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Agony for 2,600 workers as Karuturi flower firm shuts down amid debts

By Moses Michira | May 7th 2016
By Moses Michira | May 7th 2016

More than 2,600 workers of one-time world’s largest rose flower producer, Karuturi Limited, were Friday sent home as the firm shut operations.

Dejected workers from Naivasha based Karuturi Flower farm on strike after going for months without pay. The farm shut down operations yesterday sending home 2600 employees. [Photo: Antony Gitonga/Standard]

Receiver managers told the employees in a Thursday meeting that they only had a few hours left on their employment which ended last evening. “We regret to inform you that the company will cease its trading activities today Friday, May 6, 2016 following the winding up order,” receiver and interim liquidator Muniu Thoithi told the distressed workers.

Anxiety gripped the farm, which at one time produced six million stems of roses daily as the liquidator also issued a two month notice to the workers to vacate the company’s houses. This emerged during a meeting between the workers, labour, union officers and the liquidator at the farm located along Moi South Lake Road.

The fate of the farm’s primary and secondary schools that have more than 2,000 students was unclear as the workers contemplated their next move. Naivasha sub-county labour officer Moses Karimi said the workers would get their April salary.

Speaking after the meeting, Karimi added that the workers would also be entitled to a one month extra pay by May 16. “This is the last day for workers as the liquidator moves in to sell the farm assets so he can pay creditors,” he said. Karimi added that a few workers would be retained to run essential services like schools and nearby hospitals.

Karuturi was placed under receivership two years ago after encountering trouble in servicing its debts including a Sh400 million loan owed to CFC Stanbic Bank. The lender and several other debtors moved to court seeking the liquidation of the flower producer owned by Indian-listed agricultural firm Karuturi.

PriceWaterHouseCoopers were appointed receiver managers and has since been unable to return the firm to profitability besides carrying on with the ordinary business in a sustainable way. “Following a Winding Up Order, a company can only operate or carry on its business in so far as may be necessary for the beneficial winding up thereof, and with permission of the Court. As such, the closure of the operations is the inevitable consequence of the order,” Mr Thoithi added.

He is now seeking a buyer for the business following the winding up order issued by the liquidation court on March 30. Sai Ram Karuturi, the previous managing director of the agricultural firm that also has operations in India and Ethiopia, had unsuccessfully fought the receivership and the subsequent liquidation. High Court Judge Charles Kariuki on March 30 issued the winding up orders after the directors of Karuturi indicated to the Court of a change of heart and a decision not to oppose the petition for winding up that had been brought up by a creditor of the company.

On April 6, the Court appointed Mr Thoithi and Kuria Muchiru as liquidators pending further direction of the Court. The liquidators had obtained some special permission of the court to continue certain aspects of the business of the company, such as the cutting and selling of flowers up to Thursday, May 5 2016, for purposes of an orderly winding up of the company. Starting yesterday, the liquidators had no mandate to continue the operations of the company hence the closure.

Mr Thoithi in attempting to mitigate the impact of the closure would have on employees, expressed optimism of finding a buyer for the entire farming business and possibly, re-employing the now stranded workers.

“The receivers appointed by the bank over the assets of the company will remain in place and will, subject to such directions that the court may issue, exercise powers they have over the assets of the company. As previously advised, closure of the farm and sale of the assets is an inevitable consequence of a winding up order. It is our hope that a new investor will be identified to purchase the company’s assets and potentially create employment opportunities in the future,” added Thoithi.

Winding up Order

A winding up petition was brought against the company in August 2013 culminating in the eventual winding up order issued at the end of March.

CFC Stanbic Bank says it continued to support operations at Karuturi during the receivership period by providing more lending to pay salaries and other operational costs in the hope that the company would be sold as a going concern which would have ensured an uninterrupted transition prior to the winding up order.

The search for an investor has been stepped up in the hope that the company will be bought as a unit and the operations resume at the earliest opportunity.

According to Ferdinand Juma, Secretary General Kenya Plantations and Agricultural Workers Union (KPAWU) Naivasha branch, the employees would also be paid for the duration worked in May. “The liquidator is hopeful that he will get an investor to buy the farm but at the moment operations have come to a halt,” he said.

One of the workers, James Wafula told of their fear as they stand to lose millions of shillings in savings and benefits. “We are asking the government to intervene and help us to get our dues,” he said.

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