ARM cement creditors will get a paltry Ksh50 million from the sale of its Tanzanian subsidiary despite the sale raising a Ksh2.25 billion surplus. This is after the Tanzania Revenue Authority slapped ARM (Under receivership) with a Ksh2.2 billion ($22 million) capital gains tax claim after successful sale of the Maweni facility to Hong Kong’s Huaxin Cement limited.
ARM sold all its shares to Huaxin Cement through subsidiaries Huaxin (Hong Kong) International Holdings Ltd and Huaxin (Tanzania) Investment Ltd for a capital injection of Ksh11.6 billion ($116 million).
However, ARM creditors demanded more that Ksh16 billion ($160 million). PwC joint administrators George Weru and Muniu Thoithi say that Maweni liabilities amount to Ksh9.35 billion ($93.5 million) leaving the surplus of Ksh2.25 billion.
The Insolvency Act 2015 of Kenya stipulates that the proceeds of share sales should settle outstanding liabilities and the any surplus remitted to ARM to distribute to all creditors.
The administrators revealed that they are engaging with the Tanzania Revenue Authority to solve the tax claim stalemate. They added that the Ksh2.25 billion will be retained in full until the CGT claim is resolved.
Tanzania subjects a 30% tax rate to capital gains realized on the disposal of business and investment assets.