Cytonn’s dilemma in the face of liquidation order

January 13, 2023 - 5 Minutes Read - By Anne

A high court ruling in Kenya this week has ordered the liquidation of two funds owned by Cytonn Real Estate – Cytonn High Yields Solution (CHYS) and the Cytonn Real Estate Project Notes (CPN) – to recover Kshs 14 billion owed to 4,000 investors. Some 3,000 investors sank Kshs 11 billion in the former while 886 investors sank the balance in the latter fund. The majority of the funds were invested in real estate projects.

The court noted that the administrator, who was appointed in 2021, had not done anything given that the fund had no credible source of income. He therefore terminated the administration and put the assets under liquidation. The administrator had also not revealed to the court that he had an engagement with the company two months prior to the voluntary request for administration by the company. Even after the funds were placed under administration, there appears to have been interference from the company CEO, Mr Edwin Dande.

The administrator cited 11 Special Purpose Vehicles (SPVs) which proferred loan notes to CPN without security. The administrator claimed he was unable to get repayment for the loan notes. These investment projects are under preservatory orders, pending conclusion of liquidation of CHYS assets.

The problem with some of these funds is that they were unregulated having been marketed as private investments that did not fall under the regulatory watch of the Capital Markets Authority (CMA). However, both funds breached CMA rules since the law requires that funds raised for private funds involve no more than 100 people. This exposed investors to high risks and has left them at the mercy of the courts to recover their monies. Cytonn only has five funds regulated by the CMA. Among the investors are retirees. The dilemma that faces Cytonn is going forward will Cytonn ever garner investor confidence again to invest in its funds.  

Another dilemma is how to liquidate real estate holdings, some of which are still incomplete and have not found buyers. Will liquidation mean that investors go at a loss?

Spread the love

    Who is Who

  • CHANGES AT THE HELM OF THE KENYA REVENUE AUTHORITY (KRA)

    The Kenya Revenue Authority on Thursday, 23rd February 2023 communicated the new management team after the resignation of Githii Mburu. In addition to his departure, other Commissioners were replaced. These include; Lilian Nyawanda (Commissioner, of Customs and Border Control), Terra Saidimu (Commissioner, Intelligence & Strategic

    Spread the love
    More ..
  • New appointment at Safaricom board

    Mr. Adil Khawaja (MBS) has been appointed the Chairman of the Board of Safaricom PLC, having been appointed director at the same entity earlier. Mr. Khawaja currently serves as the Managing Partner at Dentons Hamilton Harrison & Mathews, and is a leading name in the

    Spread the love
    More ..
  • Meet Samir Ibrahim a new board member at KAR

    Mr Ibrahim is the Chief Executive Officer and Co-Founder of Sunculture Kenya Limited, a climate, solar, agriculture, food systems and security, water, financing and Internet of Things firm. He is also an advisor to Ezra Venture Studio, a team and network of company builders and

    Spread the love
    More ..