insolvency bill 2012

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SPECIAL ISSUE

Kenya Gazette Supplement No. 168 Bills No. 71

REPUBLIC OF KENYA

K ENYA GA ZETTE SUPPLEMENT

BILLS, 2012

NAIRO BI, 9th Novem ber, 2012

CONTENT

Bill for Introduction into the National Assembly—

PAGE

The Insolvency Bill, 2012 673

PRINTED AND PUBLISHED BY HIE GOVERNMENT PRINTER. NAIROBI



4673

THE INSO LVENCY BILL, 2012

ARRAN GEMENT OF CLAUSES

Clause

PART I—PRELIMINARY PROVISIONS

1— Short title and com mencem ent.2—Interpretation.3—Objects and application of this Act.

PART II—INSOLVENCY PRACTITIONERS

4—Circumstances in which person acts as insolvency practitioner.5—Consequences of acting without authorisation.6—Qualifications for person to act as insolvency practitioner.7—Power of Cabinet Secretary to recognised professional bodies for the

purposes of this Act.8--Application to act as insolvency practitioner.

9—Grant or refusal of authorization.10— Power of O fficial Receiver to revoke authorisation.11— Right to appeal against decisions of Official Receiver.

PART III—NATURE OF BANKR UPTCY AND RELATEDPROCESSES

Division 1—Ban kruptcy: Introductory provisions

12—Interpretation: Part III.13—Nature of bankruptcy.14— Alternatives to bankruptcy.15— Wh o is entitled to make a ban kruptcy application.



4674 he Insolvency Bill 2012

16— Proceedings on a bankruptcy application.

Division 2 ankruptcy ap plications by cred itors

17— Creditor may apply for bankruptcy order in respect of debtor.18— Wh en court can make bankruptcy order on application by secured

creditor.19—Expedited creditor's application.

20—Proceedings on creditor's application.21—Creditor's execution process not to be issued or continued.22—Power of relevant court to halt execution processes by other creditors

or allow them on terms.23— Execution process issued by another court.24—No restriction on execution process if bankruptcy application

withdrawn or dism issed.25— When court may adjudge debtor bankrupt.26— When court may halt application.27--Orders if more than one application.

28 Orders if there is more than one order.

29 Power of court to make order halting bankruptcy application, etc.

30- -Court may halt application while underlying debt is determined.

31 - Court may allow one creditor to be substituted for another.

Division 3 ankruptcy applications by debtors

32— Wh en debtor may make application for bankruptcy order.33— App ointment of insolvency practitioner by the Court.34— Action on report of insolvency practitioner.35— Joint application can be made by two or more debtors.

Division 4—Appointment of interim trustee in respect of debtor sproperty



The Insolvency Bill . 2012 675

36—Appointment of interim trustee of debtor's property on application ofcreditor.

37— Additional orders after appointment of interim trustee.

38—N otice of appointment of interim trustee to be published.39—Ex ecution process not to be issued after notice of appointment of

trustee is published.40—Effect of halting execution.

Division 5— Adjudication of bankruptcy applications

41—Bankruptcy commences on making of bankruptcy order.42—Date and time of bankruptcy order to be recorded.43—Registrar of court to notify trustee of bankruptcy order.44— Official Receiver to nominate bankruptcy trustee.

45—Presum ption that act was done, or transaction was entered into or made,after bankruptcy.

46— Bankruptcy order to be binding on all persons.47— Official Receiver to maintain public register of undischarged and

discharged bankrupts.

Division 6— W hat happens on and after the comm encement of abankruptcy

48— What happens or is to happen on and after bankruptcy commences.49—O fficial Receiver to serve notice on bankrupt requiring the bankrupt to

lodge statement of affairs.50—Bankrup t to lodge statement of affairs with bankruptcy trustee.51—Creditors entitled to inspect and take copies of statement.52—O fficial Receiver to convene first meeting of creditors.53—Circum stances in which Official Receiver may dispense w ith first

creditors' meeting.54— Docum ents to be sent with notice of meeting.55—Pow er of creditors to requisition meeting.




78—Vacancy in office of bankruptcy trustee.

79—General control of bankruptcy trustee by the Court.80—Liability of bankruptcy trustee for misapplication of money, etc.

Division 8—Creditors' meetings and creditors' committee

81—Kinds of creditors' meetings.

82—Subsequent meetings of creditors.83—Meeting and resolution not defective for lack of notice.84—Appointment of chairperson to conduct creditors' meetings.

85—Power of chairperson to adjourn creditors' meeting.86—Bankruptcy trustee to report to creditors' meeting.87—Who can attend creditors' meeting.

88—Bankrupt may be required to attend creditors' meeting and be

questioned.89—Attendance at creditors' meeting by non-creditors.

90—Minutes and record of creditors' meeting.

91—Number of persons required for creditors' meeting to be valid.

92—Who can represent creditors and bankrupt at creditors' meeting.

93—Passing of resolutions at creditors' meetings.

94—What votes can be counted for passing of resolutions at creditors'meeting.

95—Who may vote at creditors' meeting.

96—When secured creditor may vote at creditors' meeting.

97—When creditor under bill of exchange or promissory note may vote atcreditors' meeting.

98—Person disqualified from voting at creditor's meeting throughpreferential effect.

99—Entitlement of partner's creditor to prove debt at creditors' meeting.

100—Creditors may appoint expert or committee to assist bankruptcytrustee.

101—Creditors'right to inspect documents.

102—Committee of creditors may be established.



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103—Exercise by Cabinet Secretary of functions of creditor's committee.

Division 9—Bankrupt s property after bankruptcy

104— Status of property acquired during bankruptcy.105— Property vests in replacemen t bankruptcy trustee.106— Property held in trust by bankrupt.107— Court may order mon ey due to bankrupt to be assigned to bankruptcy

trustee.108— Certain payments to be applied in accordance with the Second

Schedule.109— Wh en execution creditor may retain execution proceeds.110—Effz-..i of notice to judicial enforcemen t officer of bankruptcy.

_— Judicial enforcemen t officer to retain proceeds of execution forfourteen days after sale.

112— Purchaser under sale by judicial enforcement officer acquires goodtitle.

113— Court may set aside rights conferred on bankruptcy trustee.114— Transaction in good faith and for value after bankruptcy.115— Executions and attachm ents in good faith.116— Wh en execution or attachment comp leted for purposes of section 109

or 115.117—Bankruptcy trustee's interest in property passes to transferee.

Division 10—Disclaimers of bankrupt s property

118— Bankruptcy trustee may disclaim onerous property.119— Effect of disclaimer.

120— Position of p erson who suffers loss as result of disclaimer.121— Bankruptcy trustee may be required to elect whether to disclaim.122—Liability for rent charge on bankrupt's land after disclaimer.123— Transmission of interest in land.124— Bankruptcy trustee cannot claim interest in land if bankrupt remains

in possession until discharge.




125— Bankruptcy trustee may transfer shares and other securities.

126— Bankruptcy trustee may disclaim liability under shares.127—Bankruptcy trustee may be required to elect whether to disclaim

liability under shares.128— Transfer of shares after disclaimer.129— Company may prove for unpaid calls.

Division 11 oods held by bankrupt under credit purchase transaction

- 130— Interpretation: Division 1 1.131— Restrictions on creditor dealing with goods.132—Bankruptcy trustee's powers in relation to goods that are subject to a

credit purchase transaction.133—Creditor in possession of goods may prove in bankruptcy if

bankruptcy trustee has not exercised po wers.134— Creditor may assign goods to bankruptcy trustee.

