Background and Introduction
1. Before the Court is the Notice of Motion dated 19th May 2025 brought by the Liquidator of Small and Medium Entrepreneurial Resource Centre Limited (in liquidation) under Sections 406 and 628 of the Insolvency Act, 2015, Sections 1A, 1B, and 3A of the Civil Procedure Act, and Order 51 of the Civil Procedure Rules.
2. The Liquidator seeks the following substantive reliefs:
a) Preservation orders in respect of the assets of the company, during the pendency of the liquidation process;
b) Approval of the transfer and vesting of the title to Kilimo Gardens Limited in the name of the Liquidator, for purposes of facilitating valuation and sale;
c) Lifting of the corporate veil to enable attachment of the personal assets of the directors, Josephine Gathoni Njoki and Monica Wanjiru Njenga, on grounds that they irregularly acquired assets from investor funds;
d) Orders of contempt against the said directors for their continued refusal to surrender title documents in compliance with court directions issued on 24th October 2023; and Committal to civil jail and/or a fine for each director for contempt of court orders.
3. Although the application is unopposed, the Court bears the responsibility of evaluating the merits of the reliefs sought to ensure that the orders issued are legally justifiable and consistent with the objectives of the Insolvency Act.
Analysis and Determination
4. Under Section 408 of the Insolvency Act, the Liquidator’s core mandate is to wind up the affairs of the company and distribute its assets in accordance with the Act. This encompasses taking control of company property, realizing its value, and distributing the proceeds equitably among creditors. To effectively discharge these duties, the Liquidator must be empowered to trace, preserve, and recover all assets, tangible or otherwise, that rightfully form part of the company’s estate.
5. Further, Section 420 of the Act provides that the Liquidator may refer to the Court any question arising in the course of liquidation, and the Court may determine the matter or make such order as it considers appropriate. This provision affirms the Court’s broad supervisory jurisdiction over the liquidation process, enabling it to issue directions that facilitate effective administration, including resolving disputes, preserving assets, lifting the corporate veil, or enforcing compliance by recalcitrant directors.
a) Preservation of Assets
6. With respect to the prayer for preservation of assets, the Liquidator has produced before this Court, the minutes if the creditors meeting held on 27th October 2024 at which the creditors passed the resolutions in respect of the preservation orders. In the absence of a rebuttal and in the interests of safeguarding the estate for the benefit of creditors and contributors, I am satisfied that an order preserving the said assets is warranted.
b) Vesting of Title in the Liquidator
7. As stated earlier, the Insolvency Act allows the Court to make vesting orders for the purpose of administering the estate in liquidation. The Liquidator seeks approval for the title to Kilimo Gardens Limited to be vested in him for purposes of valuation and sale.
8. In view of the uncontroverted evidence that the said title is part of the assets affected by the liquidation, and having regard to the duties imposed on the Liquidator and further noting the resolutions at the creditors meeting, I find that the prayer is merited and in furtherance of the proper administration of the liquidation estate.
c) Lifting the Corporate Veil
9. The principle of separate legal personality is not absolute. The Court may pierce or lift the corporate veil where it is shown that the company structure has been used to shield fraud, improper conduct, or misappropriation of funds. The Liquidator alleges that the directors, Josephine Gathoni Njoki and Monica Wanjiru Njenga, irregularly diverted funds contributed by investors for their personal gain and acquired property that properly belongs to the company.
10. In Stephen Njoroge Gikera & another v Econite Mining Company Ltd & 7 others [2018] eKLR, the Court held that the veil of incorporation may be lifted where it is necessary to do justice or prevent fraudulent or improper conduct. Similarly, in Multichoice (Kenya) Ltd v Mainkam Ltd & Another [2013] eKLR, the Court emphasized that directors will not be shielded where the company has been used as a vehicle for personal enrichment.
11. I am mindful that insolvency, in and of itself, is not a sufficient ground to pierce the corporate veil. Ordinarily, directors would be afforded an opportunity to appear before the Court and show cause why the veil of incorporation should not be lifted. However, in the present case, the directors in question, Josephine Gathoni Njoki and Monica Wanjiru Njenga, have not contested any of the material placed before the Court, nor have they filed any affidavits in opposition to the allegations made by the Liquidator.
12. In the circumstances, it would serve no practical purpose to require their cross-examination on unchallenged facts. Their silence, despite serious allegations of misappropriation of investor funds and irregular acquisition of assets, reinforces the Liquidator’s case.
