Insolvency Act

The Cabinet Secretary may, by notice in the Gazette, appoint dates when provisions of the Act come into operation; different provisions may have different commencement dates, and any provision not brought into force within nine months after publication comes into force at the end of that period.

Section 2(3) defines who counts as a 'member of the family' for the Act by listing specific relations, and states that for an adopted child the adopted parents are included.

Sets out the Act's objects: to provide a framework for administering insolvent estates (natural persons, unincorporated entities, companies and other bodies corporate); to enable insolvent persons and entities to continue as going concerns to meet creditor claims or achieve better outcomes than bankruptcy or liquidation; and to provide an orderly system for adjudging bankrupt and for liquidating irredeemable entities and distributing assets for the benefit of creditors.

The Official Receiver may revoke an insolvency practitioner’s authorisation for specified grounds; revocation can occur at the holder’s request or with the holder’s consent; the Official Receiver must not revoke (except at request/consent) without giving the holder an opportunity to be heard; a revocation does not take effect until the appeal period has expired or any lodged appeal is finally determined or withdrawn.

A person whose application for authorisation as an insolvency practitioner is refused, or whose authorisation is revoked (except at their request or with their consent), may appeal to the Court; appeals must meet time and form requirements. The Official Receiver is entitled to be served and to appear. The Court must quash or confirm the Official Receiver's decision and may make ancillary orders including costs.

Lists circumstances in which a person is considered to act as an insolvency practitioner (e.g. trustee in bankruptcy or sequestration, supervisor of voluntary arrangements, liquidator, administrator, various trustees or deed roles).

It is a criminal offence for a person who is not authorised to act as an insolvency practitioner for a company or natural person; on conviction they are liable to a fine not exceeding five million shillings.

Specifies who is qualified or disqualified to act as an insolvency practitioner: natural persons must meet education/training/experience rules, be members of a recognised professional body and meet its rules; a body corporate is not eligible (but employees of such a body are excluded from that prohibition); certain conditions (bankruptcy not discharged, disqualification order, physical or mental infirmity) disqualify a person; transitional rule grants temporary qualification to certain natural persons subject to compliance within twelve months.

The Cabinet Secretary must, by notice in the Gazette, declare one or more professional bodies to be recognised for this Act; the Cabinet Secretary may revoke such recognition if a body no longer meets specified requirements and may exempt specified members or classes from a revocation.

A person who wishes to act as an insolvency practitioner may apply to the Official Receiver for authorisation; the Official Receiver may direct publication of the application.

The Official must grant or refuse an application received under section 8; the Official Receiver must not refuse without giving the applicant an opportunity to be heard and must notify the applicant in writing when granting an authorisation and specify its effective date.

Creditors may appoint an expert to assist the bankruptcy trustee; a creditors' meeting may, by ordinary resolution, appoint a committee to assist the trustee; committee members are entitled to remuneration from the bankrupt's estate only if approved by an order of the Court.

Creditors are entitled to inspect the bankrupt's accounting records.

A general meeting of a bankrupt's creditors may establish a creditors' committee to perform functions under this Part; but may not do so (or impose functions) while the Official Receiver is the bankruptcy trustee, except to appoint another person as trustee.

If the Official Receiver is the bankruptcy trustee, a creditors' committee may not perform its functions; if there is no creditors' committee and the trustee is not the Official Receiver, the Cabinet Secretary must perform the committee's functions unless insolvency regulations provide otherwise.

Property acquired by a bankrupt vests in the bankruptcy trustee and the bankrupt's rights in that property are extinguished; powers over that property vest in the trustee.

If the bankruptcy trustee is replaced, the property and powers vested in the former bankruptcy trustee vest in the replacement bankruptcy trustee.

Property held in trust for another person vests in the bankruptcy trustee, who must assume control and deal with it for the beneficiaries.

A bankruptcy trustee may apply to the Court for an order; on hearing such an application the Court may order money due to, or to become due or payable to, the bankrupt to be assigned or charged to the bankruptcy trustee; such an assignment or charge is a discharge to the person who pays the bankruptcy trustee.

Certain payments to be applied in accordance with the Second Schedule.

An execution creditor may retain execution proceeds in specified circumstances relating to execution or attachment against a debtor, subject to Division 19.

If the bankruptcy trustee requires it, the judicial enforcement officer must deliver to the trustee all money and goods seized or received under the execution; the costs of the execution have first priority on those monies or goods, and the trustee may sell goods to satisfy that charge.

