Kenya Deposit Insurance Act

This Act may be cited as the Kenya Deposit Insurance Act.

Section 2 supplies interpretation and definitions for various financial and property-related terms and lists exclusions and processes (for example: bank drafts, certified cheques, deposits not payable in Kenya, exclusion and transfer of deposits and liabilities, costs to the Corporation, rights and conveyances, securities, negotiable instruments, mortgages and other property).

If this Act conflicts with any other Act on matters relating to the purpose of this Act, this Act prevails.

Section 10 establishes a Chief Executive Officer for the Corporation: the Board must competitively recruit and appoint the CEO, determine the CEO’s terms and conditions, the CEO must manage the Corporation’s day-to-day affairs and staff, must hold office for three years (eligible for one further term), and the CEO must meet specified qualifications and experience.

The Board may delegate its powers, functions or duties by resolution to committees or specific members, officers, employees or agents; the Corporation may appoint attorneys or agents (in or outside Kenya) to exercise powers or perform acts subject to instrument terms.

Members of the Board and officers, employees, agents or servants of the Corporation are not personally liable for bona fide acts or omissions done in executing functions, powers or duties under the Act; however, the Corporation remains liable to pay compensation for injuries caused by exercising powers or by failures of works.

The section governs custody and use of the Corporation's common seal: the Board may direct where the seal is kept; affixing must be authenticated by the chairperson and the Chief Executive Officer; certain documents and Board decisions may be authenticated by both; when either official is absent the Board must nominate a member to authenticate; an affixed and duly authenticated seal is judicially and officially noticed and Board orders are presumed until the contrary is proved.

Persons who know that information was disclosed in breach of subsection (1) must not disclose it; contravening subsection (1) or (3) is an offence punishable by a fine not exceeding two hundred thousand shillings or imprisonment up to three years or both. The section does not apply to information lawfully available to the public.

Establishes the Kenya Deposit Insurance Corporation, lists corporate powers (including suing and being sued; acquiring and disposing of property; borrowing money; and performing necessary acts), and sets its headquarters in Nairobi.

Section 5 states the Corporation’s objects and lists its functions, including providing a deposit insurance scheme, receiving and winding up institutions when appointed receiver or liquidator, levying contributions, managing the Fund and administering the scheme, promoting stability and performing other conferred functions.

The Corporation has the power to make investments and enter into transactions for managing the Fund's finances, subject to the provisions of this Act.

Section 7 sets out the composition of the Board of Directors and requires the Board to appoint its own secretary.

The Board's conduct and regulation of its business and affairs must be as provided in the Schedule; except as provided in the Schedule, the Board may regulate its own procedure.

The Board must pay its members remuneration, fees or allowances as it determines in consultation with the Cabinet Secretary.

Section 16 sets out sources of the Corporation's funds, permits Parliament in exigent circumstances to appropriate funds for the Corporation, requires that Fund receipts not be paid into the Consolidated Fund but retained for the Fund, and requires the Corporation to transfer from the Fund amounts sufficient to meet its requirements when its available amount is insufficient.

The Corporation's financial year is the twelve-month period ending on the thirtieth June each year.

The Board must prepare and approve annual revenue and expenditure estimates before each financial year, submit them to the Cabinet Secretary for approval, and cannot increase them after Cabinet Secretary approval without that consent.

The Board must ensure that all proper books and records of the Corporation’s income, expenditure and assets are kept.

Establishes the Deposit Insurance Fund, vests it in the Corporation, and provides that the Board shall administer it; Parliament may appropriate funds in exigent circumstances.

The Board may, from time to time, fix the size of the Fund.

The Board may authorize the Corporation to borrow sums of money for the Fund; the lender and the Corporation must determine the terms and conditions of any advance.

The Fund may invest in treasury bills, treasury bonds or other securities issued by the Government.

Section 23 refers to "payments in respect of insured deposits" relating to the application of the Fund.

Institutions licensed by the Central Bank become members of the Fund when licensed; institutions licensed at the Act's commencement are deemed members; the Corporation must publish an annual Gazette list of insured institutions.

When an institution’s membership terminates under any listed event, the Corporation must publish the institution’s name in the Gazette and at least two nationwide daily newspapers as soon as reasonably practicable.

When an institution ceases membership of the Deposit Insurance Fund it must not imply membership, must surrender its licence, remains liable for accrued obligations to the Corporation, and must indemnify the Corporation; the Corporation must notify depositors; contravention is an offence with specified fines.