13. I am therefore satisfied that a prima facie basis has been established to warrant the lifting of the corporate veil, specifically for the limited purpose of tracing and attaching personal assets alleged to have been improperly acquired using funds belonging to the company or its investors.
e) Contempt of Court
14. The Liquidator further seeks orders for committal and/or imposition of fines against the two directors for failing to comply with court orders issued on 24th October 2023, which required them to surrender title documents to the Liquidator.
15. However, a letter dated 21st February 2024 indicates that Ms. Josephine Gathoni Njoki, one of the directors, surrendered twenty (20) title deeds in compliance with the Court’s earlier directive. In the same communication, she explained that there are additional title documents which she is unable to access. In my view, this conduct does not amount to willful or contumacious disobedience of a court order, but rather a partial compliance accompanied by a plausible explanation.
16. The burden lies with the applicant to prove willful disobedience of a court order beyond reasonable doubt. In this case, the Liquidator has not discharged that burden. There is no cogent evidence demonstrating that the failure to surrender the remaining titles was deliberate or in bad faith.
17. Accordingly, I find that contempt has not been established to the requisite standard.
Disposition
18. In light of the foregoing, I find that the application dated 19th May 2025 is largely merited and I accordingly make the following orders:
a) An order is hereby issued preserving the assets of Small and Medium Entrepreneurial Resource Centre Limited (in liquidation) t/a Venture Capital for Africa (in Kilimo Gardens Limited.
b) The title known as Kilimo Gardens Limited shall be and is hereby vested in the Liquidator for purposes of valuation and sale in accordance with the Insolvency Act.
c) An order lifting the corporate veil of Small and Medium attachment Entrepreneurial of Resource Centre Limited (in liquidation) is hereby issued during liquidation for purposes of tracing the personal assets irregularly acquired by the directors in the property which is the from the investor's funds
d) The prayer seeking orders for contempt of court is dismissed
e) The costs of this application shall be borne from the assets of the Company.
It is so ordered.
DATED, SIGNED AND DELIVERED IN NAIROBI
THIS 24th DAY OF JULY 2025.
F. MUGAMBI
JUDGE
1. Before the Court is the Notice of Motion dated 19th May 2025 brought by the Liquidator of Small and Medium Entrepreneurial Resource Centre Limited (in liquidation) under Sections 406 and 628 of the Insolvency Act, 2015, Sections 1A, 1B, and 3A of the Civil Procedure Act, and Order 51 of the Civil Procedure Rules.
2. The Liquidator seeks the following substantive reliefs:
a) Preservation orders in respect of the assets of the company, during the pendency of the liquidation process;
b) Approval of the transfer and vesting of the title to Kilimo Gardens Limited in the name of the Liquidator, for purposes of facilitating valuation and sale;
c) Lifting of the corporate veil to enable attachment of the personal assets of the directors, Josephine Gathoni Njoki and Monica Wanjiru Njenga, on grounds that they irregularly acquired assets from investor funds;
d) Orders of contempt against the said directors for their continued refusal to surrender title documents in compliance with court directions issued on 24th October 2023; and Committal to civil jail and/or a fine for each director for contempt of court orders.
3. Although the application is unopposed, the Court bears the responsibility of evaluating the merits of the reliefs sought to ensure that the orders issued are legally justifiable and consistent with the objectives of the Insolvency Act.
Analysis and Determination
4. Under Section 408 of the Insolvency Act, the Liquidator’s core mandate is to wind up the affairs of the company and distribute its assets in accordance with the Act. This encompasses taking control of company property, realizing its value, and distributing the proceeds equitably among creditors. To effectively discharge these duties, the Liquidator must be empowered to trace, preserve, and recover all assets, tangible or otherwise, that rightfully form part of the company’s estate.
5. Further, Section 420 of the Act provides that the Liquidator may refer to the Court any question arising in the course of liquidation, and the Court may determine the matter or make such order as it considers appropriate. This provision affirms the Court’s broad supervisory jurisdiction over the liquidation process, enabling it to issue directions that facilitate effective administration, including resolving disputes, preserving assets, lifting the corporate veil, or enforcing compliance by recalcitrant directors.
a) Preservation of Assets
6. With respect to the prayer for preservation of assets, the Liquidator has produced before this Court, the minutes if the creditors meeting held on 27th October 2024 at which the creditors passed the resolutions in respect of the preservation orders. In the absence of a rebuttal and in the interests of safeguarding the estate for the benefit of creditors and contributors, I am satisfied that an order preserving the said assets is warranted.
b) Vesting of Title in the Liquidator
7. As stated earlier, the Insolvency Act allows the Court to make vesting orders for the purpose of administering the estate in liquidation. The Liquidator seeks approval for the title to Kilimo Gardens Limited to be vested in him for purposes of valuation and sale.