A judicial enforcement officer must deduct execution costs, retain the remaining proceeds for a fourteen-day requisite period, and pay the balance to the bankruptcy trustee or the execution creditor depending on notice of a bankruptcy application or the making of a bankruptcy order.

If a judicial enforcement officer sells a debtor's property and the purchaser acts in good faith, the purchaser acquires good title to that property against the bankruptcy trustee.

An execution creditor may apply to court to set aside a bankruptcy trustee's rights; the Court may set aside those rights on terms but may not do so unless the trustee has been served; the trustee may appear as respondent.

Section 114 sets out when this section applies to transactions between a person and a bankrupt concerning property acquired after the bankruptcy began, and lists examples of transactions for value.

Section 115 states that executions and attachments are made in good faith.

An execution against goods is completed by seizure and sale.

The bankruptcy trustee's interest in property passes to the transferee.

The bankruptcy trustee may disclaim onerous property (subject to section 121); and within fourteen days after the disclaimer the trustee must send notice to every person whose rights are, to the trustee's knowledge, affected.

The section terminates, from the date of the disclaimer, the rights, interests and liabilities of the bankruptcy trustee and the bankrupt in relation to the property disclaimed.

This part defines terms used in Part III, including "bankruptcy application", "bankruptcy order", "creditor's application", "debtor", "debtor's application" and "statutory demand".

Persons who suffer loss because of a disclaimer may either claim as creditors for the loss or apply to the Court for an order to deliver or vest the disclaimed property; the bankrupt may also apply; the Court may make such an order if it is fair and reasonable.

The bankruptcy trustee may be required to elect whether to disclaim property when a person whose rights would be affected sends a notice asking the trustee to make that election.

If land disclaimed by the bankruptcy trustee is subject to a rentcharge, vesting that land in another person (including the State) or their successors does not make them personally liable for the rentcharge, except for rentcharges accruing after they take possession or control.

Section 123 governs transmission of an interest in land: subsection (1) describes conditions (ownership by the bankrupt; subject to mortgage/charge; not disclaimed by the bankruptcy trustee); subsection (2) provides two alternative actions (arrange registration of transmission under the Land Registration Act (Cap. 300) or give notice to the mortgagee/charge holder that the trustee cannot or does not intend to register transmission); subsection (3) states the interest vests in the bankruptcy trustee and the mortgagee/charge-holder is liable to account to the trustee when taking possession or selling.

Bankruptcy trustee cannot claim interest in land if the bankrupt remains in possession until discharge.

The bankruptcy trustee may transfer shares and other securities.

A bankruptcy trustee may disclaim liability under shares owned by the bankrupt by treating the shares as onerous property under section 118.

The bankruptcy trustee may disclaim a liability under shares owned by the bankrupt in a company by disclaiming them as onerous property in accordance with section 118.

A bankruptcy trustee may be required to elect whether to disclaim liability under shares.

After disclaimer, the bankruptcy trustee may transfer, sell or (with Court approval and subject to other law) cancel shares; if transfer to an interested person cannot occur the trustee may transfer to the bankrupt with the bankrupt's consent, and the bankrupt is entitled to retain the shares and proceeds if they sell them.

On bankruptcy: the bankrupt person's property vests in the bankruptcy trustee or, if none, the Official Receiver; the person is restricted in the business activities they may undertake; and the Official Receiver is entitled to recover assets the person transferred within the two years immediately preceding the bankruptcy.

A company may prove claims for unpaid calls in certain bankruptcy situations; if trustee and company disagree, the Court may determine the value of future calls.

Defines “the lowest price at which a person could have bought those goods from the creditor on the basis of payment in full at the time the sale was made.”

Creditors who took or take possession of a debtor's goods around the time of bankruptcy are restricted from selling or disposing of them; sales contrary to that restriction are void, but a creditor may sell or part with possession with the bankruptcy trustee's consent before the end of a thirty-day period.

The bankruptcy trustee may exercise rights to introduce a buyer for goods within the thirty-day period, and may settle the bankrupt's obligations before the creditor sells the goods under a power conferred by law or the credit purchase transaction.

A creditor in possession of consumer goods may prove a claim in bankruptcy if the trustee has not acted under section 133; the creditor must submit prescribed documents with the claim form; the trustee may exercise rights of the debtor that apply after the creditor takes possession.

A creditor may assign goods to the bankruptcy trustee.