Division .12Second bankruptcies

135—Status of bankrupt's property on second bankruptcy.136— Effect of notice to bankruptcy trustee of application for b ankruptcy.

Division 13 ersons jointly adjudged bankrupt

137— Separate accounts to be kept for each.bankrupt.138— How joint and separate estates are to be applied.

Division 14 uties of bankrupt

139— General duty of bankrupt.140— Bankrupt to disclose property acquired before discharge.141— Bankrupt to deliver property to bankruptcy trustee on dem and.142—Court may impose charge on bankrupt's property.




143— Bankrupt to give bankruptcy trustee accounting records and other

documents.144— Bankrupt to give bankruptcy trustee information relating to property.145— Bankrupt to give bankruptcy trustee information relating to incom e

and expen diture.146— Bankrupt to notify bankruptcy trustee of change in personal

information.147— Bankrupt to give bankruptcy trustee financial information.

Division 15—Restrictions on bankrupt during bankruptcy

148— Interpretation: Division 1 5.149— Bankrupt can be required to contribute to payment of debts.150— Onus of proof if bankrupt defaults in making paym ent.151— Prohibition of bankrup t entering business.152—Warrant to search for and seize bankrupt's property.153—Seizure of bankrupt's property.154— Bankrupt to vacate land or buildings if required to do so.155—Bankrupt's right to inspect documents.156— Restrictions on bankrupt dealing with property.157—Bankrupt prohibited from taking steps to defeat beneficial interests of

others in bankrupt's property.158—Responsibility of bank to notify bankruptcy trustee of bankrupt's

account.159— Bankruptcy trustee entitled to require bank to search records relating

to bankrupt's account.

Division 16—Provision allowed for bankrupt during bankruptcy

160— Bankrupt entitled to retain certain assets.161— Bankrupt m ay retain certain assets with consentor creditors.162— Retention of assets not to affect rights under charge or hire p urchase

agreement.163—Retention provisions not to confer rights to otherassets.




164—Relative or dependant entitled to exercise bankrupt's right to retain

assets.165— Bankruptcy trustee may m ake allowance to bankrupt.166— Bankruptcy trustee may allow bankrupt to retain money.

Division 17—Powers of bankruptcy trustee and the Court to examinebankrupt and others

Subdivision I—Examination by bankruptcy trustee

167— Bankruptcy trustee may summ on bankrupt and others to be examined.168— Conduct of examination of person summ oned by bankruptcy trustee.169— Expenses of person summ oned by bankruptcy trustee or the Court.170— Entitlemen t of examinee to be represented.

171— Creditor may inspect record of examination.172—Report of examination not to be published without court's consent.173—Examination provisions also apply when bankruptcy trustee appointed

interim trustee in respect of debtor's property.174—No lien over bankrupt's documents and other records.175— Offences relating to conduct of exam inations by bankrup tcy trustee.

Subdivision 2—P ublic examination before the Cburt

176—Court to hold public examination if bankruptcy trustee or creditorsrequire.

177— Bankruptcy trustee to serve notice of examination on bankrup t.178—Bankruptcy trustee to lodge report with the Court before start of

examination.179— Conduct of public examination before the Court.180—Bankruptcy trustee to ensure record of examination is kept.181— When examination ends.182—Consequence of bankrupt's failing to attend examination.183— Bankrupt entitled to be paid exp enses for attending examination.




206— Gift by bankrupt between two and five years before bankruptcy can becancelled by bankruptcy trustee if bankrupt was unable to pa y debts.

207— Procedure for cancelling irregular transactions.208— Court may order retransfer of property or paym ent of an equivalent

value.209— Limits on what can be recovered.210— Bankruptcy trustee m ay recover difference in value if transaction is

found to be undervalue.

211— Court may order recipient of bankrupt's contribution to p roperty ofanother to pa y value to bankruptcy trustee.

212 — Court's powers in relation to bankrupt's contribution to recipient'sproperty.

213— How ban kruptcy trustee is to use repayment of bankrupt'scontribution to property.

Division 20 rocessing of creditors claims against bankrupt s estate

214— Interpretation: Division 20215— What debts are provable debts.216— Procedure for proving debt: creditor to submit claim form .217—Bankruptcy trustee required to examine creditor's claim.218— Bankruptcy trustee to give creditor notice of groundsof rejection.219— Bankruptcy trustee's power to obtain evidence of debt.220— Notice by bankrupt or creditor to bankruptcy trustee to allow or reject

creditor's claim.221— Court may cancel creditor's claim.222 — Power of court to quash- vary bankruptcy trustee's decision

rejecting creditor's claim.

223— App lications to the Court in relation to creditor's claim: who theparties to the p roceedings are.224— Court may make order as to costs.225— Secured creditor's options in relation to property subject to a charge.226— Power of the Court to order disposal of property that is subject to a

charge.




227— Realisation of p roperty that is subject to a security.228— Valuation of charge held by creditor and claim for balance due.

229— Offence for secured creditor to make false claim.230—Bankruptcy trustee's powers when secured creditor values property

that is subject to a charge and proves fort alance.231—Secured creditor who surrenders charge may with leave of the Court

withdraw claim or submit a new claim.232—Bankruptcy trustee may estimate amount of uncertain creditor's claim.

233—Application to court to determine amount of uncertain creditor'sclaim.234 Creditor's claim payable six months or more after commencement of

bankruptcy.235—Bankruptcy trustee's duty when mutual dealings have occurred

between the bankrupt and other persons.236— Creditor may claim pre-bankruptcy interest.

237—Post-bankruptcy interest payable at prescribed rate if surplus remains.238—Additional post-bankruptcy interest on contract or judgment debt if

surplus remains.239—Meaning of prescribed rate for purposes of sections 237 and 238.240— Creditor required to deduct trade discounts.241—Secured creditor can prove as unsecured creditor if security is void or

partly void.242— Judgment creditor may prove for costs.243— Company may prove for unpaid calls.244— Wh en guarantor for bankrupt may prove claim.

Division 21 istribution of bankrupt s estate

245--Interpretation: Division 21246— Preferential debts: priority of debts.247—Priority ranking of debts owed to bankrupt's spouse.248—Person who makes payment on account of preferential creditor to be

subrogated to the rights of that creditor.




249— Priority given to landlord or other person who distrains on goods an deffects of bankrupt.

250— Creditors to have priority over creditors of joint bankrupt.251—Final distribution of bankrupt's estate.252— Final meeting of creditors.

Division 22 ischarge of bankrupts from bankruptcy

253— Automatic discharge three years after bankrupt lodges statement ofaffairs.254— Effect of automatic discharge.255— Right of creditor to object to automatic discharge.256— Objection can be withdrawn.257— Bankrupt may ap ply for early discharge.258— When b ankrupt is to be publicly examined before the Court

concerning d ischarge.259— Bankruptcy trustee to lodge report with the Court in specified

circumstances.260— When creditor required to give notice of opposition to discharge.261— Power of the Court to grant or refuse discharge.262— Court may restrict bankrupt from engaging in business after

discharge.263— Court may quash order discharging bankrupt.264— Effect of quashing order discharging bankrupt from bankruptcy.265— Bankrupt may apply for absolute discharge on ground that conditions

of discharge are too o nerous.266— Debts from which bankrupt is released on discharge.267— Discharge to be conclusive evidence of bankruptcy and validity of

bankruptcy proceedings.268— Discharge not to release partners of bankrupt and others.269— Discharged bankrupt to assist bankruptcy trustee.270 ' Official Receiver to record in public register decision of the Court

refusing to discharge bankrupt, etc.




