Court bars Fly540 asset transfers over Sh101m tax bill

Politics and policy

Fly540 staff board a plane at Wilson Airport in Nairobi. PHOTO | FILE 

By BRIAN WASUNA, bwasuna@ke.nationmedia.com

In Summary

• Fly540’s assets were frozen after the former airport manager Imtiaz Khan told the Labour Relations Division of the High Court that the carrier had hatched a scheme to transfer its assets to a holding company to escape a Sh101 million tax demand from the KRA.
• Justice Nzioki wa Makau stopped Fly540 from moving any of its assets until an application filed by Ms Khan is heard and determined.
• The High Court orders also bar Fly540 from voluntarily winding up before Ms Khan’s application is heard.

Low-cost flights operator Fly540’s assets have been frozen in the wake of a vicious court battle with a former employee seeking compensation for wrongful dismissal.

The airline’s assets were frozen after former airport manager Imtiaz Khan told the Labour Relations Division of the High Court that the carrier had hatched a scheme to transfer its assets to a holding company to escape a Sh101 million tax demand from the Kenya Revenue Authority (KRA).

Ms Khan had argued that such a transfer would make it impossible for the airline to compensate her in the event that the court ruled in her favour.

Justice Nzioki wa Makau stopped Fly540 from moving any of its assets until an application filed by Ms Khan is heard and determined. The High Court orders also bar Fly540 from voluntarily winding up before Ms Khan’s application is heard.

“A temporary order is hereby granted restraining Fly540 and EASAX from transferring, wasting or vesting all the assets of Fly540 and from voluntarily winding up the company pending hearing on March 9,” the judge ruled.

East African Safari Air Express (EASAX), one of the first casualties of Kenya’s air fare wars, was a rival low cost airline purchased by Fly540 in 2010. It was rebranded as FlySAX and operates as a safari and private charter airline.

Ms Khan told the court that despite an earlier judgment by Justice George Odunga, the airline had started transferring its assets to EASAX and, if not stopped, would leave her with no remedy in the event she won her Sh12.3 million claim against the carrier.

The former employee of the airline had initially been hired as a resource training and development manager in 2006 shortly after the firm launched its Kenya operations, and had risen to the post of airport manager by the time of her sacking last year.

Ms Khan said that a search on Fly540 at the companies registry shows it is a sole proprietorship but that the airline identified itself as a limited liability company when it sued KRA over the Sh101 million tax claim.

READ: Fly 540 loses bid to block Sh101m KRA demand

Her lawyers Gikama & Vedgama Advocates said in suit papers that a search on both firms had produced different outcomes causing them reason to suspect foul play.

“A similar search on EASAX indicated no results. This shows that the records of the two companies are in the process of being changed or the files are being intentionally withheld,” Ms Khan said.

“There is a high likelihood that the current goings-on are an attempt by Fly540 to evade tax obligations and all its financial liabilities including this suit.”

Ms Khan’s contract was verbally terminated in October last year, an action she says was in contravention of the law.

She is seeking Sh3.3 million compensation for wrongful dismissal, Sh4.3 million for house allowance over the nine years she worked at Fly540 and Sh1.1 million in salary arrears not paid since October last year.