Mastermind Tobacco Ltd Lays Off Over 1,000 Employees

After facing fatal financial problems, Mastermind Tobacco (K) Ltd has decided to terminate the contract of about 1,000 employees.

Mastermind Tobacco

The cigarette maker was pushed into administration by I&M Bank last week as a result of an undisclosed amount of debt that the company owed.

As the country’s economy worsens, companies have been seeking rescue through formal insolvency processes. Mastermind, which is owned by the estate of the late businessman Wilfred Murungi stopped making cigarettes nearly six months ago and without business it was forced into receivership under the administration of I&M on December 14.

“We hereby notify all employees that on the placement of the company under administration all existing contracts of employment stand automatically terminated, in accordance with the provisions of the law,” joint administrators Swaroop Rao Ponangipalli said in a notice to all employees dated December 18, 2023.

According to the notice, employees interested in continuing their employment with the company are required to submit their applications in writing but such re-employment will be subject to Joint Administrators’ approval and in accordance with the newly negotiated terms and conditions.

“Any such re-employment will be communicated only after the initial assessment of whether the operations can continue at a financially viable level, which determines the number of employees required to be re-employed by the Joint Administrators,” said Ponangipalli.

“Any employee, who is not re-employed, in writing, ceases to be the employee of the company with effect from the date of appointment of the Joint Administrators (December 14).”

The notice did not mention the number of employees who are affected, but the company has published the total number of its employees as more than 1,000.

The firm’s financial woes began to show in 2018 when employees experienced delays in salary payments.

In 2019, Mastermind and the Kenya Revenue Authority (KRA) agreed to sell the company’s prime assets to settle a KES2.9 billion ($18.83 billion) tax arrear. Earlier this year, the company lost a KES517 million lawsuit against the KRA, with the High Court denying it the opportunity to introduce new evidence.

Latest data from the Office of the Official Receiver shows an increasing number of firms sliding into financial distress, failing to survive the administration process and eventually being liquidated.

In the last two fiscal years (2020/2021 and 2021/2022) the High Court allowed a total of 75 firms to be liquidated and in the first four months (July, August, September and October) of this financial year the High Court has approved nine firms to be liquidated, according to the Office of the Official Receiver.

Kenya introduced the Insolvency Act in 2015, marking a paradigm shift from the previous requirement that insolvent companies be wound up immediately for the benefit of creditors.

Currently, the law requires that insolvent companies be first put under administration to help in efforts to steer them back to profitability.

Leave a Reply

Your email address will not be published. Required fields are marked *