A bitter split between former lovers who built a Diani hospitality business together has ended with court-ordered separation.
The High Court has blocked the liquidation of Paradiso Toys Limited after finding that its shareholders can no longer run the company together.
Justice Nabil M. Orina instead ordered an independent valuation, paving the way for one shareholder to buy out the other.
The decision follows a prolonged dispute between Petra Lettau and Yves Berten, former partners who jointly built the company.
Lettau owns 33.33 per cent of Paradiso Toys, while Berten holds the remaining 66.66 per cent.
Their personal relationship collapsed around 2021, but the consequences soon spread into the company’s affairs.
The judge found that the breakdown had become a corporate problem requiring judicial intervention.
Yet he stopped short of ordering liquidation, saying another remedy could resolve the impasse without destroying the company.
Bitter Split
Paradiso Toys was incorporated in 2002 and acquired two properties in Diani, Kwale.
The properties, identified as Kwale/Galu Kinondo/721 and 722, became the foundation for Zum Zum Beach House.
The boutique hospitality business features six guest bedrooms, a presidential suite, and a residential wing.
Lettau told the court that she was an original subscriber, shareholder, and director involved in developing the enterprise.
She also claimed that about €500,000 from selling Turtle Beach House was reinvested into the company’s development.
According to her evidence, she received neither remuneration nor dividends despite contributing to the business.
The relationship deteriorated in 2021, triggering what became a bitter struggle over control, information, and ownership.
Lettau alleged that Berten excluded her from management, withdrew her access to funds, and forced her from the premises.
She also challenged her removal as a director during an extraordinary meeting held on April 25, 2022.
Lettau maintained that she never received notice of that meeting before her removal.
Berten disputed the allegation, insisting that notice had been issued more than thirty days beforehand.
Failed Exit
The dispute did not immediately begin as a fight to wind up the company.
Lettau first attempted to secure an exit by selling her 33.33 per cent stake to Berten.
She later offered to purchase his controlling interest, but neither proposal resolved their differences.
The disagreement had already reached court before the latest petition was filed.
In April 2024, the High Court directed the parties toward arbitration under the company’s Articles of Association.
The court also issued interim protections concerning the company’s shares, assets, directorship, and records.
Those proceedings eventually ended through consent, leaving the parties to pursue civil remedies before court.
The dispute over valuation nevertheless remained unresolved.
On August 30, 2024, Berten offered €100,000 for Lettau’s 33.33 per cent shareholding.
The proposal required €20,000 upon transfer, followed by €1,000 monthly instalments for the balance.
Lettau rejected the proposal and sought an independent valuation of the company.
That unresolved valuation dispute eventually became central to her liquidation petition.
Trust Collapses
Justice Orina found that the parties’ personal and corporate lives had been unusually intertwined.
Both incorporated Paradiso Toys, held shares, and served as directors during the company’s development.
The company’s property also accommodated the business and the couple’s former residence.
The judge therefore warned against treating their personal history as irrelevant to the corporate dispute.
He observed that “the line between their partnership and separate corporate dealings” had been thin.
That distinction became crucial when the court examined whether continued joint ownership remained workable.
The court rejected Lettau’s argument that the company’s substratum had disappeared.
Even if the hotel had stopped operating as previously, that alone did not establish corporate collapse.
There was also no evidence showing that Paradiso Toys could not pay its debts or had completely stopped operating.
However, the court reached a different conclusion about the shareholders’ relationship.
Justice Orina found that the company’s affairs had become unfairly prejudicial to Lettau’s interests.
He identified a complete breakdown of mutual trust and little prospect of productive cooperation.
The judge said the situation had become one where “one party is at a disadvantage”, identifying Lettau.
The court therefore found sufficient corporate consequences to justify intervention.
Buyout Ordered
The critical question was whether intervention should mean liquidation or another remedy.
Justice Orina chose the latter, relying on sections 782 of the Companies Act and 427 of the Insolvency Act.
Those provisions give courts alternatives to liquidation where shareholder interests have been unfairly prejudiced.
The judge concluded that winding up Paradiso Toys would be unnecessarily destructive in these circumstances.
“The just and equitable jurisdiction is intended to achieve justice between those interested in the company,” he said.
The court consequently ordered an independent valuation of the company and its properties.
The parties have thirty days to agree on a firm of Certified Public Accountants to conduct that valuation.
If they cannot agree, the ICPAK chief executive will nominate the independent valuer.
The valuation must be completed within sixty days after the firm’s appointment.
Berten will then receive the first right to purchase Lettau’s 33.33 per cent shareholding.
He must exercise that option within fourteen days after the valuation is completed.
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If he declines or fails to exercise it, Lettau will receive fourteen days to buy his 66.66 per cent stake.
The purchase price must be paid within sixty days after exercising the relevant option.
The shares must also be transferred simultaneously with payment.
The company will meet the valuation costs, while each party will bear their own legal costs.
The ruling therefore preserves Paradiso Toys while ending the shareholders’ failed partnership.
It also demonstrates how courts can separate intertwined business interests without necessarily destroying the underlying company.
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