Division 23— Annulment of bank ruptcy orders

271— Court may annul bankrup tcy order in certain circumstances.272— Wh en Official Receiver may annul bankruptcy order.273— Effect of annulmen t of bankruptcy order.

Division 24 omposition during bankruptcy

274— Interpretation: Division 2 4.

275— Creditors may accept comp osition by passing preliminary resolution.276 Composition not effective unless approved by confirming resolution.

277—Compositions with members of partnership.278— Com position not binding unless approved by the Court.279— Procedure for approval of composition by the Court.280— Deed of com position to be executed-.

281— Effect of deed of composition.282—Bankrupt remains liable for unpaid balances of certain debts.283—Deadlines for steps to approve composition and execute deed.284—Procedure following approval of composition by the Court.285— How com position may be enforced.286—Jurisdiction of the Court in relation to composition and deed of

composition.287—Law and practice in bankruptcy to apply to deed of composition.

Division 25 ankruptcy offences

288— Offences in relation to debts.289— Offences in relation to property.

290—Offence in relation to written statement to creditor, etc.291— Offence in relation to docum ents, etc.292—Offence in relation to fictitious losses or expenses.293— Offences in relation to credit, etc.294— Offences in relation to ob taining consent of creditors.




295--Offence for bankrupt to leave Kenya without consent.

296—General penalties for bankruptcy offences.297—Failure to keep and preserve proper record of transactions.298—Failure to keep proper records with intent to conceal.299—When bankrupt presumed not to have kept or preserved proper

records.300—Offence by bankrupt in relation to management of companies.301—Other bankruptcy offences.

PART IV—ALTERNATIVES TO BANKRUPTCY: NATURALPERSONS

Division 1—Voluntary arrangements

Subdivision 1—Ordinary procedure

302—Interpretation: Division 1.303—When application for interim order can be made.304—Effect of application for interim order.305—Power of the Court to make interim order.306—Provisional supervisor to report on debtor's proposal.

307—Debtor's proposal and provisional supervisor's report.308—When provisional supervisor is to convene creditors' meeting to

consider debtor's proposal.

309—Conduct of creditors' meeting: consideration of debtor's proposal.

310—Approval of debtor's proposal.

311—Effect of approval of debtor's proposal by meeting of creditors or bythe Court.

312—Additional effect on -undischarged bankrupt.313—Right to challenge decision taken at creditors' meeting.

314—Implementation and supervision of voluntary arrangement.

Subdivision 2—Expedited procedure




315—Expedited voluntary arrangement procedure: availability.316—Duty of Official Receiver to report result to the Court.

317— App roval of expedited voluntary arrangement.319— Revocation of expedited voluntary arrangem ent.318—Power of Official Receiver to make application for annulment of

bankruptcy order where debtor is an undischarged bankrupt.

Subdivision 3—Crimnal conduct under theDivision

320—Offence for debtor to make false representation for purpose ofobtaining creditors' approval.

321— Prosecution of delinquent debtors.

Division 2—Summary instalment orders

322—What is a summary instalment order?

323— Who can apply for summ ary instalment order.324— Requirements for applications made by debtors.325— Official Receiver may make summ ary instalment order.326— Power of Official Receiver to m ake additional orders.327—Appointment of supervisors.328— Role of supervisors.

329—Power of Official Receiver to require supervisor or past supervisor to_provide docum ents.

330—Termination of supervisor's appointment for failure to superviseadequately.

331— Period for payment of instalments.332— Variation or discharge of summ ary instalment orders.333— Effect of summ ary instalment orders.334—Restrictions on bringing proceedings against debtors while summary

instalmen t order h as effect.335—Supervisor to give notice of summary instalment order to creditors.336—Public register of debtors subject to current summary instalment

order.




337—When summary instalment order ceases to be current.338—Claims of creditors when summary instalment order has effect.339—Payment of debtor's earnings to supervisor.

340—Consequences of default by debtor to pay amount due under summaryinstalmen t order.

341—Offence for debtor to obtain credit while summary instalment orderhas effect.

Division 3—No-asset procedure

342—Division 3: introduction.343—Application for entry to no-asset procedure.344—Criteria for entry to no-asset procedure.345—Debtor disqualified from entry to no-asset procedure in certain cases.346—Official Receiver to notify creditors.

347—Restrictions on debtor obtaining credit after application made.348—When debtor admitted to no-asset procedure.349—Public register of persons admitted to no-asset procedure.350—Creditors may not enforce debts of debtor admitted to no-asset

procedure.351—Debtor's duties after entry to no-asset procedure.

352—Offence for person admitted to no-asset procedure to obtain credit.353—How debtor's participation in the no-asset procedure is terminated.354—When Official Receiver may terminate no-asset procedure.355—Official Receiver may apply for preservation order on ground of

debtor's misconduct.

356--Effect of termination of debtor's participation in no-asset procedure.

357—Creditor may apply to Official Receiver for termination of debtor'sparticipation in no-asset procedure.

358—Discharge of debtor's participation in no-asset procedure.359—Effect of discharge of debtor's participation in no-asset procedure.360—Discharge does not release debtor's business partners and others.




PART V— ADMINISTRATION OF INSOLVENT DECEASEDS'ESTATES

Division 1— Introductory provision

361—Interpretation: Part V.

Division 2—Functions of the Court in respect of administration ofinsolvent estates

362—Court may order that estate be administered under this Part.363— App lication by executor or adm inistrator, etc.364—Application by creditor or beneficiary for order under this Part.365—Notice of application by creditor or beneficiary

366—Court may order administration by Official Receiver or the PublicTrustee instead of executor o r adm inistrator.

367—Certificate lodged by the Public Trustee has effect as application andorder.

368—Estate vests in trustee.369— Trustee to realise, administer and d istribute estate.370—Entitlement of surviving spouse to household furniture and effects.371—Trustee may make allowance to surviving spouse.

Division 3—Trustee s responsibilities with respect to administration ofinsolvent deceased s estate

372— App lication of Division 3.373— Trustee's functions and powers in respect of insolvent deceased's

estate.

374—Distribution of insolvent deceased's estate.375—How any surplus is to be paid.376—Creditor's notice to executor or administrator.377—Power of trustee to act in relation to deceased's irregular transactions.378—Trustee may cancel execution against insolvent deceased's estate.



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379—Certain acts of executor or administrator valid if done in good faith.

PART VI—LIQUIDATION OF COMPANIES

Division 1—Introductory provisions

380—S cheme of Part VI.

381—Distinction between "members' and "creditors' voluntaryliquidation.382—Interpretation: Part VI.383—The circumstances in which a company is unable to pay its debts.384—Liability as contributories of present and former members.385—Liability of past directors and shareholders.386—Position of limited companies that were formerly unlimited.387—Position of unlimited companies that were formerly limited.388—Nature of contributory's liability.

389— Death o f contributOries not to affect their liability.390—Liability of contributories who are adjudged bankrupt.391—Liability of contributories to contribute to debts of company registered

but not formed under Companies Act, 2012.

Division 2—Voluntary liquidation (introductory and general)

392—Circumstances in which company may be liquidated voluntarily.393—Notice of resolution to liquidate.394--When liquidation commences.

