It is déjà vu season again as yet another foreign contractor has gone bankrupt, leaving a trail of debts that could see the taxman take a Sh2 billion bath as Germany’s HP Gauff Ingenieure struggles to fight off creditors eyeing the few assets it has in Kenya.
HP Gauff Ingenieure is facing insolvency proceedings in Germany and the ripple effect has hit several countries where the contractor has been doing several government projects.
Other cases
The firm has followed the steps of other foreign contractors that did big business with the Kenyan government before going under.
In 2019 CMC Di Ravenna, the company at the centre of the Sh63 billion Arror and Kimwarer dams saga, collapsed after bagging the two tenders and receiving billions of shillings in advance.
Two years earlier Spain’s Isolux Corsan went under before completing the 428-kilometre Loiyangalani-Suswa power transmission line that was initially to cost Sh15.7 billion.
The Spanish firm’s collapse left Kenyans paying Sh14.5 billion in fines for delays in connecting the Lake Turkana Wind Power plant to the national grid through the Loiyangalani-Suswa transmission line.
And now, HP Gauff Ingenieuere has gone under before paying the taxman’s dues.
The company has been receiving billions for government tenders but not paying tax dues that have now grown to Sh1,955,787,204.
A German court issued an order protecting HP Gauff Ingenieure from creditors on April 23, 2020 and the firm has since been requesting judges in other countries where it operates to effect the same shield.
Aside from shielding HP Gauff Ingenieure’s assets, the German courts also appointed Mr Joachim Exner as an insolvency monitor.
Report
Mr Exner’s job is to monitor the company’s operations and report to the German courts on whether there is a chance of revival or HP Gauff Ingenieure should be put out of its misery.
In Kenya, HP Gauff Ingenieure filed an application to effect the shielding order on May 20, 2020.
Last week Justice David Majanja stopped creditors from attaching the German contractor’s assets, but also barred HP Gauff Ingenieure from transferring its assets or moving them outside Kenya until the insolvency matter is resolved in Germany.
The Kenya Revenue Authority (KRA), Zamconsult Consulting Engineers Ltd and 38 HP Gauff Ingenieure workers had asked Justice Majanja to allow them to recover debts from monies set to be paid by Kenya’s government to the German contractor.
In East Africa, the firm is still owed Sh117 million, most of it by Kenyan government agencies.
KRA, Zamconsult and the 38 workers were each fighting to get a slice of the Sh117 million.
The taxman is claiming Sh1.9 billion, while Zamconsult is owed Sh16.1 million.
HP Gauff Ingenieure is also owed Sh24.6 million by Rwanda’s government, Sh24.2 million by the Water and Irrigation ministry, and Sh4.8 million by the Transport ministry.
The 38 workers have not been paid salaries since May last year.
On the flip side, the Kenya National Highways Authority (Kenha) owes HP Gauff Ingenieure Sh73.8 million from a roadworks contract, while Konza Technologies Development Agency owes the German firm Sh13.8 million.
“The claims made by the employees, Zamconsult and KRA are not exceptional. They are ordinary claims made by creditors owed money by an insolvent company. The court in Germany has already appointed a monitor who is responsible to the court for the manner in which the assets of the company are dealt with. The provisions relating to cooperation are, in my view, sufficient to assuage some of the concerns by the creditors as they are able to raise with those issue with the court supervising the insolvency.”
“Having considered the concerns raised by the creditors, their interests would be best served by an order providing for their access to the court in Germany and directing the monitor and or foreign representative to file and serve on the creditors periodical reports of the proceedings and status of the company. Further and in order to protect the Kenyan creditors, any transfer of the company’s assets in Kenya shall be prohibited unless by leave of this court,” Justice Majanja ruled.
Interestingly, barely one month after HP Gauff Ingenieure filed an application before Justice Majanja, the firm’s directors registered a new company in Kenya – Gauff Consultants Africa Ltd – and started using it to collect debts owed by various government institutions.
HP Gauff Ingenieure was registered as a foreign company doing business in Kenya in 1986. The new company, Gauff Consultants Africa, was incorporated on June 18, 2020.
French nationals Michel Andre Fest and Guillaume Claude Patricot are the only shareholders listed in Gauff Consultants Africa Ltd. Mr Fest has 700 shares, while Mr Patricot has 300 shares.
The two are also the country managers (Kenya) at HP Gauff Ingenieure.
At least 200 HP Gauff Ingenieure were absorbed by the new company, while 38 were told their contracts would be terminated.
In court, the workers now say that last year, Mr Fest and Mr Patricot, ordered them to chase debts from government agencies.
The instructions were to have debtors deposit funds in bank accounts owned by the new company, Gauff Consultants.
Employees were also told that Gauff Consultants would also take over payment of salaries for the absorbed workers, and terminal benefits to those who would be downsized.
The insolvency monitor, Mr Exner, allegedly approved the change in operation.
Mr Danson Mbaru, one of the employees, told Justice Majanja that Kenha could have settled all pending payments to the German firm in early October, 2020. The payment was allegedly made to Gauff Consultants.
Mr Mbaru claimed that HP Gauff Ingenieure had initially promised to pay them pending salaries alongside one month’s salary in lieu of notice and other terminal benefits.
He claimed that Mr Fest and Mr Patricot have been blackmailing the 38 workers to have them accept a quarter of their dues before leaving the company.
The KRA said it traced two bank accounts operated by HP Gauff Ingenieure, and monies owed to the company by Konza Technopolis, Kenha, Sinohydro Corporation, Tetra Tech International Inc and Rift Valley Water Services Board.
KRA manager Sheryl Sanya told Justice Majanja that the taxman froze HP Gauff Ingenieure’s bank accounts in August, 2020 but that the orders have since lapsed.
Court papers indicate that the rain started beating HP Gauff Ingenieure in 2014 when the firm embarked on an ambitious expansion project. This left the company with a bloated workforce.
Subcontractors at the time also started increasing their fees, which ate into HP Gauff Ingenieure’s revenue.
Many experienced staffers also left the company for greener pastures and it was difficult to replace them, leading to massive delays in project completion.
When an unnamed financier backed out of a plan to fund HP Gauff Ingenieure last year, the company immediately went face to face with bankruptcy.
bwasuna@ke.nationmedia.com
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