Institutions licensed by the Central Bank must contribute annual amounts to the Deposit Insurance Fund as determined by the Corporation; the Corporation issues notices specifying amounts and payment periods, can increase contributions where an institution is detrimental to depositors, may appropriate future contributions if the Fund is insufficient, and institutions that fail to pay face penalty interest.

The Corporation must insure deposits placed with institutions; payment to customers is capped at five hundred thousand shillings unless the Corporation sets a higher amount, and the Corporation must pay within six months (or a shorter period) after liquidation; contravention is an offence punishable by a fine up to one million shillings or imprisonment up to three years or both.

Deposits held by a trustee or as joint owners are treated as separate deposits, trustees must keep and submit detailed trust-account records, ensure their truthfulness and indemnify institutions; the Corporation may refuse separate insurance if a trust exists mainly to obtain insurance.

Section 30 sets rules for insurance of deposits when institutions amalgamate, are acquired or assume deposits, and requires institutions to maintain prescribed records.

Monies received by an institution do not count as a liability unless the issued instrument and the institution's records specify who is entitled to repayment.

A customer's aggregate account balances minus any liabilities is an insured deposit to the extent that may be prescribed.

The Corporation must pay insured deposits (when appointed liquidator), payments must come from the Fund, depositors must lodge claims on liquidation, and the Corporation may require proof, may decline payments in certain cases, must pay within 30 days where obliged, may offset debts and may make interim payments.

Upon payment of insured deposits under this Part, the Corporation is discharged from liabilities to the extent of the payment.

When the Corporation pays an insured deposit it is subrogated to the depositor's rights to the extent of the payment, may bring actions in those rights, is entitled to recover from the institution an amount equal to the insolvency payment, and is entitled to be paid its subrogated claims before other depositors or creditors.

The Corporation may withhold payment to a third party for any deposit until it receives a written assignment of the depositor's rights and interests, where it deems it necessary.

Creditors may not bring claims for insured deposits more than two years after the Corporation publishes commencement of payment, and may not bring claims for dividends more than one year after that publication; an exception applies if a person, for reasons beyond their control and to the satisfaction of the Corporation, was unable to claim within the period.

The Corporation may ask the Central Bank, at any time, to inspect an institution and to provide the Corporation with information from that inspection.

The Corporation may examine any institution when it deems necessary, its officers may require documents, it must report completed examinations to the Central Bank, and it may recover the costs from the institution examined.

Section 40 grants the Corporation powers to require information, gives the Corporation access to Central Bank examination reports, imposes confidentiality limits on use and disclosure, requires the Central Bank to advise the Corporation of material changes promptly, allows the Corporation to require additional reports, and requires the Corporation to submit certain information to the Central Bank where necessary.

The Corporation may recommend enforcement to the Central Bank; if the Central Bank does not act within thirty days the Corporation must serve notice of intention to terminate membership and within thirty days of that notice the Corporation shall terminate the institution's membership.

The Corporation must, in consultation with the Central Bank, take prompt corrective action under this Act or any other law to resolve problems in an institution that put depositors or the banking sector at risk.

The Central Bank must, in consultation with the Cabinet Secretary whenever circumstances require, appoint the Corporation as the sole and exclusive receiver of any institution.

The Central Bank must notify the Corporation in writing when an institution has ceased, or is likely to cease, to be viable; the institution concerned must pay the Corporation's costs and remuneration of any appointed person.

Institutions must immediately submit control of their assets, liabilities, businesses and affairs to the Corporation or appointed person; directors are barred from acting except as authorized; contraventions carry fines and/or imprisonment.

Creditors have no right of set-off against the institution; persons who suffer losses from actions of the Corporation or appointed person may sue for damages; the Corporation or appointed person must continue to exercise its powers under the Act.

This section states that prior agreements are overridden to the extent they provide for or permit anything that, in substance, is contrary to section 44.

A person is prohibited from requiring payments to be made in cash for goods, services, use of leased or licensed property or other valuable consideration provided after assumption of control under section 44(2)(b).

Section 49 lists a currency or interest rate swap agreement as a financial agreement or transaction.

Section 50 gives the Corporation broad receivership and resolution powers over an institution, including taking control of assets, selling or transferring assets and liabilities, carrying on business, suing and settling claims, drawing from the Fund in certain circumstances, and adopting prescribed resolution mechanisms.

