Minority Investors Lose Sh2bn Stake Battle in Tatu City Court Ruling

A long-running ownership dispute over Tatu City took another turn this month. The Judicial Committee of the Privy Council in London dismissed an appeal that would have protected the position of certain Kenyan investors in the massive Kiambu County development.

The ruling, delivered on May 16, affects Stephen Mbugua Mwagiru, an associate of businessman Vimal Shah of Bidco Africa and former Central Bank of Kenya Governor Nahashon Nyagah. It clears the path for liquidation of Manhattan Coffee Investment Holdings, a Mauritius-registered entity tied to their stake.

Manhattan Coffee held shares in Mauritius-based special purpose vehicles Cedar IV and Cedar V. Those vehicles in turn hold indirect interests in Tatu City. The decision weakens the minority investors' position after years of legal fighting.

Tatu City spans about 5,000 acres in Kiambu County. Rendeavour develops the mixed-use project through its subsidiary SCF Holdings II. The site includes residential, commercial and industrial components and ranks among Kenya's largest private real estate schemes.

The dispute stretches back nearly two decades. It has played out in courts in Kenya, London and Mauritius. Parallel arbitration at the London Court of International Arbitration ended with a $15 million (about Sh1.94 billion) award in February 2018 against Shah, Nyagah and Mwagiru.

The tribunal ruled their actions had harmed the foreign investors. That award went unchallenged within the required period. When payment did not materialise, the foreign side moved to enforce it in Mauritius by targeting Manhattan Coffee.

Liquidation proceedings followed. Mwagiru tried to block them through derivative actions on behalf of the company. Mauritian courts rejected those efforts. The case then reached the Privy Council, Mauritius' highest appellate body.

In its judgment, a five-judge bench found Mwagiru lacked standing once Manhattan Coffee entered liquidation. He could no longer act as a shareholder or creditor under relevant sections of the Mauritius Companies Act and Insolvency Act. The lower court order allowing the derivative proceedings was ruled in error.

The ownership layers involve offshore entities. Cedar IV (Mauritius) Ltd holds 99.9 per cent of the project. SCFE II (Cyprus) and Manhattan Coffee own that entity. Manhattan Coffee was formed by Kenyan investors and held through Redline Investments Corporation and Blacknight Holdings.

Former Tatu City director Josphat Kibogo Kinyua has identified Shah, Nyagah and Mwagiru among the local investors in earlier court records. With the Privy Council decision in place, enforcement can now move forward. This opens the way for disposal of the contested shares.

The ruling marks the latest chapter in a bitter contest between shareholder groups over control of the development. It follows other related matters, including probes into tax and money laundering issues around the project.

Tatu City itself continues to see construction activity. The project has drawn both local and international capital over the years. Its scale makes it a significant piece of Kenya's urban expansion efforts north of Nairobi.

Legal experts following the case expect the decision to reshape parts of the ownership structure. After nearly two decades of litigation across jurisdictions, the minority stake linked to the Kenyan investors appears headed for resolution through the liquidation process.