On a second bankruptcy before discharge, property acquired since the first bankruptcy vests in the trustee of the second bankruptcy; a surplus in the second bankruptcy is an asset of the first bankruptcy and payable to the first bankruptcy's trustee.

If the bankruptcy trustee receives notice that a creditor has applied for another bankruptcy, the trustee must hold any property in the trustee's possession that was acquired by or passed to the bankrupt since the first bankruptcy until the new application is dealt with.

Separate accounts to be kept for each bankrupt

Section 139 directs that the joint estate is applied to debts due by bankrupts jointly; each bankrupt’s separate estate is applied to that bankrupt’s individual debts; any surplus in the joint estate is applied to each bankrupt’s separate estate in proportion to their interest in the joint estate; and any surplus in a separate estate is credited to the joint estate.

Provision permits entering into a voluntary arrangement in accordance with Division I of Part IV.

A bankrupt must, to the best of their ability, help realise their property and distribute the proceeds among creditors.

A bankrupt must disclose any property acquired before discharge; failure without reasonable excuse is an offence punishable by a fine up to two hundred thousand shillings or imprisonment up to six months, or both.

On demand by the bankruptcy trustee, the bankrupt must deliver to the bankruptcy trustee (or a person authorised by the trustee) all property acquired by or passing to the bankrupt before discharge.

The Court may impose a charge on a bankrupt's property.

A bankrupt must deliver to the bankruptcy trustee all relevant accounting records and other documents in the bankrupt's possession or control, and must notify the trustee of relevant documents held by others.

The bankrupt must give the bankruptcy trustee a complete and accurate list of the bankrupt's property and of the bankrupt's creditors and debtors, and must update those lists as necessary.

A bankrupt must provide the bankruptcy trustee with details of their income and expenditure when required; failing without reasonable excuse is an offence punishable by a fine up to two hundred thousand shillings or imprisonment up to twelve months, or both.

A bankrupt must notify the bankruptcy trustee within seven days after any change in name, address, employment or income.

A bankrupt must provide the bankruptcy trustee with the information and details needed to prepare a financial statement of the bankrupt's estate; the trustee must give the bankrupt access to accounting records and may provide a certified public accountant at estate expense; failure without reasonable excuse is an offence with fines or imprisonment.

Section 148A. Principles of Data Protection

Interpretation heading for Division 15 concerning "property of the bankrupt".

Section 15(1) entitles specified actors to make a bankruptcy application: (a) one of the person's creditors (or jointly by two or more of them); (b) the debtor; and (c) the supervisor of a person bound by a voluntary arrangement approved under Division I of Part IV.

If required by the bankruptcy trustee, the bankrupt must pay an amount or periodic amounts during the bankruptcy as a contribution towards payment of the bankrupt's debts.

If a bankrupt fails to make a payment required under section 150, the bankrupt must show in any proceedings arising from that failure that the failure was not deliberate.

Bankrupt persons are prohibited from entering into, carrying on, or participating in the management or control of any business; they also must not be employed by certain relatives or by entities owned, managed, or controlled by such relatives; contravention is an offence punishable by a fine not exceeding five hundred thousand shillings or imprisonment for up to two years, or both.

The Court may issue a search warrant to the bankruptcy trustee or any other person where it reasonably believes relevant property is concealed; the warrant authorises entering and searching, seizing property, using force to enter, and opening containers.

The person executing a warrant must leave a list of any property seized with the bankrupt or in a prominent place if the bankrupt is absent, subject to exceptions; if subsection (5) applies they must ensure a notice listing seized property is delivered or sent or left within seven days.

The bankruptcy trustee may require the bankrupt and their relatives to vacate land or buildings vested in the trustee; if they do not comply the trustee may apply to court for possession, the court may order possession if no justification exists, and the bankrupt and relatives are entitled to appear and be heard.

The bankrupt is entitled to inspect documents, including the bankrupt's accounting records.

The section restricts a bankrupt from recovering property that is part of the bankrupt's estate or giving a release or discharge in relation to that property, subject to sections 114 and 115 and irrespective of whether the bankruptcy trustee has intervened.

After bankruptcy commences, a bankrupt must not use a power (including a power of appointment) in a way that would defeat or destroy another person's contingent or other estate or interest in the bankrupt's property prior to the bankrupt's discharge.

Banks must notify the bankruptcy trustee of any customer account, must not pay money from that account unless allowed by subsection (2), must inform the customer when notifying the trustee, and failure may be an offence punished by a fine up to two million shillings.

