Insolvency Act

Appointments under section 541 are restricted by the notice and consent rules in subsection (1) and cannot be made after a 14‑day period following the lodging of the notice of intention under section 546(1).

A person who appoints an administrator under section 541 must lodge specified documents with the Court, the administrator may rely on directors' information unless doubted, and failure to comply is an offence liable to a fine not exceeding five hundred thousand shillings.

If no person is entitled to notice of intention to appoint under section 545(1) so that section 547 does not apply, the statutory declaration accompanying the notice of appointment is ineffective unless it includes the statements and information required under section 546(2); if it does include them, section 548(2)(c) does not apply.

An administrator appointed under section 541 only takes effect when the requirements of section 548 are satisfied.

The person who appointed the administrator under section 541 must, as soon as reasonably practicable after the requirements of section 548 are satisfied, notify the administrator and other persons prescribed by the insolvency regulations that those requirements have been satisfied.

An appointment under section 541 has no effect in certain cases.

On an application under subsection (1), the Court may order the person who purported to make an invalid appointment under section 541 to indemnify the person appointed for liability solely caused by that invalid appointment.

The Court may make an administration order on an application by the holder of a qualifying floating charge only if it is satisfied that the applicant could properly appoint an administrator under section 534.

A holder of a qualifying floating charge may intervene when an application for administration of a company is made by someone who is not the holder of such a charge.

A holder of a qualifying floating charge who would otherwise be entitled to appoint an administrator under section 534 but for section 528(1)(b) may apply to the Court for an administration order.

The liquidator of a company may apply to the Court for an administration order under subsection (2).

While a company is under administration, applications for its liquidation may not be made and pending liquidation applications are suspended; subsection (2) preserves the ability to apply under section 425 or for the Court to make a liquidation order under that section; if an administrator learns an application under section 425 was made before appointment, the administrator must apply to the Court for directions under section 580.

While an administration order is in effect, the Court may not make an order for the liquidation of the company; however, the Court may make a liquidation order in respect of an application under section 425. The administrator must apply to the Court for directions under section 580 on becoming aware that an application under section 425 has been made.

While an administration order is in effect, certain actions (enforcing security, repossessing goods under credit, forfeiture by landlords, and starting or continuing legal proceedings) may be taken only with the administrator's consent or the Court's approval.

The section lists considerations to take into account on applications for approval to lift a moratorium.

When an application for an administration order is made, an interim moratorium restricts certain actions against the company; many enforcement actions may only be taken with the Court's approval and the Court can impose conditions when granting approvals.

An administrator must ensure the company's business documents state the administrator's name and that the company's affairs and property are being managed by the administrator.

When someone becomes an administrator of a company they must notify the company, publish notices as prescribed, obtain a list of creditors and notify known creditors; they must lodge a notice with the Registrar within seven days (from the prescribed date) and notify prescribed classes within fourteen days; failure without reasonable excuse is an offence with fines.

The administrator must, as soon as practicable after appointment, give notice requiring relevant persons to provide a statement of the company's affairs complying with subsection (2).

A relevant person must submit a statement of financial position by the end of twelve days (inclusive) from the day they receive notice of the requirement; failure without reasonable excuse is an offence punishable by fines.

An administrator of a company must prepare a statement of proposals for achieving the purpose of the administration, provide it to known creditors and members, lodge a copy with the Registrar, meet timing requirements (as soon as reasonably practicable and in any case within 60 days), and may publish a notice to supply copies on request; failing to comply without reasonable excuse is an offence punishable by fines.

The person presiding at a creditors' meeting must ensure the meeting is conducted in the manner prescribed by the insolvency regulations.

The administrator must present a copy of the administrator's statement of proposals to the initial creditors' meeting.

An administrator must convene a creditors' meeting requested under subsection (2) within the prescribed period; failing without reasonable excuse is an offence punishable by fines up to specified amounts.

Administrators must report the outcome of the initial creditors' meeting to the Court and prescribed persons and lodge a copy of the report with the Registrar; failure without reasonable excuse is an offence punishable by fines.

An administrator may revise previously approved proposals but must follow specified notification, publication and meeting procedures; failure without reasonable excuse is an offence with fines.

If an initial or later creditors' meeting fails to approve the administrator's proposals, the Court may (a) terminate the administrator's appointment, (b) adjourn the hearing, (c) make an interim order, (d) declare a liquidation application suspended because of section 558(1)(b), or (e) make any other order the Court considers appropriate.

