Prime Bank has named Ponangipali Venkata Raman Rao as the administrator of Midland Hauliers Limited Company after the transport firm failed to pay back a loan of undisclosed amount to the lender.
Mr. Rao will be tasked with managing Midland Hauliers as well as informing creditors on any developments regarding the company’s progress and business options, such as the sale of company assets to recover part of the debt moving forward.
The appointment which took effect on April 24, 2019 was published in the latest issue of the Kenyan gazette and it was made possible by the Insolvency Act of 2015.
The Insolvency Act allows companies that are under financial distress to use legislation as a means to navigate through any restructuring process while protecting the interests of creditors and other stakeholders in the company such as shareholders.
According to investments firm Cytonn, prior to the enactment of the 2015 Act, insolvency proceedings of corporate entities were dealt with under the winding-up provisions of the Companies Act, and the Bankruptcy Act. The resolution of insolvency proceedings for corporations involved the liquidation of the company under financial distress, and paying the firm’s creditors.
This effectively meant that creditors and other stakeholders in firms ran the risk of failing to recover total amounts of interest, especially in the event the company’s assets failed to cover the total amounts due. An attempt to remedy this is what led to the creation of the Insolvency Act of 2015.
Midland Hauliers is the latest firm to join a long list of companies that have been put under administration for defaulting on loans. Other companies that have been put under administration recently include: Spencon Kenya Limited, Athi River Mining (ARM) Cement, Deacons East Africa, Nakumatt Holdings and liquefied petroleum gas dealer Midland Energy.
Despite being put under administration, there is no guarantee that the administered companies will recover their debt. For instance ARM cement which came into administration in August 2018, failed to make any recovery whatsoever which led to its eventual sale by its administrators.