The Court can dismiss or stay a bankruptcy application if requirements have not been complied with, and if it stays proceedings it may impose appropriate terms. A bankruptcy application cannot be withdrawn without the Court's approval.

The Official Receiver may require a bank, by notice, to search its account records for names of undischarged bankrupts; the bank must search and provide written results within seven days; failure allows the Official Receiver to apply to Court, which shall order compliance unless the requirement was unjustified; the bank is entitled to be served and to appear and be heard.

A bankrupt may choose and keep certain assets listed in subsection (2), subject to a maximum value set under subsection (3).

A bankrupt may keep necessary tools of trade and household furniture and effects exceeding the maximum value in section 161 if the bankrupt's creditors approve by ordinary resolution at a creditors' meeting.

Retention of an asset by a bankrupt under sections 161 or 162 does not affect existing rights under valid charges, bailment contracts or credit purchase transactions; the Court may, on application by the bankruptcy trustee and if satisfied it is in creditors' overall best interests, order the trustee to dispose of goods in the bankrupt's possession.

If the net value of the assets the bankrupt keeps is below the maximums in section 161, that fact does not give the bankrupt any rights over other assets in the bankrupt's estate.

If the bankrupt has died, an approved relative or dependant may exercise the bankrupt's right to retain assets under section 161 or 162 for the benefit of the bankrupt's relatives and dependants.

The bankruptcy trustee may make an allowance from the bankrupt's property to the bankrupt or to any relative or dependant for their support.

The bankruptcy trustee may allow a bankrupt to keep money for immediate maintenance up to the prescribed limit.

The bankruptcy trustee may summon specified persons to appear and be examined on oath, to produce and surrender documents related to the bankrupt, and to answer questions about the bankrupt's conduct, affairs or property.

The bankruptcy trustee may examine summoned persons on oath; the trustee must record the examination in writing and ensure the summoned person signs unless excused; the trustee may report an unjustified refusal to sign to the Court, and the Court may find the person in contempt if satisfied.

A creditor may apply to the Court for a bankruptcy order against a debtor where statutory conditions about the debt amount, security, ability to pay, and procedural demands are met.

A person summoned by the bankruptcy trustee or the Court is entitled to be paid expenses for attending the examination, subject to limits set by the insolvency regulations.

A person examined by the bankruptcy trustee has the right to be represented by an advocate; that advocate may question the person and the person's answers form part of the examination.

Creditor may inspect the record of examination.

A person must not publish reports of examinations or matters arising from such examinations without the Court's consent; a person may apply to the Court for approval, and the Court may grant approval subject to conditions; contravening subsection (1) is an offence punishable by a fine not exceeding five hundred thousand shillings or imprisonment up to three months, or both.

Examination provisions apply when the bankruptcy trustee is appointed interim trustee in respect of a debtor's property.

No lien may be taken over a bankrupt's documents or business records; a person’s preferential-claim for services is limited to ten percent of the services' value, up to two hundred thousand shillings.

Criminal offences are created for persons who fail to comply with summonses, fail to produce documents, refuse or give false answers at public examinations by bankruptcy trustees; persons questioned must answer all relevant questions they can; answers are generally not admissible in criminal proceedings except in specified perjury-related cases and when the bankrupt is charged.

If the bankruptcy trustee or specified creditors apply, the Court must order the bankrupt to be publicly examined, set a time and date (not earlier than 14 days unless there are compelling reasons), and must reject certain unauthenticated creditors' copies.

The bankruptcy trustee must serve a copy of the bankruptcy order on the bankrupt as soon as practicable after the Court makes the order.

The bankruptcy trustee must lodge a report with the Court before the start of the examination.

A secured creditor's application must include either a statement that the creditor will give up the security for the benefit of all the bankrupt's creditors if a bankruptcy order is made, or (if not made in respect of the secured part) a statement of the security's estimated value at the application date.

At the Court-fixed time for the public examination the bankrupt must attend and may be examined about their conduct, affairs and property; examiners include the bankruptcy trustee (or their advocate) and a creditor (or their advocate); examiners must examine on oath; the bankrupt must produce relevant documents and answer questions; the bankrupt is not entitled to advance notice of who will ask or what will be asked.

The Court must ensure a written record is made of a public examination; the bankrupt must sign the record if the Court requires it; failure without reasonable excuse to comply with that request is contempt of the Court.

The public examination of a bankrupt ends when the Court makes an order declaring the examination ended.