395—Consequences of resolution to liquidate.396--Share transfers and attempts to alter member's status after liquidation

resolution to be void.397—Making and effect of declaration of solvency by directors of company.

Division 3—Members voluntary liquidation




398—Appointment of liquidator in members' voluntary liquidation.

399—Power to fill vacancy in office of liquidator.400—General company meeting at each year's end.

401—Final meeting prior to dissolution: members' voluntary liquidation.

402—Effect of company's insolvency.

403—Conversion to creditors' voluntary liquidation.

Division 4—Creditors' voluntary liquidation

404—Application.405—Meeting of creditors to be convened by company.406—Directors to lay statement of affairs before creditors.407—Creditors' voluntary liquidation: appointment of liquidator.

408—Creditors may appoint liquidation committee.409—Creditors' meeting if liquidation converted under section 403.

410—Cessation of directors' powers.

411—Vacancy in office of liquidator: creditors' voluntary liquidation.

412—Meetings of company and company's creditors to be held everytwelve months.

413—Final meeting prior to dissolution: creditors' voluntary liquidation.

Division 5—Provisions applying to both kinds of voluntary liquidation

414—Property of company to be distributed among members aftersatisfaction of liabilities.

415—Appointment or removal of liquidator by the Court.416—Notice of appointment to be published by liquidator.417—Power of liquidator to accept shares or membership rights as

consideration for sale of company's property.418—Dissenting member may require liquidator to refrain from giving

effect to arrangement under section 417 or to purchase member'sshares.

419—Questions relating to liquidation may be referred to the Court fordetermination.



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420—Restrictions on directors' power to appoint or nominate liquidator ofcompany in voluntary liquidation.

42I—Saving for certain rights.

Division 6—Liquidation by the Court

422—Jurisdiction of High Court to supervise liquidation of companies.423--Circumstances in which company may be liquidated by the Court.

424—Applications to the Court for liquidation of companies.425—Application for liquidation of company on grounds of public interest.426—Powers of the Court on hearing of liquidation application.427—Power to halt or restrain proceedings against company when

liquidation application has been made.428—Dispositions of property by company after commencement of

to be void unless the Court otherwise orders.429—Avoidance of attachments, etc.430—When liquidation by the Court commences.431—Consequences of liquidation order.432—Official Receiver may require company's statement of affairs to be

submitted.433—Duty of Official Receiver to conduct investigation into failure of

company.434—Public examination of officers and former officers of company.

435—Consequences of failure to attend public examination.

436—Appointment and powers of provisional liquidator.437—Functions and powers of Official Receiver in relation to office of

liquidator.

438—Appointment of liquidator by Cabinet Secretary.439— f meeting of creditors and meeting of contributors nominate different

liquidators, creditor's choice to prevail.

440—Appointment of liquidator by the Court following administration orvoluntary arrangement.

441--Creditors' meeting may appoint liquidation committee.




442—General functions of liquidator when company is liquidated by theCourt.

443—Liquidator to assume control of company's property when liquidationorder made.

444—Company's property to vest in liquidator.

445—Duty of liquidator to convene final general meeting of company'screditors.

446—Power of the Court to halt liquidation.

447—Settlement of list of contributories and application of assets.448—Recovery of debts due from contributory to company.

449—Power of the Court to make calls from contributories.

450—Power of the Court to order money due to company to be paid intoCentral Bank.

451—Order made by the Court against contributory to be conclusiveevidence that money ordered to be paid is due.

452—Power of the Court to fix deadlines for proving claims.

453—Court to adjust rights of contributories.

454—Power of the Court to make orders enabling creditors andcontributories to inspect company's records.

155—Payment of expenses of liquidation.

456—Power to arrest absconding contributory.

457—Powers of the Court to be cumulative.

458—Power of the Court to delegate its powers to liquidator.

Division 7—Liquidators

459—Style and title of liquidators.

460—Offence to make corrupt inducement affecting appointment ofliquidator.

461—Liquidator's function voluntary liquidation.

462—Liquidator's functions: creditors' voluntary liquidation.

463—Liquidator's functions: liquidation by the Court.

464 — Liquidator's functions: supplementary powers.




465—Enforcement of liquidator's duties to lodge, deliver and make returns,

accounts and other documents.466—Circumstances in which liquidator may be removed from office in the

case of a voluntary liquidation.467—Liquidator may be removed only by the Court or by general meeting

of creditors in the case of company being liquidated by the Court.468—Release of liquidator in the case of company liquidated voluntarily.469—Release of liquidator in case of company being liquidated by the

Court.

Division 8—Provisions applying to all kinds of liquidation

471—Preferential debts (general provision).472—Preferential charge on property of company distrained within three

months before making of liquidation order.473—Expenses of liquidation to have priority over claims under floating

charge.474—Share of assets to be made available for unsecured creditors where

floating charge relate's to co mp any's property.475—Power of the Court to appoint special manager of company's business

or property when company is in liquidation or provisional liquidatorappointed.

476—Power of liquidator to disclaim onerous property.477—Special provisions relating to disclaimer of leaseholds.478—Effect of disclaimer in relation to land subject to rentcharge.479—General powers of the Court in respect of disclaimed property.480—Powers of the Court in respect of leseholds held by company in

liquidation.

481—Creditor not entitled to retain benefit of execution or attachmentagainst liquidator unless creditor completes execution or attachmentbefore commencement of liquidation.

482—Duties of judicial enforcement officers charged with execution ofwrits and other processes involving companies, in liquidation.

483—Power of the Court to rescind contracts entered into by company in




484— Power of liquidator to transfer. assets of compan y to its emp loyees.

485—Company in liquidation required to state that it is in liquidation in allinvoices, letters and other com mun ications.

486—Interest on debts to be paid if surplus permits.487—Certain documents relating to company in liquidation to be exempt

from stamp duty.488—Records of company in liquidation to be evidence.489—Liquidator to lodge periodic statements with Registrar of Companies

with respect to current position of liquidation.490—Effect of resolutions passed at adjourned meetings of company's

creditors and contributories.491—Court may order meetings to be held to ascertain wishes of creditors

or contributories.492—Judicial notice to be taken of documents of the Court.

493—Affidavits required to be sworn for purposes of this Part.

Division 9—Dissolution of companies after liquidation

494— Dissolution (voluntary liquidation).495— Early dissolution of comp any.496—Consequence of notice given under section 495(3).

497—Dissolution otherwise than under sections 494 to 496.

Division 10—Offences relating to conduct before and during liquidationand criminal proceedings relating to those offences

498—Offences involving commission of fraudulent acts in anticipation ofliquidation.

499—Offences involving transactions to defraud creditors of company inliquidation.

500—Offence involving misconduct committed in course of liquidation ofcompany.

501—Offence to falsify documents in relation to company in liquidation.




502—Offence to make material omission from statement relating to affairs

of company in liquidation.503—Offence to make false representations to creditors of company in

liquidation.504—Power of the Court to make orders against delinquent directors,

liquidators, etc.505—Power of the Court to make orders against officer's of company and

others found to have participated in fraudulent trading by company inliquidation.

506—Power of the Court to make orders against officers of companyengaging in wrongful trading.

507—Supplementary provisions relating to proceedings under sections 505and 506.

508—Director of company in insolvent liquidation prohibited from beingdirector of, or being involved with, any other company that is knownby a prohibited name.

509—Personal liability of director for debts of company followingccntravention of section 508.

510—Prosecution of delinquent officers and members of company inliquidation by the Court.

