1st Respondent. It was her contentionThat the resignations were not done in reaction to the insolvency and liquidation proceedings before the Court, contrary to the assertions by the 2nd Respondent.

12. The Applicant submittedThat the Insolvency Petition E063 of 2021, whose ruling dated 6 October 2021 made the Administration Order. The Ruling of 6 January 2023 ordering liquidation was filed after the Applicant had tendered her resignations to the Board of Cytonn Management on 10 May 2021 and initiated the formal processes attendant thereto.

13. It was the Applicant’s submissionThat pursuant to the provisions of Section 577 of the Insolvency Act, the Administrator is clothed with powers to appoint and/or remove directors. The Administration process does not expressly bar changes to the status of members of a company. The same is only barred in the liquidation process as provided in section 429 of the Act.

14. The 1st Respondent submittedThat the 16 entities which the Applicant is trying to run away from and escape liability for actionsThat occurred while she was partner and/or manager are part and parcel of the liquidation process in Cytonn High Yields Solutions LLP and Cytonn Real Estate Project Notes LLP andThat the application has been brought in bad faith.

15. It was the 1st Respondent’s submissionThat section 33(1) and (2) of the Limited Liability Partnerships Act requires entities to notify the Registrar of Companies of any changes within 14 days. The Interested Parties failed to abide by this provision. Although the Applicant was cushioned by section 33(2), she failed to personally lodge the statement specifying her resignation. It was not until 24 November 2021, a month after administration orders had been issued against CHYS and CPN, and six months after the date of her resignation,That the Applicant wrote to the 1st Respondent allegingThat the Interested Parties had failed to comply with Section 33(1) of the Limited Liability Partnerships Act and, therefore, she would rely on Section 33(2) to register her resignation. Nonetheless, the Applicant, having been the Manager of the various entities, ought to have ensuredThat the provisions of section 33 of the Act were complied with given the factThat it was her personal responsibility to see to itThat the Registrar of Companies was notified of her resignations and the necessary changes effected in the register.

16. The 2nd Respondent identified two issues for determination; (i) whether the Application was brought in good faith; and (ii) whether the Applicant should be removed from the Interested Parties’ register.

17. On the first issue, the 2nd Respondent submittedThat the Applicant held various roles in 50 different Cytonn entities and has successfully exited from 33, leaving the 17 Interested Parties. This was a strategic move to avoid any culpability in the matter when the creditors come calling. The 2nd Respondent pointed outThat the earliest payment made by the Applicant to register her resignation was on 24 October 2022, only 2 months before the liquidation order against CHYS was issued and 12 months after CHYS had gone into administration.

18. The 2nd Respondent relied on the case of Perry -v- Schwarzenegger, 671 3D 1052, in submittingThat any reasonable man, presented with the facts of the Applicant’s involvement in the Cytonn entities, followed by her departure therefrom, keeping in mind the timing of the departures, would come to the conclusionThat the Applicant was likely party to the schemes and machinations of Cytonn to defraud innocent investors, who were members of the public.

19. On the second issue, the 2nd Respondent made reference to the provisions of section 33(3) and (4) of the Limited Liability Partnership Act in submittingThat the Applicant could have exited from the Interested Parties as guided by the Registrar on 1 September 2021 when she was notified her documents needed to be amended in order to effect her resignation. The 2nd Respondent averredThat although the Applicant claimed to have resigned on 10 May 2021, she did not tender any proof of the same, yet, by law, the Registrar of Companies should have been notified.

Analysis & Determination 20. I have keenly read the various Affidavits and submissions by the parties.

21. Section 522(1) of the Insolvency Act lays out the objectives of administration of a company, which are:a)to maintain the company as a going concern;(b)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);(c)to realise the property of the company in order to make a distribution to one or more secured or preferential creditors.

22. In the case of Thika Nursing Homes Limited v Rao & 2 others (Insolvency Cause E092 & E093 of 2021 (Consolidated)) [2021] KEHC 417 (KLR), the learned judge observed;“It is clear from the foregoingThat the objective of administration under the Act is to maintain a distressed Company as a going concern.”

23. In re Nakumat Holdings Limited [2017] KEHC 2266 (KLR), the Court opined thus:“Administration, though, is now a tool intended to offer breathing space for insolvent companies whilst also putting better returns and packages for creditors, not ordinarily available in liquidation. And, unlike compromises, administration as an alternative rescue process leads to a stay of past and future legal proceedings as per ss.560 & 561 of the Act hence making it cheaper for the company.”

24. Section 522(2) of the Insolvency Act providesThat the administrator of a company shall perform the administrator's functions in the interests of the company's creditors as a whole.