The Court may, on a trustee's application or on its own initiative and by warrant, have a bankrupt arrested and brought before the Court for examination.

A bankrupt is entitled to be paid expenses for attending a public examination before the Court if those expenses are prescribed by the insolvency regulations; if the relevant expenses have not been paid or tendered to the bankrupt, the bankrupt person is not obliged to attend the examination.

If the Court authorises it, the bankruptcy trustee or a person appointed by that trustee may use subsection (2) powers to examine a company associated with the bankrupt or a partnership of which the bankrupt is a member; the trustee must record examinations in writing and obtain a signature unless excused.

Persons examined at a public examination of a bankrupt must answer all questions about the bankrupt's conduct, affairs and property (to the extent able); they are not excused from answering because of possible self-incrimination; statements made in the examination are not admissible in criminal proceedings against the maker except in the subsection (4) exceptions (perjury, false swearing, or specified charges against the bankrupt).

Section 187 makes it an offence for a bankrupt to (a) fail to attend an examination under section 180(1), (b) fail to deliver a document required by section 180(4)(a), (c) fail to answer a question required by section 180(4)(b), or (d) knowingly or recklessly give a materially false or misleading answer; subsection (2) confirms the Court may still punish the bankrupt for contempt even if criminal proceedings occur.

A person examined at a public examination of a bankrupt is entitled to be represented by an advocate; that person may be questioned by the bankrupt's advocate and their answers form part of the examination.

The bankruptcy trustee may either continue or disclaim contracts that the bankrupt entered into before the bankruptcy commenced, subject to the contract terms and relevant rules of law.

Expedited creditor's application: there is a serious possibility that the debtor's property, or the value of any of that property, will be significantly reduced during that period.

If the other party terminates a contract because of the bankrupt's bankruptcy, the bankruptcy trustee may recover from that party an amount the Court considers fair and reasonable, but not exceeding the amount calculated by the formula in subsection (3).

A transaction is treated as made in ignorance of a person’s bankruptcy if the payment or delivery was made before the bankruptcy was advertised, the person had no knowledge of the bankruptcy or of an application for a bankruptcy order, and the payment or delivery was made in the ordinary course of business or otherwise in good faith.

If the bankrupt and another person are jointly liable under a contract, that other person may sue and be sued on the contract without joining the bankrupt as a party.

The bankruptcy trustee may recover money a bankrupt paid to their advocate for costs in obtaining a bankruptcy order, subject to any amounts prescribed by the insolvency regulations.

Lists kinds of irregular transactions and enables the bankruptcy trustee to cancel those transactions or recover property or money.

Section 195 provides a power to extend certain periods in this Division in the case of a bankruptcy order made on a creditor's application by the period between service of the application on the bankrupt and the making of the bankruptcy order.

Insolvent transactions may be cancelled by bankruptcy trustee

Section 197 defines an 'insolvent transaction' as a transaction entered into when the bankrupt cannot pay debts or that enables a creditor to get more from the bankrupt than they would in bankruptcy, and lists acts (conveyance, charge, incurring obligation, execution process, payment, or other acts) that give effect to such transactions.

A transaction entered into within six months before a person is adjudged bankrupt is presumed to have been made when the person was unable to pay their debts, until proven otherwise.

If a series of commercial transactions between a bankrupt and a creditor form an integral part of a continuing business relationship, the transactions are to be regarded as a single transaction for the purposes of section 196, and an individual transaction in the series may only be treated as an insolvent transaction cancellable by the bankruptcy trustee if treating the series as a single transaction results in the single transaction being an insolvent transaction.

The Court must not make a bankruptcy order if the application includes the statement referred to in section 19 until at least twenty-one days after service of the statutory demand; the Court must take into account a debtor's contingent and prospective liabilities and must presume the creditor's prospect known at transaction time was reasonable when assessing prospects; and nothing in sections 17–19 prevents the Court from allowing a creditor's application to be amended and proceeded with in relation to remaining creditors or debts.

The bankruptcy trustee may cancel insolvent charges on their own initiative.

Section 201. Charge for new consideration or replacement charge not affected

If a bankrupt gave a charge within the six months before the bankruptcy started, the bankrupt is presumed to have been unable to pay their debts immediately after that charge was created, unless the contrary is proved.

If a bankrupt gave the seller a charge over purchased property within two years before the bankruptcy, and the charge was given no more than fourteen days after the sale, section 200 does not affect that charge to the extent it secures unpaid purchase money.