An administrator must convene a creditors' meeting when creditors holding at least ten percent of the company's debts request it or when directed by the Court; failure without reasonable excuse is an offence with fines up to 500,000 shillings and continuing daily fines up to 50,000 shillings.

A creditors' meeting may establish a creditors' committee.

Creditors' meetings may be conducted by correspondence in accordance with the insolvency regulations and any conditions they specify.

The administrator of a company has the functions and powers specified in the Fourth Schedule.

An administrator may remove a director of the company from office and may appoint directors of the company.

The administrator of a company may convene a meeting of the company's members or creditors.

The Court may, on application by an administrator, give directions about how the administrator should perform and exercise functions and powers; the administrator must comply with those directions.

The administrator of a company may take actions to manage the company's affairs and property effectively and efficiently; persons dealing with the administrator in good faith and for value need not inquire whether the administrator is acting within their powers.

Companies under administration and their officers must not perform management functions without the administrator's consent; breaches are offences with fines and (for officers) possible imprisonment.

An administrator of a company may distribute the company's assets to its creditors.

An administrator of a company may make a payment not in accordance with section 582 or paragraph 13 of the Fourth Schedule when the administrator believes the payment is likely to assist achievement of the purpose of administration.

When appointed, an administrator must immediately assume control of all company property the administrator believes the company is entitled to.

If the Court gives directions to an administrator about managing the company's affairs, business or property, the administrator must comply with those directions.

When performing administrator functions and powers under this Part, the administrator of a company acts as the company's agent.

An administrator of a company may deal with property under a floating charge as if it were not charged; the charge holder retains the same priority over any acquired property.

The Court may order that property subject to a security be treated as not subject to the security so the administrator can dispose of it; the administrator must apply disposal proceeds by security priority and must lodge the order with the Registrar within 14 days; failure without reasonable excuse is an offence with fines.

The Court may order an administrator to sell goods held under a credit purchase transaction; an administrator who obtains such an order must lodge a copy with the Registrar within fourteen days, and failure to do so without reasonable excuse is an offence punishable by fines.

Section 590 identifies effects that would protect secured and preferential creditors and lists specific exceptions (consent, voluntary arrangement, Companies Act-sanctioned compromise/arrangement, or cross-border merger).

Creditors or members may apply to the Court to challenge an administrator's conduct; the Court may make various orders and may regulate, require, call meetings, end the appointment or make consequential provisions.

The Court may examine an administrator's conduct and may order remedies; certain persons may apply to the Court about an administrator.

The appointment of an administrator automatically ends at the end of twelve months from and including the date on which it took effect.

Section 594 allows the Court to extend an administrator's term on the administrator's application, allows an administrator to extend the term by consent up to six months, requires the administrator to lodge a copy of a Court order with the Registrar as soon as practicable, sets consent rules for creditors, requires lodging notices with the Court and Registrar, and creates offences and fines for failure to lodge copies.

The court may end a company's administration on an administrator's application where specified conditions are met (for example the administration's objective cannot be achieved, the company should not have entered administration, a creditors' meeting requires it, or where the administration resulted from an administration order and the administrator considers the purpose achieved). The court may make various orders including terminating the administrator's appointment, dismissing the application, interim orders, adjourning the hearing, and ancillary orders.

An administrator appointed under section 534 or 541 must, within seven days of lodging a notice with the Court, send a copy to every creditor of whose claim and address the administrator is aware; failure without reasonable excuse is an offence punishable by fines (up to 500,000 shillings, and thereafter up to 50,000 shillings per day).

A creditor of a company under administration may apply to the Court for an order terminating the administrator's appointment; the Court may make various orders including termination, dismissal, interim orders, adjournments, and ancillary orders.

When the court makes a public interest liquidation order it must either terminate the administrator's appointment or direct that the appointment continue; the court must also specify which powers under this Part are exercisable by the administrator and may order that the Part applies to the administrator with specified modifications.

Procedure allowing an administrator to lodge a notice that triggers conversion from administration to a creditors' voluntary liquidation, with registration by the Registrar and related steps for lodging and sending copies, effect on the administrator's appointment, liquidation as if a voluntary resolution were passed, nomination of liquidator by creditors or otherwise the administrator, and specified inapplicability or applicability of several listed sections.

If an administrator believes an insolvent company has no distributable property they must lodge a notice with the Registrar; the Registrar must register it; the appointment ends on registration and the company is dissolved three months after registration unless the Court orders otherwise. Failure by an administrator to comply is an offence punishable by fines.

