This archive report was first published on 14 July 2019.
July 14, 2019, marked a significant day in Kenya's business world as the planned auction of Njenga Karume's Jacaranda Hotel in Nairobi shed light on the challenges faced by trusts in overseeing businesses.
Trusts are established to preserve assets and manage transitions, ensuring a business thrives and grows in line with the founder's vision. However, recent events have revealed a glaring gap in Kenyan trusts, with the Karume Trust being embroiled in several suits filed by the family, who have accused the trust of running down his properties.
Family conflicts and the collapse of once successful businesses are a common phenomenon in Kenya, with many families feuding over assets left behind by their departed kin. These disputes can lead to the collapse of businesses if not addressed promptly.
According to Joseph Waruingi, managing director of Advantech Consulting, the lack of management processes and systems is a major contributor to the collapse of businesses. He emphasizes the importance of engaging professionals to set up management structures and understand future prospects of a business.
Waruingi, a former PwC partner, notes that founders and their children often lack the management expertise to handle businesses that grow beyond a single branch.
Asaad Abdullatiff, a Mauritius-based attorney and managing director of Axis Fiduciary, agrees that trusts can play a crucial role in ensuring smooth transitions. He suggests that trusts should oversee business operations, including the inclusion of heirs in their respective roles or as top shareholders.
Abdullatiff warns that blind expansion without proper corporate structures in place can expose businesses to further family feuds fueled by increased mistrust. He emphasizes the importance of allocating specific roles to children and overseeing their involvement in business decision-making.
Axis Fiduciary, which is planning to launch a Kenyan office to oversee East Africa clients, has drawn its clientele from a cross-section of businesses, including real estate, technology firms, fast-moving goods firms, and retail chains.
Abdullatiff believes that the operationalization of the double taxation treaty between Kenya and Mauritius could unlock the formation of more trusts keen to enjoy the benefits of a trust office in Mauritius.
