The case of a Rwandan investor defrauded of a company worth billions of francs is a wakeup call regarding the poor way some foreign investors are treated by their Kenyan partners and the impact it has on the country's ability to attract Foreign Direct Investments (FDIs), a prominent lawyer has said.
The investor, Desire Muhinyuza, on Wednesday, December 27, won a legal battle in Kenya to reclaim ownership of an online company valued at Rwf 3.2 billion ($2.6 million) defrauded of him by a Kenyan who had helped in its registration.
Until October, Kenyan law prohibited foreigners from registering companies unless they had local status. Due to such barriers, Stay Online Limited (SOL), a Rwandan company seeking expansion into Kenya, registered under a Kenyan's name. However, the Kenyan individual - Kirimi Koome, later claimed ownership of the company.
Muhinyuza initiated the company's registration remotely on April 14, 2023, by transferring $29,000 from Kigali to Koome for the registration process in Nairobi. However, as Koome assisted with the registration process in Nairobi, he did not disclose the beneficial owner of the company, leading to a contentious ownership dispute that reached the High Court of Nairobi.
In a verdict issued on Wednesday, December 27, Justice Alfred Mabeya, head of the High Court's commercial division, found that find Muhinyuza is the beneficial owner of SOL, and that Koome committed fraud by not filling out the form of beneficial ownership at the time of incorporation of the company.
Speaking to the media, Muhinyuza's lawyer Danstan Omari, referred to what happened to his client as a wakeup call to everybody in Kenya in regards to how some foreign investors have been treated.
"This is a wakeup call to everybody in this country," he warned.
"This is a narrative (of) how foreigners have lost. We have asked this question: Why is Kenya losing Direct Foreign Investments to Tanzania, to Uganda. The reason is simple, when foreigners come here, they register a company using the name of a Kenyan, the Kenyan swindles them and they disappear," he added.
Taking note of such fraudulent conduct, barely three months ago, the Kenyan government amended the companies' act and introduced new articles that deal with beneficial ownership, not just registered ownership.
Though many foreigners are thought to have registered their companies through their Kenyan counterparts, Muhinyuza's case is the first to have been decided by the courts in the country, regarding the difference between the registered owner and the beneficial owner.
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During the court sessions, Muhinyuza and his lawyers produced evidence that he was the beneficial owner, despite the fact that the company was not registered in his name. Among these, they showed that he studied in the USA and graduated with a master's degree in digital sciences, after which he got employed in a fintech company in Canada.
He took ten years to conceptualise and develop an infrastructure known as a gateway for payments online. Afterwards, he went with his product to Rwanda and registered it as a company called SOL.
He partnered with other companies in Estonia and Canada and they started the business. Having succeeded in Rwanda, he went to Kenya where he registered the company through Koome who turned out to defraud him.
Besides returning the company to Muhinyuza, Justice Mabeya ordered Koome to reimburse approximately $100,000 (approximately Rwf 125,731,200) received from Muhinyuza for tax purposes, which Koome had pocketed without remitting any funds to the tax authorities.
Omari also said that the High Court judgement has restored the confidence of investors who are defrauded (of) their property by Kenyans "who are hell-bent."