This section applies if the bankrupt has made a payment or payments to a secured creditor after the bankrupt has given a charge to which section 202 or 203 applies.

A charge or security right made or made effective against third parties before the two years immediately before the bankruptcy cannot be cancelled under section 200.

The bankruptcy trustee may cancel gifts made by a bankrupt to another person if those gifts were made within the two years immediately before the commencement of the bankruptcy.

Specifies conditions under which gifts made by a bankrupt within the period beginning five years and ending two years before the commencement of the bankruptcy may be subject to cancellation, including that at the time of the gift the bankrupt was unable to pay debts.

Sets the procedure by which a bankruptcy trustee serves notice to cancel certain irregular transactions, the contents the notice must include, the 21-day objection window, automatic cancellation if no objection is received, the trustee's ability to disregard defective objections, and the Court's power to cancel on trustee application.

The Court may order return of property to the bankruptcy trustee or payment (not exceeding the property's value when the transaction was cancelled); the Court may make other orders to give effect to that relief; existing rights and remedies of the bankruptcy trustee remain unaffected.

A creditor applying for a bankruptcy order must not start or continue execution against the debtor's property to recover the debt underlying that application, but may apply to the relevant court for approval; the court can permit execution only if satisfied that other creditors' interests will not be detrimentally affected, and actions contrary to these prohibitions are void.

States that the person acted in good faith.

The bankruptcy trustee may recover from a party to a transaction with the bankrupt an amount calculated by A = B - C.

The Court may order a recipient of a bankrupt's contribution to pay the value of that contribution to the bankruptcy trustee; the bankruptcy trustee may apply to Court for such an order.

The Court must determine the value of a bankrupt's contribution and may order the recipient to pay that value to the bankruptcy trustee; the Court may also direct sale of relevant property and make vesting orders.

The bankruptcy trustee must first keep enough of the proceeds to pay creditors in full (including interest); if a surplus remains, the trustee must pay the recipient of the contributed property up to the amount repaid under section 212; the trustee must not pay the bankrupt anything until steps 1 and 2 are completed.

Defines 'creditor's claim' and when a debt is proved for this Division.

Debts provable in bankruptcy are debts existing at the commencement of the bankruptcy, or debts arising after commencement but before discharge where the obligation was incurred before the commencement; certain debts in subsection (2)(a) are not provable and subsection (2)(b) debts are not discharged on the bankrupt's discharge.

Creditors who wish to claim in a bankruptcy must submit a creditor's claim to the bankruptcy trustee before the deadline for submitting claims.

The bankruptcy trustee must examine every creditor's claim and the grounds of the debt unless the trustee believes no dividend will be paid to creditors.

When the bankruptcy trustee rejects all or part of a creditor's claim, the trustee must, as soon as practicable, give the creditor a notice rejecting the claim or part and specify the grounds for the rejection.

After a creditor's application is made, the debtor or any creditor may apply to the relevant court for an order to stop or to allow the continuation of another creditor's execution process, and the Court may stay or allow the execution on terms it considers appropriate.

The provision identifies persons connected to creditor's claims and gives the bankruptcy trustee the power to issue a warrant to bring such a person before the Court for examination; the Court may order the person to pay expenses if it believes the person's evidence was relevant to allowing or rejecting the creditor's claim.

A bankrupt or any creditor may give the bankruptcy trustee notice to allow or reject a creditor's claim; if the trustee has not decided within fourteen days after receiving the claim, the creditor or bankrupt may apply to the Court, which may then order allowance or rejection based on whether the claim is substantiated.

The Official Receiver, the bankrupt, or a creditor may apply to the Court to cancel or reduce a creditor's claim if the bankruptcy trustee improperly allowed it; the Court may cancel or reduce the claim on hearing the application if it considers the claim was improperly allowed.

A creditor whose claim is rejected may apply to the Court within 21 days (or an extended period the Court allows) for the Court to confirm or quash the trustee's decision; the Court must quash if it finds the decision wholly unjustified, and a creditor cannot prove the rejected debt unless they have applied.

Applicants who are not the bankruptcy trustee must serve a copy of the application on the bankruptcy trustee; applicants who are not the bankrupt or an affected creditor must serve a copy on the bankrupt or that creditor; on being served the bankrupt or creditor may notify the Court to appear and be heard and by doing so becomes a party.

The Court may order that specified costs of a creditor be added to that creditor's claim.