Discharge of administration order if administrator's appointment is terminated

Administrator must, within fourteen days after the Court order terminating their appointment, lodge a copy of that order with the Registrar; the Registrar must register the copy on receipt; failure by an administrator without reasonable excuse is an offence with fines up to 200,000 shillings and continuing daily fines up to 20,000 shillings.

An administrator may resign only in the circumstances prescribed by the insolvency regulations; depending on how they were appointed, the administrator must give notice to the Court, the holder of the floating charge, the company, or the directors.

The Court may, by order, remove an administrator from office when it is satisfied that circumstances make it inappropriate for the administrator to continue.

An administrator vacates office if they cease to be an authorised insolvency practitioner; the administrator must give notice to specified recipients depending on how they were appointed; failure without reasonable excuse is an offence punishable by fines, including daily fines after conviction.

Filling vacancy in office of administrator

The Court must, on hearing an application under subsection (1), make an order replacing the administrator if satisfied the administrator has died, cannot act, or is not performing duties competently.

If the administrator was appointed under section 534, the holder of the floating charge under which the appointment was made may replace the administrator.

If an administrator was appointed under section 541(1), the company may replace that administrator.

If an administrator was appointed under section 541(2), the directors of the company may replace that administrator, subject to consent of qualifying floating charge holders or, if consent is withheld, with the Court's approval.

The Court has the power to replace the administrator where a relevant person is not taking reasonable steps to make a replacement or where it is otherwise right for the Court to do so.

A prior qualifying floating charge-holder may apply to the Court to replace an administrator appointed by a later qualifying floating charge-holder; the Court may do so only if it would administer the company more effectively and efficiently, and an application cannot be heard unless the existing administrator and the appointing charge-holder have been served and given an opportunity to appear.

A creditors' meeting may replace an administrator who was appointed by the company or its directors, subject to conditions in subsections (1)(a), (1)(b) and (2).

When an administrator's appointment ends, the administrator is discharged from liability for all acts done or omitted while administrator.

When a person's appointment as a company administrator ends, the former administrator has a charge on property they controlled immediately before termination and that charge is payable in priority to certain other security and charges.

The section states that references to appointing an administrator of a company include appointments of multiple persons to act jointly or concurrently, and that references to appointing a person include appointments of a person as one of multiple persons acting jointly or concurrently; it also addresses which functions are to be performed jointly or by any or all of the persons appointed.

When two or more persons are appointed as joint administrators, references to the administrator mean those persons acting jointly; if a provision requires an administrator to comply and that requirement is not complied with for a company where administrators act jointly, the non-compliance constitutes an offence.

A reference to the administrator of a company in this Part means any one of the persons appointed as administrator or any combination of them.

The Court, the company (with qualifying floating-charge holders' consent or Court approval), and the directors (with the same consent or Court approval) may appoint a person to act as administrator jointly or concurrently.

An act by a company's administrator remains valid even if the administrator's appointment or qualification is later found defective.

If a provision in this Part refers to an act done (or omitted) by the directors of a company, that reference also covers the same act done (or omitted) by a majority of the company's directors.

The Court may vary a time period provided for a company under administration when the administrator of the company applies.

An administrator may vary certain company periods with specified consents; limits apply including only once, no extension over thirty days, not if court-extended, and not after expiry.

Defines the term "administrator" in relation to a company under administration.

Applies when a company is under administration or in liquidation; the Court may require a person in control of certain company property to pay or deliver it to the office-holder; office-holders have limited immunity for seizure or disposal and a lien for expenses.

Certain persons connected to a company (officers, recent participants in formation, recent or current employees, related company officers/employees, and certain insolvency practitioners) must provide information to, and appear before, the relevant office-holder when reasonably required; failure without reasonable excuse is an offence punishable by fines up to 500,000 shillings and continued daily fines after conviction.

The Court may require certain persons connected with an insolvent company to submit affidavits or produce documents, and may issue warrants for arrest or seizure if summoned persons fail to appear or are believed to be absconding; "relevant office holder" includes the Official Receiver even if not the liquidator.

The Court may order a person who controls company property to deliver that property to the relevant office-holder, and may order a person indebted to the company to pay the whole or part of the amount due, on application by the relevant office-holder after considering evidence obtained under section 680 or this section.

If an office-holder reasonably believes a company in administration or liquidation entered into an undervalue transaction, the office-holder may apply to Court and the Court must set aside the transaction if it finds it was undervalue.

The Court can void and reverse certain preferences given by a company if, on an application by the relevant office-holder, the Court is satisfied the company gave a preference at the relevant time.