511—Obligations arising under section 510.

PART VII—LIQUIDATION OF UNREGISTERED COMPANIES

512—Meaning of unregistered company for purposes of this Part.513—Liquidation of unregistered companies.514—Circumstances in which unregistered company can be liquidated.515—Company incorporated outside Kenya may be liquidated though

dissolved.516— Contributories in liquidation o f' unregistered com pany.517—Power of the Court to halt or restrain proceedings.518—Actions halted on liquidation order.519--Provisions of this Part to be cumulative.



4698 he Insolvency Bill. 2012

PART VIII— ADMINISTRATION OF INSOLVENT COMPANIES

Division 1—Introductory provisions: nature and objective ofadministration

520— Interpretation: Part VIII.521—What is administration?522— The objectives of administration.

Division 2—Appointment of administrators otherwise than by the Court

523—Who can appoint an administrator?524— Duty of administrator.525— Status of administrator.526— Qualification for appointmen t of administrators.

527—Administrator not to be appointed if company is already underadministration.

528—Administrator not to be appointed if company is in liquidation.529—Administrator not to be appointed in respect of banking, finance and

insurance compan ies.

Division 3—Appointment of administrator by the Court

530— Wh at is an administration order?531— Conditions for making adm inistration orders.532—Applications to the Court to appoint administrator in respect of

company.533— Powers of the Court on hearing app lication for adm inistration order.

Division 4—Appointment of administrator by holder of floating charge

534— Holder of floating charge may ap point administrator.535—Restrictions on the power of holder of floating charge to appoint

administrator.




536—Administrator not to be appointed if relevant floating charge is notenforceable.

537—Holder of relevant floating charge to notify the Court on appointingadministrator.

538—When administrator's appointment takes effect.

539—Duty of holder of relevant floating charge to notify appointment toadministrator and other persons.

540—Power of the Court to order person invalidly appointed to beindemnified against liability.

Division 5—Appointment of administrator bysompany or directors

541—Administrator may be appointed by company or by its directors.542—Restrictions on power of company or its directors to appoint

administrator.543—Other restrictions on power of company or its directors to appoint

administrator.544—Circumstances in which company or its directors may not appoint

administrator.545—Notice to be given of intention to appoint administrator.546—Person giving notice of intention to appoint administrator to lodge

certain documents with the Court.547—Further restrictions on making appointments under section 541.548—Person appointing administrator under section 541 to lodge certain

documents with the Court.549—What happens if no one is entitled to notice of intention to appoint

administrator.550—When appointment of administrator under this Division takes effect.551—Person making appointment to notify appointment to administrator

and o thers.552—Appointment under section 550 not to take effect in certain cases.553—Power of the Court to order person invalidly appointed to be

indemnified against liability.



y ,

591—Administrator's conduct of administration can be challenged.

592—Power of the Court to examine conduct of administrator'sadministration of the company.

593—Automatic end to administration.

594—Circumstances in which administrator's term of office can beextended.

595—Court may terminate administration on application of administrator.

596—Termination of administration when objective achieved.

597—Court may terminate administrator's appointment on application of

creditor.598—Court to terminate administrator's appointment on making of public

interest liquidation order.

599—Procedure for moving from administration to creditors' voluntaryliquidation.

600—Procedure for moving from administration to dissolution.

601—Administration order to be discharged if administrator's appointmentis terminated.

602— Administrator to lodge copy of order of the Court terminatingappointment with Registrar of Companies.

Division 10—Termination of appointment and replacement ofadministrators

603—Resignation of administrator.604—Court may remove administrator from office.

605—Administrator to vacate office on ceasing to be qualified.

606—Filling vacancy in office of administrator.

607—Power of the Court to replace administrator.

608--Power of holder of floating charge to appoint replacement

administrator appointed under section 534.609—Power of company to appoint replacement administrator appointed

under section 541(1).

610—Power of directors of company to appoint replacement administratorappointed under section 541(2).



The Insolvency Bill. 2012 703

611—Power of the Court to replace administrator in certain othercircumstances.612—Court may replace administrator when there is a competing floating

charge-holder.613— Creditors' meeting may replace administrator appointed by company

or directors.614—Discharge from liability on administrator's vacating office.

615—Former administrator's remuneration and expenses payable ofcompany's property and to have priority over holders of floatingcharges.

Division 11 upplementary provis ions

616—Joint and concurrent administrators.

617—Offences committed by joint administrators.618—Administrators acting concurrently.'619—Power to appoint administrators to act concurrently.620—Presumption of validity of acts of administrator.621—Majority decision of directors.622—Power to extend time limits.

623—Certain specified periods can be varied by consent.

PART IX—COMPANY VOLUNTARY ARRANGEMENTS

Divis ion 1—P roposa l s fo r com pany vo lun ta ry a r rangemen ts

624—Interpretation: Division 1.625—Proposal for voluntary arrangement.626—Procedure if supervisor is not the liquidator or administrator.627—Supervisor to convene meetings of company and of its creditors.628—Conduct of meetings of company and its creditors.629—Approval of proposal for voluntary arrangement.




630—Approved proposalto take effect as voluntary arrangem ent and to bebinding on company and its creditors.

631— Certain persons may challenge decisions relating to approvedvoluntary arrangement.

632— Offences involving false representations and fraudulent acts bycomp any officers.

633— Implementation of app roved voluntary arrangement.634—Prosecution of delinquent officers of company.635— When voluntary arrangemen t comes to an end prematurely.

Division 2—M oratoria on debt payments when company 's directorspropose voluntary arrangement

Subdivision 1—Introductory provisions

636— Interpretation: Division 2 .637—A pplication of: Division 2.638—Eligible comp anies.639— Banking and insurance comp anies ineligible to obtain moratorium.640— Comp anies under adm inistration, etc. ineligible to obtainmoratorium.641— Certain project companies ineligible to obtain moratorium.642— Comp anies with large outstanding liabilities ineligible.

Subdivision 2 btaining a moratorium

643—:What steps com pany's directors have to take to obtain a m oratorium.644 Wh at directors have to do to obtain moratorium.

645—Duration of m oratorium.646—W hat happens when moratorium takes effect.647— Duty of provisional supervisor to publish and give notice that

moratorium has taken effect.648— Notification of end of m oratorium to be given by provisional

supervisor.




Subdivision 3—Effects of moratorium

649—Effect of mo ratorium •on creditors and others.650—Effect of moratorium on property that is subject to uncrystallised

floating charge.651—Security not to be enforced unless it would benefit the company.652—Application of sections 653 to 657 to company in respect of which a

moratorium has effect.

653—Company invoices and other documents to state provisionalsupervisor's name and that moratorium has effect.

654—Restrictions on company obtaining credit during moratorium.655—Restrictions on disposal of property and making payments by

company.656—Restriction on company paying debts and other liabilities.657—Circumstances in which company may dispose of property and goods

that are subject to a security or held under credit purchase transaction.

Subdivision 4— Provisional supervisors

658—Provisional supervisor to monitor activities of company duringmoratorium.

659—Withdrawal of provisional supervisor's consent to act.

660—Creditors and others may challenge provisional supervisor's conductduring moratorium.

661—Creditor may pursue claim against provisional supervisor for loss.662—Replacement of provisional supervisor by the Court.

Subdivision 5—Consideration of proposal for and implementation of

voluntary arrangement663—Provisional supervisor to convene meetings of the company and its creditors.664—Conduct of meetings of company and its creditors.665—Approval of proposal for voluntary arrangement.666—Voluntary arrangement binding on company and creditors.




