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Karume estate in deeper trouble

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Trustee chairman of the late Njenga Karume Estate George Ngugi (left) spokesman Stephen Karau (centre) and Geoffrey Njenga, a mediator at a media briefing at Jacaranda Hotel Nairobi on August 27, 2018. NMG PHOTO 

The troubled Njenga Karume Trust has been pushed into a deeper crisis following the filing of criminal charges against its trustees for non-payment of taxes.

At the centre of the suit that Director of Public Prosecution (DPP) Noordin Haji has opened against the trustees and management of the Karume estate is the multi-million shilling dispute between the taxman and the late tycoon’s estate

On the list of those facing criminal charges are Alfred Kigera Karume, Kungu Gatabaki, Jane Grace Njoki Njenga, James Raymond Njenga, Mary Wamboi Kimotho and James Kimondo Ngata.

The trustees had last month moved to court seeking to restrain the DPP from charging them with a criminal offence over a civil matter.

They had sought the court’s protection against the Kenya Revenue Authority (KRA) whom they accused of using the criminal justice system to enforce payment of civil debts and settling scores arising from a family succession dispute.

The High Court had last month directed the trustees to serve the DPP and the taxman with the suit documents and return to court this morning for further directions.

The petitioners are seeking “an order of prohibition directed at the 1st and 2nd respondents prohibiting them from prosecuting, continuing with prosecution and/or instituting criminal prosecution against the applicants in the resident magistrate court…in connection with tax demands.”

Alfred Karume, a son of the late tycoon, is however not part of those challenging the criminal charges in the High Court despite being listed as one of those facing criminal charges.

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KRA has accused the trustees of deliberately failing to remit value added tax (VAT) by the due date and of failing to remit Pay as You Earn (PAYE) tax contrary to the Tax Procedure Act.

The taxman claims that between April 20, 2016 and December 20, 2016, being the directors of Jacaranda Hotels Limited, the trustees failed to remit Sh43.5 million in VAT, and a separate Sh44 million in VAT for the period between April 2017 and December 2017.

The accused face another count of failing to remit Sh32.8 million PAYE covering April 2016 to December 2016 and a separate Sh32.5 million PAYE for the period between April 2017 and December 2017.

Mr Gatabaki, however, says in a sworn affidavit that the charges preferred against him, Mary Kimotho and James Ngata are malicious and faulty because they were not directors, shareholders nor members of the board of Jacaranda Hotels Limited at the time the said taxes accrued.

KRA issued the Jacaranda Hotels Limited with an enforcement notice on January 12, seeking immediate payment of tax arrears amounting to Sh197 million and on the same day moved to secure goods at the Jacaranda Hotel to recover the tax.

On January 18, the hotel management proposed to settle the undisputed amount within 18 months, noting that it was facing financial distress. But KRA rejected the plea and instead demanded that the debt be paid in monthly installments of Sh50 million.

The taxman further demanded payment of Sh7.9 million to pay auctioneers who had already secured the hotel’s property to recover the tax.

The trustees also told the taxman that an earlier court order blocking the sale of the hotel’s property had made it impossible to immediately settle the outstanding debt.

The petitioners argue that by end of last month, the hotel had paid KRA Sh127 million even as it continues to interrogate the taxman’s demands, which keep on mutating.



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Kenya listed among Sub-Saharan Africa countries with high potential for Islamic Banking

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NAIROBI, Kenya, May 8 – Kenya has been listed as one of the countries with a high potential for Sharia Finance, an Islamic banking model with several restrictions and principles that do not exist in conventional banking like interest fees.

Middle East, Africa, India, and Jersey Finance Director Faizal Bhana said Sub-Saharan Africa’s share of global Sukuk issuances is only a mere 2 percent, despite an Islamic population of more than 200 million people.

Sukuk are financial products whose terms and structures comply with Islamic law, with the intention of creating returns like those of conventional fixed-income instruments like bonds.

“When you are coming to Africa, the story is very different. Africa is home to 250 million Muslims in Sub-Saharan Africa. At the moment, the penetration for Sharia compliance finance across the continent is 21 countries providing Islamic Finance services,” he said.

Speaking to Capital Business, he revealed that the Islamic Finance industry has a compound annual growth of 11 percent since 2006, with assets worth multi-trillion shillings.