Section 684 defines when the "relevant time" occurs for the purposes of sections 682 and 683, specifying different periods and triggering events depending on the type of transaction, preference and appointment or application dates.

Section provides ancillary orders that courts may make under sections 682 and 683, including vesting property in the company, discharging securities, imposing payments to office-holders, creating new obligations for sureties or guarantors, and specifying how persons may prove claims in liquidation.

The Court has the power to set aside or vary obligations and make related orders in respect of credit transactions involving a company that are or were extortionate and entered into within three years before the company entered administration or a liquidator was appointed.

Section 687 lists situations where a floating charge over a company’s assets is invalid, describes the monetary amounts relevant to such charges, specifies time windows relative to insolvency or administration events, and defines how to value goods or services supplied as consideration.

If enforcing a lien would deny possession of a company's documents to the relevant office-holder, that lien is unenforceable for companies under administration or in liquidation.

Suppliers may require a relevant officer-holder to personally guarantee payment for continued utility supply, but suppliers may not require pre-effective-date outstanding charges to be paid as a condition of supply.

The holder of a floating charge over a company's property may not appoint an administrative receiver of the company.

Sets enforcement for a company's obligation to lodge documents or give notices to the Registrar: after a 14‑day non‑compliance period the Registrar or certain parties may apply to Court, which must order compliance and may allocate costs; the company has rights to be served and heard.

Section 692 grants the Court authority to grant injunctions (including interim injunctions), to vary or discharge injunctions, and to order payment of damages in certain cases; it also prohibits the Court from requiring an undertaking as to damages as a condition for an interim injunction.

Section 693 sets out circumstances in which an officer may be treated as in default (authorises or permits; participates in; or fails to take all reasonable steps to prevent) and states company liability rules where a company is an officer of another company.

A body corporate commits an offence under this section if the offence was committed with the consent or connivance of, or attributable to neglect by, an officer (or person acting as one); such an officer may be prosecuted even if the body corporate is not prosecuted; where members manage the affairs, members' management acts and omissions are treated as if they were officers.

Certain statements prepared for the purposes of this Act or the insolvency regulations are not admissible in evidence and related questions may not be asked; specified offences under the Penal Code and offences designated by the insolvency regulations are mentioned for this section.

A proceeding under this Act cannot be invalidated or set aside for a procedural defect unless a person is detrimentally affected.

Grants power to make insolvency procedure rules covering the listed procedural matters.

The Court may review, rescind, or vary any order of the Court under this Act.

A person dissatisfied with a Court decision under this Act may appeal to the Court of Appeal against that decision.

If an appeal is lodged against a bankruptcy, liquidation or administration order, any interested person may ask the Court or Court of Appeal to suspend that order until the appeal is decided; the Court or Court of Appeal has power to suspend the order on terms it considers appropriate.

Section 701 establishes the Official Receiver and one or more Deputy Official Receivers, sets qualification and disqualification rules for appointment, provides that Deputies are subject to the Official Receiver's control, limits the Official Receiver's term to a period not exceeding seven years, entitles them to remuneration determined by the Salaries and Remuneration Commission, and preserves incumbents in office on commencement.

A Deputy Official Receiver may act in place of the Official Receiver or another Deputy Official Receiver.

Section 703 incorporates the Official Receiver as a corporation sole named "Official Receiver in Insolvency" and gives the Official Receiver powers such as bringing and defending proceedings; it also states the Official Receiver may not employ staff and that the Cabinet Secretary may appoint public officers to assist, subject to National Treasury approval of numbers and remuneration.

Lists when the Official Receiver or Deputy Official Receiver vacates office and empowers the Cabinet Secretary to remove them for incompetence or misconduct; requires the Cabinet Secretary to give the person an opportunity to be heard before removal and to appoint a suitably qualified replacement as soon as practicable after a vacancy.

Official Receiver and Deputy Official Receivers are exempt from civil liability for acts or omissions done in good faith while performing functions or powers under this Act or any other written law.

The Official Receiver and Deputy Official Receivers may charge fees at rates set by the insolvency regulations; the Official Receiver must pay or recover those fees into the Insolvency Services Account.

The insolvency regulations may fix or prescribe the amount or rates of fees chargeable under section 706.

The Official Receiver must establish an Insolvency Services Account at the Central Bank of Kenya, pay into it money received or recovered in performing the Official Receiver's functions under the Act, make payments due to creditors and contributories from that account, and may invest funds not immediately required in trustee-eligible investments under the Trustee Act (Cap. 167).