667— Right to challenge decisions relating to app roved voluntaryarrangement.

668— Implem entation of voluntary arrangement.

Subdivision 6 xtension of moratorium

669— Circumstances in which moratorium m ay be extended.670— Conditions for extension of moratorium.

671— Decisions to extend or further extend moratorium.672—Meeting may establish moratorium committee.

Subdivision 7 upplementary provisions

673— Effect of certain decisions of meetings of company an d com pany'screditors.

674— M emb er or creditor of company m ay challenge actions of directors.675— Offences under this Division.676— Certain provisions in floating •harge documents to be void.

PART X— PROVISIONS APPLICABLE TO COM PANIES INLIQUIDATION OR UNDER ADMINISTRATION

677— Interpretation: Part X678— Realising property of comp any that is in liquidation or under

administration.679— Duty of certain persons to co-operate with office-holder.680—Po wer of the Court to conduct inquiry into insolvent comp any's

dealings, etc. on application made by office holder.

681— Court's enforcement p owers under section 680.682— Power of the Court to set aside transaction that is undervalue.683— Power of the Court to void preference.684— What relevant time means in sections 682 and 683.685— Orders under sections 682 and 683: ancillary provisions.686— Power of the Court to set aside certain extortionate credit transactions.




687— Circumstances in which floating chargeOrt4ompany's undertaking orproperty to be invalid.

688—Lien in respect of com pany's documents unenforceable if it woulddeny their possession to office-holder.689—Supply of utility services to companies in liquidation or under

administration, etc.690—A ppointment o f administrative receiver in respect of comp any

prohibited.

PART XI—LEGAL PROCEEDINGS UNDER THIS ACT

Division 1—Provisions against debt avoidance

691— Interpretation and app lication of Division 1.692— Power of the Court to m ake orders relating to transactions entered into

at an undervalue by natural persons.693— Those who m ay apply for an order under section 692.694— Provisions that may be included in order m ade under section 692.

Division 2—General provisions relating to legal proceedings under theAct

695—En forcement of com pany's obligations to lodge docum ents with, orgive notice to, Registrar of Com panies.

696— Power of the Court to grant injunctions in certain cases.697— Liability of officers who are in default.698— Offences by bodies corporate.699—A dmissibility in evidence of statement prepared for p urpose of

provision of this Act or the insolvency regulations.

700— Legal proceeding under this Act not to be invalidated or set becauseof a defect unless p erson detrimentally affected.

701— Power to make insolvency procedure rules.

Division 3—Appeals and reviews




702—Power of the Court to review, rescind or vary order made under thisAct.

703— Right of appeal to the Court of Appeal.704—Suspension of bankruptcy, liquidation or administration pending

determination of app eal.

PART XII—ADMINISTRATION OF THIS ACT

Division 1—Official Receiver and Deputy Official Receivers

705— App ointment of Official Receiver and others.706—Deputy Official Receiver may act on behalf of Official Receiver.707—In,orporation of Official Receiver as a corporation sole.

o8—Vacation of office by Official Receiver and Deputy Official Receiver.709—Protection of Official Receiver and Deputy Official Receivers from

liability.710—Official Receiver and Deputy Official Receivers may charge fees.711—Rates of Official Receiver's fees.712—Insolvency Services Account to be established and maintained.713— Official Receiver to pay certain unclaimed dividends and

undistributed balances into Insolvency Services Account.

Division 2 ublic registers relating to bankrupts and others

714— App lication of Division 2.715—Official Receiver to ensure access to public registers.716— Purposes of pub lic registers.717—General information to be included in public registers.

718—Information kept indefinitely on public register after multipleinsolvency events.719—Restricted information that may be included in public register relating

to bankruptcies.720—When Official Receiver may omit, remove, restrict access to, or

amend, information contained in a public register.

The Insolvency B ill. 20/2 709



721— Right of mem bers of public to inspect registers.722— Information con tained in public registers may be used for statistical or

research purposes.723— Governmen t and Official Receiver not liable for certain acts and

omissions.

PART XIII—SUPPLEMENTA RY PROVISIONS

/z4—C ross border insolvency.

725— Representation of bodies corporate at meetings.726— Courts, Official Receiver and others to publish orders and notices on

their respective w ebsites.727— Official Receiver, bankruptcy trustees, liquidators and administrators

to notify creditors of p rescribed steps in the insolvency p rocess.728— Certain transactions relating to bankrupt's estate exemp t from stamp

duty.

729— Re-direction of bankrupt's correspondence.730— Supp ly of utility services to bankrupts and o thers.731— Order for production of documents by Kenya Reven ue Authority.732— Cabinet Secretary to prepare annual report.733— Serving and giving notices under this Act.734— Power of Cabinet Secretary to make insolvency regulations to

supplem ent this Act.735— Act to bind the Government.736— Repeal of Ban kruptcy Act and revocation of subsidiary legislation.737—Transitional proviSions: insolvency of natural persons.738— Transitional provisions: Winding up and insolvency of comp anies.739— Power of Cabinet Secretary to make savings and transitional

regulations.740— Consequential amendm ents to other enactments.

SCHEDULES



INSOLVEN CY B ILL, 2012

A Bill for

An Act of Parliament to amend and consolidate the law relating to theinsolvency of natural persons and incorporated and unincorporatedbodies; to provide for and to regulate the bankruptcy of naturalpersons; to proiide alternative procedures to bankruptcy that willenable the affairs of insolvent natural persons to be managed for thebenefit of their creditors; to provide for the liquidation of

incorporated and unincorporated bodies (including ones that maybe solvent); to provide as an alternative to liquidation proceduresthat will enable the affairs of such of those bodies as becomeinsolvent to be administered for the benefit of their creditors; and toprovide for related and incidental matters

ENACTED by the Parliament of Kenya as follows—

PART I—PRELIMINARY PROVISIONS

1. 1) This Act m ay be cited as the Insolvency Act, Short title and

2012. ommencement.

(2 ) This section comes into operation on the dateon which this Act is p ublished inGazette.

(3 ) The rema ining provisions of this Act comeinto operation on such date or such different dates as theCabinet Secretary may app oint, by notice published in theGazette.

39 •


Interpretation. 2 1) In this Act unless the context otherwise



Interpretation. 2. 1) In this Act, unless the context otherwiserequires—

affairs , in relation to a natural person orcom pany, includes a business carried on by the p erson orcompany and any dealings conducted in the course of thebusiness;

amount means an amount of money;

app ly to includes apply in relation to;

associate —

(a) in relation to a company, means-

(i) its holding company or itssubsidiary;

(ii) a subsidiary of its..holtlingcompany;

(iii) a holding comp any of itssubsidiary;

(iv) a person who controls thecomp any or body corporate(whether alone or with the

person's associates or with otherassociates of the com pany;

(v) any comp any in which a naturalperson is a director;

(b) in relation to a natural person,means-

(i) a mem ber of the family of theperson;

(ii) a comp any or other bodycorporate controlled directly or




indirectly, by that natural personwhether alone or with theassociates of the person; and

(iii) an associate of the associates ofthe person;

authorised insolvency practitioner means aperson who holds an authorisation granted under section 9;

bank means a bank to which the Banking Act

applies;

bankrupt mean a debtor who has been adjudgedbankrupt under Part III and has not been discharged frombankruptcy;