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“We need to look to all forms of financing. And Sharia compliance financing is one form and because of its links like sustainability and ethical, for government, it is an easy win,” he said.

He said there is a need for regulators to provide enabling legislation for Sharia finance services and more so for sovereign and corporate issuance of Sukuk.

The common practices of Islamic finance and banking came into existence along with the foundation of Islam.

However, the establishment of formal Islamic finance occurred only in the 20th century.

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Currently, the Islamic finance sector grows at 15-25 percent per year, while Islamic financial institutions oversee over $2 trillion.

Islamic finance strictly complies with Sharia law. Contemporary Islamic finance is based on a number of prohibitions that are not always illegal in the countries where Islamic financial institutions are operating like paying or charging interest, investing in businesses involved in prohibited activities like gambling.

Due to the number of prohibitions set by Sharia, many conventional investment vehicles such as bonds, options, and derivatives are forbidden in Islamic finance.

The two major investment vehicles in Islamic finance are equities and fixed income instruments.

 

 

 

 

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CMA okays Crown Paints’ rights issue to fund expansion

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Crown Paints head of sales Bhavesh Gandhi and CEO Rakesh Rao during the company’s launch of all-weather paints at the Trademark Hotel, March 1, 2020. [David Gichuru, Standard]

The Capital Markets Authority (CMA) has given the nod to Crown Paints Kenya Plc to raise Sh711.80 million from shareholders via purchase of additional shares.

The regulator, in a statement yesterday, said it had approved the firm’s bid to issue and list 71,181,000 new ordinary shares on the Nairobi Security Exchange (NSE).

“The rights will be issued on the basis of one new ordinary share for every one existing share,” noted CMA.

The additional funds raised will boost the company’s financial flexibility to navigate through a tough business environment brought about by the Covid-19 pandemic.

It would also boost the firm’s growth strategy according to the information memorandum.

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“The group’s management plans to use the rights issue funds to facilitate the development of new products, retiring of current facilities and funding regional expansion,” CMA said in a statement.

Wyckliffe Shamiah, the CMA chief executive observed that the disclosures made on the rights issue comply with the capital markets regulations and will enable investors to make an informed decision.

Mr Shamiah noted that the regulator had reviewed the application for exemptions from complying with Regulation 4 of the Capital Markets (Take Over and Mergers) Regulations, 2002 concerning the intention of the company’s major shareholders, who have undertaken to take up their full rights entitlements.

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“They are also willing to take more than their initial entitlements subject to availability during the rights issue,” said Shamiah.

Crown Paints is expected to make bi-annual updates to CMA on the use of the proceeds of the rights issue.

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Branch buys local micro finance bank

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The deal gives Century Microfinance Bank a much-needed lifeline. [Courtesy]

Branch International Ltd has acquired microfinance lender Century Microfinance Bank in a move that gives the financial technology (fintech) firm a stronger presence in the country’s financial sector.

According to regulatory filings published by the Competition Authority of Kenya (CAK), Branch has acquired 84.89 per cent of the issued share capital in the microfinance bank.

The deal has been approved by the market regulator.

“The Competition Authority has authorised the proposed transaction as set out herein on condition that the acquirer and the target will each maintain the terms agreed with the borrowers in respect of all loans existing in their loan books at the time of the acquisition,” explained CAK in a notice in the Kenya Gazette.

The deal will further give Century Microfinance Bank a much-needed lifeline, coming in the wake of depressed earnings due to disruption from digital lenders and recently, the Covid-19 pandemic.

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According to Central Bank of Kenya (CBK) data, the micro-lender recorded Sh348 million in assets as of the end of December 2019, a 19 per cent drop from Sh431 million in 2018.

The firm also recorded Sh326 million in liabilities for the year ended December 2019 with customer deposits sitting at Sh256 million during the period under review. The lender made Sh82 million in total income in 2019, the majority of it from interest on loans, fees and commissions.

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Brach International, one of the leading fintech players in the Kenyan market has over the years increased its user base across the region to more than three million.

The firm says it has disbursed more than Sh35 billion in loans, the majority of which it lent to users in its African markets in Kenya, Nigeria and Tanzania. In 2019, Branch secured Sh17 billion in the new financing and a partnership with Visa to issue virtual pre-paid debit cards to its users.

The acquisition of Century Microfinance Bank will allow the fintech firm to deploy more solutions to grow its digital and physical foothold in the Kenyan market.

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