If a bankrupt's property is charged, the creditor holding the charge may choose one of three options (sell if entitled; value and prove as unsecured for the balance; or surrender the charge and prove for the whole debt). The creditor must choose and, if selecting option 2 or 3, exercise the choice within thirty days after receipt of the notice; failure to comply is treated as surrender under option 3 and allows proof as an unsecured creditor for the whole debt.

If property of a bankrupt is subject to a security, the bankruptcy trustee may apply to the Court for an order allowing disposal as if not subject to the security; the Court may make such an order if it would likely give a better overall outcome for creditors. The trustee must apply disposal proceeds in priority order, must lodge a copy of the order with the Official Receiver within fourteen days, and failure without reasonable excuse to lodge the copy is an offence punishable by a fine up to five hundred thousand shillings.

A creditor who realises property subject to a charge may prove as an unsecured creditor for any balance due after deducting the net amount realised, except where the bankruptcy trustee has accepted a valuation and creditor's claim under section 231.

A creditor holding a charge who values the bankrupt's property and claims the balance must use the prescribed claim form, include particulars of the valuation, debt and the charge or registration, and must produce identified documents for inspection if required by the bankruptcy trustee; failure to comply invalidates the claim.

If an execution process was issued by a court other than the High Court, the section provides for either staying the execution process or permitting it to continue on terms the court considers appropriate.

Secured creditors commit an offence if they make or authorise a claim under section 229(1) knowing it is false or misleading, or omit matters from such a claim knowing the omission will make it false or misleading; on conviction they face a fine up to two million shillings, imprisonment up to five years, or both.

The bankruptcy trustee may accept or reject a secured creditor's valuation and claim; the creditor may submit a revised valuation within fourteen days of a rejection; the trustee may revoke/amend a wrongful rejection and may redeem charged property by paying the valuation if the trustee accepts the claim.

A secured creditor who surrendered a charge may, with the Court's approval, either withdraw the surrender and rely on the charge or submit a new creditor's claim; subsection (2) does not apply if the bankruptcy trustee has already realised the property subject to the charge.

The bankruptcy trustee may estimate the amount of a creditor's claim when the amount is uncertain.

On the hearing of an application under subsection (1), the Court must make an order determining the amount of the creditor's claim.

If a creditor's claim would (but for the bankruptcy) be payable six months or more after the bankruptcy began, that claim is treated as a claim for the present value of the debt.

The bankruptcy trustee must account for mutual credits/debts, set off amounts, and allow only the balance to be proved; persons who knew the bankrupt was insolvent when credit was given may not claim set-off; a creditor claiming set-off must declare they did not know insolvency; the trustee must reject non-complying claim forms.

A creditor may claim pre-bankruptcy interest.

If surplus assets remain after paying creditors, the bankruptcy trustee must pay post-bankruptcy interest on allowed creditors' claims at the prescribed rate and for the period from commencement of the bankruptcy to payment; if surplus cannot cover all interest, the interest is abated rateably among debts.

The bankruptcy trustee must pay additional post-bankruptcy interest from the date the bankruptcy began until the creditor's claim is paid.

If a bankruptcy application is withdrawn or dismissed, the restrictions in sections 21 to 23 on issuing or continuing an execution process do not apply.

Defines the 'prescribed rate of interest' for sections 238 and 239 as the rate prescribed by the insolvency regulations.

A creditor must deduct from the creditor's claim any trade discount the creditor would have given the debtor if the debtor had not become bankrupt.

A secured creditor may prove as an unsecured creditor if the security is void or partly void.

A person who obtained an order for costs against a bankrupt before the bankruptcy began may prove for the amount of those costs even if the amount is not fixed until after the commencement.

A company may prove unpaid calls: amounts made before commencement in respect of the bankrupt's shares, and the value of calls to be made in the twelve-month period after commencement; valuation may be by agreement with the bankruptcy trustee or, if they cannot agree, as directed by the Court.

A person who is a guarantor or otherwise liable and who discharges the bankrupt's debt may stand in the creditor's place and may prove for the payment as if it were a debt; if they do so, they are entitled to receive dividends paid subsequently (without disturbing dividends already paid to the creditor).

Defines "preferential claim" as a claim in respect of a debt listed in paragraphs 2, 3 or 4 of the Second Schedule.

Preferential debts are those listed in paragraphs 2 to 4 of the Second Schedule and are payable in priority to the bankrupt's other debts.