25. The Act confers functions and powers upon the Administrator upon appointment, which are outlined in the Fourth Schedule and include: Power to convene members/creditors meeting; Power to remove and appoint a director to the office; Power to take any actionThat contributes to the effective and efficient management of the affairs and property of the company; Power to distribute company’s assets to the creditors; Duty to assume control of property of the company; Power to dispose of propertyThat is subject to floating charge; Power to dispose of goodsThat are in possession of the company under a credit purchase.

26. As rightly submitted by the Applicant, under section 577, the Administrator has the power to remove and appoint directors of the company. The section provides as follows:The administrator of a company—(a)may remove a director of the company from office; and(b)may appoint a person to be director of the company (whether or not to fill a vacancy)

27. It is noteworthyThat the section is not couched in mandatory wording, but rather gives the discretion of appointment or removal of directors to the Administrator, who at all times is acting in the best interest of the creditors.

28. Further, as submitted by the Respondents, in carrying out his functions, the Administrator may be required to conduct investigations into the status of the company, its properties and dealings, in a bid to ensure the effective and efficient management of the affairs and property of the company.

29. Turning back to the application herein, it is important to review the chronology of events, which I have pieced together based on the averments and submissions by respective parties and reproduced below:10-11th May 2021 - Applicant pens her resignation from Interested Parties6 October 2021 - CHYS and CPN are placed under administration;24 November 2021 - Applicant writes to the 1st Respondent allegingThat the Interested Parties have failed to effect the changes in the Register. She will rely on section 33(2) of the Act to effect the resignations.4 April 2022 - Applicant depones statutory declarations to reflect theresignations24 Oct – 29 Nov 2022- payment of statutory fees required to effect resignation6 January 2023 - Court lifts the administration and orders liquidation of CHYS and CPN.4 October 2023 - Applicant files the instant cause

30. I have taken the liberty of setting out the chronology above because the same is important in understanding the Applicant’s arguments and the counter-arguments by the Respondents. The Applicant claimedThat she resigned in May 2021 from the Interested Parties where she held various senior positions such as Manager, Director, Secretary and Partner. As submitted by the Respondents, by virtue of holding these positions, the Applicant was involved in the day-to-day operations of the various entities. I noteThat the Applicant held the position of Secretary in Seriton Construction Company Ltd, 14th Interested Party. This impliesThat the Applicant was conversant with the procedures relating to changes within a company and the registration of such changes with the Registrar of Companies. The duty to ensure compliance with the provisions of the Companies Act and other legislation would form part of the job description of a secretary of any company. It is, therefore, surprisingThat the Applicant waited from May 2021 until November 2021 to realiseThat the changes had not been effected. Notably, by this time, the order for administration had been issued.

31. Even upon realising this and communicating to the 1st Respondent, it wasn’t until April 2022, almost a year later,That the Applicant deponed the Statutory Declarations. Payments were then made about 6 months after the Affidavits. Definitely, the timing of it all raises eye brows. As submitted by the 2nd Respondent, any reasonable man presented with the facts above and chronology of events, bearing in mindThat shortly thereafter the insolvency processes were initiated to recoup over Kshs 11 billion invested by innocent members of public, would come to the conclusionThat this is an attempt by the Applicant to escape liability and separate herself from the insolvency proceedings.

32. Even if one is to assumeThat the timing of the events was a coincidence, the Applicant cannot run away from the responsibility in section 27(3)(a) of the Limited Liability Partnerships Act, which provides as follows:A manager of a limited liability partnership — (a) shall be personally responsible for ensuringThat the partnership complies with sections 29 sections 32 and sections 33

33. Section 33(1) and (2) of the Limited Liability Partnership Act provide thus:(1)Whenever a change occurs in any of the details registered in respect of a limited liability partnership, the partnership shall, within fourteen days after the change, lodge with the Registrar a statement specifying the nature and effective date of the change and such other information (if any) as is prescribed by the regulations.(2)A person who ceases to be a partner or a manager of a limited liability partnership may personally lodge with the Registrar the statement referred to in subsection (1) ifThat partner or manager reasonably believesThat the partnership will not lodge the statement with the Registrar.

34. Again, assumingThat the timing of events was merely a coincidence, the Applicant has not given satisfactory explanation, or any at all, as to why it took her 4 months, from November 2021 to April 2022, to pursue registration of the changes upon discoveringThat the Interested Parties had not done so. Further, no reason has been advanced why the payments were made 6 months afterThat.

35. Based on the material placed before me, I am not satisfiedThat the Applicant is deserving of the orders sought. The Application is, therefore, dismissed with costs to the Respondents.

DATED AND DELIVERED AT NAIROBI THIS 24 DAY OF MARCH 2025HELENE R. NAMISIJUDGE OF THE HIGH COURTDelivered on virtual platform in the presence of:Ms. Samba..........for the ApplicantMs. Akoth h/b Mr. Odhiambo ............for the 1st RespondentMs. Kinuthia............for the 2nd RespondentMs. Koile.... for Interested PartiesLibertine Achieng .... Court AssistantPage 12 of 12