Cap. 488

the Bankruptcy Act means— ap. 5

(a ) the Bankruptcy Act repealed by thisAct; and

(b ) the rules made under that Act;

bankruptcy trustee , in relation to a bankrupt or abankruptcy, means the trustee of the bankrupt's estate;

business includes trade and profession;

business records , in relation to a bankrupt,includes accounting records, receipts, bills, invoices andany other documents relating to the bankrupt's business;

company means a company or foreign companywithin the meaning of the law relating to companies, andincludes—

(a ) a building society within the meaningof the Building Societies Act;

(b ) a limited liability partnership within

Cap.489


the meaning of the Limited



No. 42 of 2011

the meaning of the LimitedPartnerships Act, 2011; and

(c ) a body (whether incorporated or not)of a class prescribed by the insolvencyregulations for the purposes of thisdefinition;

"control of or "control over", in relation todocuments or other property, includes having possessionof, or custody over, the docum ents or property;

correspondence includes correspondence byelectronic means;

the Court means the High Court, and if there isan insolvency division of that Co urt, means that division;

creditor .includes a person entitled to enforce a

final judgment or final order;

credit purchase transaction means a hire-purchase agreement, a conditional sale agreement, achattel leasing agreemen t or a retention o f title agreem ent;

credit sale agreement means an agreement forthe sale of goods under which payment of the whole or apart of the purchase price is deferred and a securityinterest in the goods is created or provided for in order tosecure the paymen t of the whole or a part of the purchaseprice;

debt means an obligation or liability of a personto pay money or money's worth to another person; andincludes (except when the con text otherwise provides)includes—

(a ) a liability under a written law;

(b ) a liability for a breach of trust;




y

(c ) a liability under a contract or bailment

or in tort; and(d ) a liability arising from an obligation to

make restitution;

debtor mean s a person who owes a debt;

docume nt mea ns information recorded in anyform; and in p articular includes a summ ons, notice, orderor other legal process and a register (whether in hard copyor electronic form);

electronic form in relation to a documen t orinformation, means the storage or keep ing of thedocum ent or information in the form o f data, text orimages by m eans of guided or unguided electromagnetic

energy, or both;

execution process means any of the following:

(a) issuing or proceeding w ith any of thefollowing orders or warrants under ajudgment or o rder obtained against thedebtor in any co urt in its civiljurisdictions-(i) an order or w arrant for the

possession , seizure, or sale ofany p roperty;

(ii) an order of attachmen t;

(b) obtaining a garnishee order in favourof a judgm ent creditor under the CivilProcedure Rules;

(c) obtaining an order that a judgmentcreditor- may sue a sub-debtor underthe Civil Procedures Rules;

(d) having a charging order nisi ma de

Cap . 21, sub leg.




absolute under the Civil ProcedureRules;

(e ) beginning or continuing proceedings inany court for the appointment of areceiver of property, except anapplication for the appointment of aperson as interim trustee under section36 (appointment of interim trustee ofdebtor's property on application of

creditor);(f ) exercising a p ower of re-entry under a

lease, or a pow er terminating a lease;

(g ) seizing or selling p roperty by levyingdistress for rent;

functions includes duties and responsibilities;

goods includes all chattels personal other thanthings in action and m oney, and all em blements, industrialgrowing crops and things attached to or forming part ofthe land which are agreed to be severed before sale orunder the co ntract of sale;

Cap. 507. hire-purchase agreement means a hire-purchaseagreement as defined in section 2(1) of the Hire PurchaseAct;

insolvency regulations means regulations madeunder this Act and in force;

judicial enforcement officer means a bailiff or

other officer of a court who is charged with carrying out aprocess involving the execution or enforcement of anorder or judgemen t of the court;

landlord , in relation to a letting of premises,includes any person to whom rent or other money is




y ,

payable in respect of the occupation or use of the

premises;

liquidation application , in relation to a com pany,mean s an ap plication to the Court for a liquidation order inrespect of the comp any;

liquidation order , in relation to a com pany,means an order of the Court for the liquidation of thecompany by the Court;

mem ber , in relation to*a comp any, includes aperson who is not a mem ber of a company but to whomshares in the comp any have been transferred, ortransmitted by operation of law;

notice mea ns notice in writing;

officer , in relation to a com pany or other bodycorporate, means the chief executive officer, or anydirector, mana ger or secretary, of the com pany or bo dy;

partnership means a partnership within themeaning of the Partnership Act;

person includes a partnership, an unincorporatedassociation, a corporation, a co-operative society or an

. organization, the successors of a partnership, assoc iation,corporation, society or organization, and heirs, executors,liquidators of the succession, adm iQistrators or other legalrepresentative of a person;

powers includes rights and authorities;

preferential creditor mean s a person to whom apreferential debt is owed;

preferential debts , in relation to a n atural personor a comp any, means the debts listed in the Second




Schedule;

property includes money, goods, choses inaction, land and every description of property, whetherreal or personal, legal or equitable, and whether located inKenya or elsewhere, and includes obligations, easementsand every description of estate, interest and profit, presentor future, vested or contingent in, arising out of orincidental to property;

prescribed bankruptcy level has the meaninggiven by subsection (4);

provable claim , in relation to a bankrupt, meansa claim that is provable by a creditor in proceedings underPart 111;

purchaser , in relation to a credit purchasetransaction, means the person to whom goods are disposedof under the transaction, and, if the rights of that personare transferred by assignment or by operation of law,includes the person for the time being entitled to thoserights;

records means information stored in documentsor in an electronic database or by electronic means;

the Registrar (except when used in reference tothe Court) means the Registrar of Compan ies;

"register", "registered" and "registration", inrelation to a notice or other document required orpermitted to be lodged with, or sent or notified to, theRegistrar under this Act, means respectively register,registered and registration in the Register of Companies inrelation to the company to which the notice or otherdocument relates;

"relative", in relation to a person, means-




(a ) the parents, spouse, child, brother, orsister of that pprson;

(b ) the parents, child, brother or sister ofthe spouse of that person; or

(c) a nominee or trustee for any of thepersons specified in paragraph (a) and(b);

relevant court , in relation to a matter other thanone that is specifically entrusted to the High Court by aprovision of this Act, means the court exercising or havingresponsibility for exercising jurisdiction in respect of thatmatter;

the repealed Companies Act means—

(a) t h e Companies Act repealed by theCompanies Act, 2012; and

(b ) the rules or regulations made underthat Act;

retention of title agreement means an agreementfor the sale of goods to a company, being an agreement—

(a ) that does not constitute a charge on thegoods; but

(b ) under which, if the seller is not paidand the company is wound up, theseller will have priority over all othercreditors of the company with respectto the goods or any propertyrepresenting the goods;

"secured creditor" means—

(a) a person holding a security on oragainst the property of the debtor or




(any part of it) to secure a debt due or

accruing due to the person from thedebtor; or

(b) a person whose claim is based on, orsecured by, a ne gotiable instrumentheld as co llateral security and onwhich the debtor is only indirectly orseconda rily liable;

security mean s any -mo rtgage, charge, lien orother security;

security agreement mea ns an agreement underwhich p roperty become s subject to a security for thepayment of an obligation;

service provider mean s any entity or person whosupplies fuel, wa ter, electricity, telecom munications, orsuch other services as may be prescribed;

shares include stocks;

special resolution means a resolution of creditorspassed in accordance with this Act;

terms includes conditions;

transfer includes conveyance, assignment andsurrender;

under administration , in relation to a company,has the m eaning given by section 521;

unsecured creditor , in relation to a natural personor a comp any, means a creditor of the person or comp anywho is not a secured c reditor;

written or in writing includesrespectively

The Insolvency B111,2012 721

itt i l t i f d i l t i f



written in electronic form and in electronic form .