Bankruptcy debts owed in respect of credit provided by a person who was the bankrupt's spouse at the commencement of the bankruptcy rank after the debts required to be paid under section 247(3) and (4), and are payable with interest at the rate specified in section 247(5) for the period outstanding since commencement.

If one person advances money so that a preferential creditor is paid, the advancing person is entitled in the bankruptcy to the same priority in that money as the preferential creditor would have had if the payment had not been made.

The Court may make a bankruptcy order against a debtor if the creditor has complied with section 7, subject to the listed exceptions in subsection (2).

A landlord or other person who distrains goods or effects of a bankrupt within thirty days before bankruptcy has preferential claims that are a first charge on those goods or their sale proceeds; if money is paid under that charge, the landlord or person has the same priority rights as the claimant.

If a bankrupt is a partner, a creditor who is jointly indebted with the other partners must not receive money from the bankrupt's separate property until the claims of all other creditors have been paid in full.

The trustee must include prescribed information and a statement setting a final claims date; the Court may postpone that date on application; the trustee must pay any surplus to the bankrupt after specified payments.

When the bankruptcy trustee (who is not the Official Receiver) considers the administration of a bankrupt's estate practically complete, the trustee must summon a final general meeting of the bankrupt's creditors; the trustee must retain sums to cover meeting expenses; trustees may give meeting notice with the notice under section 252(1); if summoned early the trustee must adjourn until able to report completeness; where the estate includes an occupied dwelling the trustee must not summon a final meeting unless specific court or Attorney-General outcomes occur.

A bankrupt is automatically discharged three years after lodging the required statement, but may apply for earlier discharge; specified objections or unfinished public examination or an earlier undischarged bankruptcy prevent automatic discharge.

The automatic discharge of the bankrupt has the same effect as if the Court made an order for the bankrupt's discharge.

The bankruptcy trustee, the Official Receiver (if not the trustee), or a creditor (with Court approval) may object to a bankrupt's automatic discharge; objections are ineffective unless made in the manner and form prescribed by the insolvency regulations.

An objection to the automatic discharge of the bankrupt may be withdrawn in the manner prescribed by the insolvency regulations.

A bankrupt may at any time apply to the Court for an order of discharge from bankruptcy.

The bankruptcy trustee must summon the bankrupt as soon as practicable after the end of the three-year period referred to in section 254(1).

The Court may stay a creditor's application for bankruptcy at any time, on terms and for a period the Court considers appropriate.

The bankruptcy trustee must lodge a report with the Court in specified circumstances and include particular matters to assist the Court on discharge.

A creditor must give the bankruptcy trustee and the bankrupt a notice complying with subsection (2) if the creditor intends to oppose the bankrupt's discharge on a ground not mentioned in the trustee's report.

Section 262 gives the Court the power to grant or refuse discharge of a bankrupt, including immediate discharge, discharge on conditions, suspension for a specified period, or discharge at a specified future date; the Court may also vary a judgment if the bankrupt consents.

The Court may prohibit a bankrupt, after discharge, from engaging in various business activities (listed as (a)–(e)); the Court may make the prohibition for a fixed period or indefinitely and may vary or cancel it at any time.

The Court may quash a bankrupt's discharge and may make a new discharge; the bankruptcy trustee or a creditor may apply (subject to two-year timing rules); the Court will not hear such an application unless the bankrupt has been given notice including the grounds.

Quashing a discharge does not affect rights of persons other than the bankrupt; property owned by the bankrupt at the time the quashing order is made vests in the bankruptcy trustee subject to encumbrances; the bankruptcy trustee must apply such property to pay debts the bankrupt incurred since discharge.

A bankrupt may apply to the Court for an absolute discharge even if unable to comply with discharge conditions; the Court may grant an absolute discharge if satisfied the inability to comply is due to circumstances for which the bankrupt should not reasonably be held responsible.

On discharge, a bankrupt is released from all provable debts except those specifically listed in subsection (2).

A discharge of a bankrupt is conclusive evidence of the bankruptcy and of the validity of the bankruptcy proceedings.

Discharge not to release partners of bankrupt and others

If there are multiple bankruptcy applications and one has been stayed, the Court may make a bankruptcy order on the unstayed application and, when it does so, shall dismiss the stayed application on terms it considers appropriate.

A person discharged from bankruptcy must assist the bankruptcy trustee in realising and distributing that person's property vested in the trustee.

The Official Receiver must record in the public register any Court decision refusing to discharge a bankrupt.