When appointed receiver, the Corporation is exempt from direction or supervision by any other entity in exercising its rights, powers and privileges; any party aggrieved by exercise of those powers may apply to the High Court for appropriate orders.

Directors of an institution are not liable to the institution’s shareholders or creditors for agreeing in good faith to the Corporation's appointment as receiver.

Appointments as receiver are limited to specified periods; the appointing authority may extend once by up to six months if justified; the Corporation may recommend liquidation to the Central Bank, which must appoint the Corporation as liquidator; and the Cabinet Secretary may, in exceptional circumstances, extend receivership by up to twelve months.

The High Court must not approve appointing a liquidator under subsection (4) unless the Central Bank certifies it will not exercise its powers under this section.

Section 55 lists powers the Corporation has when acting as liquidator (including carrying on business, appointing professionals, compromising claims, selling assets, and suing in the institution's name), allows aggrieved parties to apply to the High Court, and requires the Corporation on appointment to open Central Bank accounts to transact the institution's business.

Prior causes of action against directors, management or the institution before liquidation cannot be maintained against the liquidator; no injunction or other civil proceeding may be commenced or continued against the institution or its assets without the Court's sanction; and no enforcement (attachment, garnishment, execution or other methods) may take place or continue against the institution or its assets.

Lists categories of institutional debts that have priority for payment in receivership, liquidation or winding-up and sets ranking and priority rules among them.

Persons are required to cooperate with a liquidator by giving reasonable assistance, appearing for examination, and producing books or documents; they must not refuse or fail to comply with the liquidator, obstruct or hinder the liquidator, or furnish false or misleading information.

The Corporation must file with the Official Receiver, during liquidation, a status report and statement of accounts for an institution every six calendar months; the Corporation must also endeavor to liquidate an institution efficiently to minimize costs and delays that could harm dividends or cause losses.

Rules for completing liquidation and winding-up: the Corporation must publish a final statement and handle objections; it may apply to the High Court to terminate liquidation; notices and transfers of unclaimed assets, monies, securities and title endorsements are given to the Corporation and amounts are to be paid into the Fund.

The Corporation shall not be subject to the supervision of any person or authority.

No person must claim to be a member of the Fund or say they are insured under the Act; anyone who does so commits an offence and may be fined up to one million shillings or imprisoned up to three years and additionally fined up to fifty thousand shillings for each day the contravention continues.

A person ("he") must not submit to the Corporation an account, statement, return, report or other document required to be submitted under this Act that he knows or has reason to believe is false or contains false or misleading information.

Requires that any account, record, statement, return, report or other document in respect of the business or affairs of the institution that is required to be submitted to the Corporation under this Act be provided to the Corporation within the time specified.

A natural person is liable to a fine not exceeding five hundred thousand shillings, or to imprisonment not exceeding three years, or to both.

Section 66 identifies categories of persons connected to a body corporate (directors, officers, controllers, persons purporting to act as such, those responsible for management, and those assisting management) and states that where a person would be liable under the Act for an act, omission, neglect or default, that person is also liable for the same punishment or penalty for such acts, omissions, neglects or defaults of their employees or agents.

Institutions must follow the Act and related Corporation rules, provide requested information, and keep accurate deposit records; the Corporation may impose penalties after giving the institution the right to be heard.

The court has the power to order a person to rectify the contravention for which they were convicted.

Penalties recoverable by the Corporation shall be paid into and form part of the Fund.

The Corporation may acquire, preserve or dispose of any asset; when the property is land it may take steps to preserve value (including entering and repairing) and may dispose of land by public auction, private treaty or other sale methods subject to a reserve price.

The Corporation may give or convey information about suspected offences to police, affected institutions or other authorities, and may disclose information to monetary, financial, tax or fraud agencies (inside or outside Kenya) or licensed credit reference bureaus, with outside-Kenya disclosures limited to reciprocal arrangements.

The Corporation is exempt from income tax and from certain stamp duties; the Cabinet Secretary can, by order published in the Gazette, specify further taxes or imposts from which the Corporation shall not be liable.

The Corporation (including when acting as receiver or liquidator of an institution) is exempt from levy, attachment, garnishment, lien, foreclosure or sale; those exemptions also apply mutatis mutandis to institutions in liquidation.

Regulations may prescribe anything which under this Act may be prescribed.