8. In view of the uncontroverted evidence that the said title is part of the assets affected by the liquidation, and having regard to the duties imposed on the Liquidator and further noting the resolutions at the creditors meeting, I find that the prayer is merited and in furtherance of the proper administration of the liquidation estate.
c) Lifting the Corporate Veil
9. The principle of separate legal personality is not absolute. The Court may pierce or lift the corporate veil where it is shown that the company structure has been used to shield fraud, improper conduct, or misappropriation of funds. The Liquidator alleges that the directors, Josephine Gathoni Njoki and Monica Wanjiru Njenga, irregularly diverted funds contributed by investors for their personal gain and acquired property that properly belongs to the company.
10. In Stephen Njoroge Gikera & another v Econite Mining Company Ltd & 7 others [2018] eKLR, the Court held that the veil of incorporation may be lifted where it is necessary to do justice or prevent fraudulent or improper conduct. Similarly, in Multichoice (Kenya) Ltd v Mainkam Ltd & Another [2013] eKLR, the Court emphasized that directors will not be shielded where the company has been used as a vehicle for personal enrichment.
11. I am mindful that insolvency, in and of itself, is not a sufficient ground to pierce the corporate veil. Ordinarily, directors would be afforded an opportunity to appear before the Court and show cause why the veil of incorporation should not be lifted. However, in the present case, the directors in question, Josephine Gathoni Njoki and Monica Wanjiru Njenga, have not contested any of the material placed before the Court, nor have they filed any affidavits in opposition to the allegations made by the Liquidator.
12. In the circumstances, it would serve no practical purpose to require their cross-examination on unchallenged facts. Their silence, despite serious allegations of misappropriation of investor funds and irregular acquisition of assets, reinforces the Liquidator’s case.
13. I am therefore satisfied that a prima facie basis has been established to warrant the lifting of the corporate veil, specifically for the limited purpose of tracing and attaching personal assets alleged to have been improperly acquired using funds belonging to the company or its investors.
e) Contempt of Court
14. The Liquidator further seeks orders for committal and/or imposition of fines against the two directors for failing to comply with court orders issued on 24th October 2023, which required them to surrender title documents to the Liquidator.
15. However, a letter dated 21st February 2024 indicates that Ms. Josephine Gathoni Njoki, one of the directors, surrendered twenty (20) title deeds in compliance with the Court’s earlier directive. In the same communication, she explained that there are additional title documents which she is unable to access. In my view, this conduct does not amount to willful or contumacious disobedience of a court order, but rather a partial compliance accompanied by a plausible explanation.
16. The burden lies with the applicant to prove willful disobedience of a court order beyond reasonable doubt. In this case, the Liquidator has not discharged that burden. There is no cogent evidence demonstrating that the failure to surrender the remaining titles was deliberate or in bad faith.
17. Accordingly, I find that contempt has not been established to the requisite standard.
Disposition
18. In light of the foregoing, I find that the application dated 19th May 2025 is largely merited and I accordingly make the following orders:
a) An order is hereby issued preserving the assets of Small and Medium Entrepreneurial Resource Centre Limited (in liquidation) t/a Venture Capital for Africa (in Kilimo Gardens Limited.
b) The title known as Kilimo Gardens Limited shall be and is hereby vested in the Liquidator for purposes of valuation and sale in accordance with the Insolvency Act.
c) An order lifting the corporate veil of Small and Medium attachment Entrepreneurial of Resource Centre Limited (in liquidation) is hereby issued during liquidation for purposes of tracing the personal assets irregularly acquired by the directors in the property which is the from the investor's funds
d) The prayer seeking orders for contempt of court is dismissed
e) The costs of this application shall be borne from the assets of the Company.
It is so ordered.
DATED, SIGNED AND DELIVERED IN NAIROBI
THIS 24th DAY OF JULY 2025.
F. MUGAMBI
JUDGE