Official Receiver must pay certain unclaimed dividends and undistributed balances into the Insolvency Services Account.

Division 2 applies to a public register established under section 47, 337 or 350.

The Official Receiver must make all public registers available for public access and inspection during the Official Receiver's ordinary business hours, subject to specified exceptions.

Public registers are used to provide information about bankrupts, discharged bankrupts, persons under summary instalment orders, and those in or discharged from the no asset procedure, and to facilitate compliance, enforcement, and statistical/research functions of specified authorities.

Lists the information about bankrupt persons to be held in public registers and requires the Official Receiver to make registers available to the public during ordinary business hours and to exclude certain annulled bankruptcies.

For people who have multiple bankruptcy events, the Official Receiver must keep their insolvency information permanently on the public register and ensure the register contains all required details; certain provisions of section 713 do not apply to them.

The public register kept under section 47 may contain the documents listed in section 101 for a bankrupt or former bankrupt, and the Official Receiver must ensure that a person has access to those documents only if entitled under section 101.

The Official Receiver may omit, remove, restrict access to, amend, or refuse access to information in a public register in specified circumstances.

A person may inspect the public registers only in accordance with this Act and applicable insolvency regulations.

Information contained in public registers may be used for statistical or research purposes.

The Government and the Official Receiver are not liable to be sued for acts or omissions relating to maintaining a public register if done in good faith and with reasonable care.

The UNCITRAL Model Law on Cross-Border Insolvency has the force of law in Kenya in the form set out in the Fifth Schedule.

If a body corporate authorises one person, that person is entitled to exercise the corporate powers at meetings on its behalf; if it authorises multiple persons, any one of them is entitled to exercise those powers.

Certain court officers and insolvency practitioners must publish orders, notices, or prescribed details on their respective websites (Registrar for Court orders; Official Receiver/interim trustee/bankruptcy trustee; liquidator/provisional liquidator; administrator).

Trustees, liquidators, provisional liquidators and administrators must notify all known creditors, by notice, of the prescribed details whenever they take a prescribed step in the insolvency, liquidation or administration process.

An insolvency practitioner must provide requested information within five business days of receiving the request, or a longer period if agreed with the creditor; the practitioner may extend time by written notice if satisfied an extension is required, and that notice must be given to the creditor, specify the period and state reasons.

Transfers or other documents that relate only to property in a bankrupt's estate and leave ownership with the bankrupt or the bankruptcy trustee are exempt from stamp duty.

The Court may order Posta Kenya to redirect and deliver a bankrupt's mail to the Official Receiver or bankruptcy trustee on their application; such an order may last up to three months as specified.

Rules about supply of utility services to persons subject to bankruptcy orders, trustees or approved arrangements, including definitions of "communications services" and "the relevant office-holder", events that constitute the relevant date, and limits on conditions suppliers may impose.

Section 727 lists categories of documents related to a bankrupt that may be produced and says the Court may authorise disclosure of such produced documents after they are produced.

The Cabinet Secretary must prepare an annual report on the Act and arrange for a copy to be laid before each House of Parliament within three months after the end of 2015 and each subsequent calendar year.

Rules describing how documents required or permitted under this Act may be served on natural persons, partnerships/trusts/unincorporated bodies, and how Companies Act service provisions apply to companies.

Gives the Cabinet Secretary the power to make insolvency regulations for carrying out this Act and lists subjects those regulations may cover.

This Act binds the Government.

The Cabinet Secretary may appoint the date(s) on which the Bankruptcy Act (Cap. 53) are repealed by notice published in the Gazette; and may combine such repeals with notices bringing provisions of this Act into operation where they correspond.

Section 733 lists transitional events for insolvency of natural persons: Section 733(1)(a), 733(1)(b) (by creditor or debtor), 733(1)(c), and 733(1)(d).

Lists events treated as transitional provisions concerning winding up and insolvency of companies (e.g., passing a special resolution to wind up, application to Court for winding up, appointment of liquidator or provisional liquidator, failure to deliver statutory report or hold statutory meeting, failure to commence business or suspension for a year, reduction in number of members below statutory minima, inability to pay debts, commencement of winding-up abroad for foreign companies carrying on business in Kenya, appointment of a receiver by debenture holders, and appointment of a receiver and manager).

The Cabinet Secretary may make regulations containing savings or transitional provisions to manage the transition from the repealed Bankruptcy Act and specified parts of the repealed Companies Act to this Act.