(2) For the purpo ses of the app lication of this Actto a debt, it does not matter—

(a ) whether the deb t is present or future;

(b ) whether it is certain or contingent; or

(c ) whether its amount is fixed orliquidated, or is capab le of being

ascertained by fixed rules or as amatter of opinion.

(3) For the purposes o f this Act, a person is amem ber of the family of a natural person if the person isthe parent, spouse, brother, sister, child, uncle, aunt,nephew, niece, stepfather, stepmother, stepchild, or adoptedchild of the person concerned and, in case of an adop ted

child, the child's adopted p arents.(4) For the purposes of this Act, the prescribed

bankruptcy level is—

(a ) seventy five thousand shillings; or

(b ) if the insolvency regulations for thetime being specify another amountprovide— the amount so specified.

3. 1) The objects of this Act are— bjects andapplication of this

(a) to establish and provide for the ct.operation of framework for the_efficient and equitable ad ministrationof the estates of insolvent naturalpersons and unincorporated entitiescom prising natural persons, and theassets of insolvent comp anies andother bodies corporate, that maintains afair balance between the interests ofthose persons, entities, comp anies and


bodies and those of their creditors;



(b) in the case of insolvent natural persons

and unincorporated entities comprisingnatural persons, and insolventcompanies and other bodies corpOratewhose financial position isredeemable-

(i) to enable those persons andentities to continue to operate as

going concerns so that ultimatelythey may be able to meet theirfinancial obligations to theircreditors in full or at least to thesatisfaction of those creditors;and

(ii) to achieve a better outcome for

the creditors as a whole thanwould likely to be the case ifthose persons and entities wereadjudged bankrupt;

(c) in the case of insolvent companies andother bodies corporate wh ose financialposition is redeemable-

(i) to enable those companies andbodies to continue to operate asgoing concerns so that ultimatelythey may be able to meet theirfinancial obligations to theircreditors in full or at least to thesatisfaction of those creditors;and

(ii) to achieve a better outcome forthe creditors as a whole thanwould likely to be the case ifthose companies and bodies were


li id t d d



liquidated; and

(d ) in the ease of insolvent natural personsand unincorporated entities comp risingnatural persons, and insolventcomp anies and other bodies corporatewhose financial po sition isirredeem able— to provide an orderlysystem for adjudging those personsbankrupt and for the efficient andoptimal administration and distributionof their estates for the benefit of theircreditors;

(e ) in the case of insolvent com panies. andother bodies corp orate whose.financialposition is irredeemable— to providean orderly system for liquidating the

affairs of those comp anies and bodiesand for the efficient and optimaladministration and distribution of theirassets for the bene fit of their creditors.

(2) This Act app lies to natural persons,partneiships, limited liability partnership, companies andother corporate bodies established by a ny written law.

PART II NSOLVENCY PRACTJTIONERS

4. (1) A person acts as an insolvency practitionerin relation to a natural person if the person acts-..

(a) as the bankruptcy trustee or interimtrustee in respect of the person 'sproperty or as permanent or interimtrustee in the sequestration of the

Circumstances in

which person actsas insolvencypractitioner.




Receiver.



6 . 1) Subject to subsection (2) and (3), a person isqualified to act as an insolvency practitioner only if the

.person—

(a ) satisfies the requirements of theinsolvency regulations with respe ct toeducation, practical training andexperience;

(b ) is a mem ber of a professional bodyrecognised under section 7 (power ofCabinet Secretary to recogniseprofessional bodies for the purposesof this Act.); and

(b) satisfies the requirements (if any) of

the rules governing the bo dy.(2) A natural person is not qualified to act as an

insolvency practitioner if the person—

(a ) has been ad judged bankrupt, or theperson's estate has been sequestratedand, in either case, the person has notbeen discharged;

(b ) is subject to a disqualification ordermad e under the law relating tocompanies; or

(c ) is unable to perform the functions ofan insolvency practitioner because ofphysical or m ental infirmity.

(3) A body corp orate is not eligible to be aninsolvency practitioner.

(4) A natural person who , during the two yearsimm ediately preceding the comm encem ent of this Act,was carrying on any of the activities referred to in section

Qualifications pirperson to act asinsolvencypractitioners.


4(1) or (2) is taken to b e qualified to act as an insolvencypractitioner on and after that com men cemen t even though



practitioner on and after that com men cemen t even thoughthe person is not qualified in term s of subsection (1).

Power of CabinetSecretary torecogniseprofessional bodiesfor the purposes ofthis Act.

7. (1) The Cabinet Secretary may, by noticepublished in the Gazette, declare a professional body as arecognised professional body for the p urposes of section 6.(qualifications for p erson to act as insolvencypractitioners).

(2) The Cabinet Secretary may declare aprofessional body to be a recognised professional bodyonly if it—

(a) regulates the practice of a profession;and

(b) mainta ins and enforces rules

authorizing its mem bers to act asinsolvency practitioners to ensure thatmem bers are —

(i) are fit and proper persons to actas' insolvency practitioners; and

( ii ) meet acceptable requirementsrelating to education practicaltraining an d exp erience.

(3) A reference to the members of a recognisedprofessional body includes a reference to persons w ho are,whether m emb ers of that body or n ot, subject to its rules inthe practice of the relevant profession.

(4) The Cabinet Secretary may revoke a notice

made under subsection (1) if it appears to the CabinetSecretary that the professional body no longer m eets therequirements of subsection (2).

(5) A notice made by the Cabinet Secretaryunder this section takes effect from the date of the notice


or such oth er date as is specified in it.



(6 ) The Cabinet Secretary may, in revoking anotice made under subsection (1), exempt a specifiedmem ber, or a specified class of mem bers, .of theprofessional body concerned from the effect of therevocation and to authorise the member, or the membersof that class, to continue acting as an insolvencypractitioner or as insolvency practitioner for such period asthe Cabinet Secretary determines and notifies in writing to

the member or m embers concerned.(7 ) In this section, profession means a

profession involving carrying on any of the activitiesreferred to in section 4(1 ) or (2)...

8. (1) A person who wishes to act as an insolvency

practitioner may apply to the Official Receiver for an -authorisation to act as an insolvency practitioner for thepurposes of this Act.

(2) An application under subsection (1) must—

(a ) be made in the manner prescribed bythe insolvency regulations;

(b ) contain or be accompanied by suchinformation as the Official Receivermay reasonably require for purposesof determining the application; and

(c ) be accompanied by the fee soprescribed.

(3) In particular, such an application must be

accompanied by evidence=

(a ) that the applicant is qualified to act asan insolvency practitioner; and

(b ) that the applicant-

(i) has a professional indemnity

Application to act

as insolvencypractitioner.


insurance policy or has providedsecurity for the p roper



Grant or refusal ofauthorisation.

performance of the functions of

an insolvency p ractitioner; and(ii) that policy or security meets the

requirements prescribed by theinsolvency regulations withrespect to acting as a •practitioner; and

(c ) that the applicant is a fit andproper person to act as aninsolvency practitioner.

(4) The Official Receiver may direct that noticeof the application be published in such publication and insuch m anner as the Official Receiver specifies.

(5) Information to be provided to,the Official

Receiver under this section must, if the Official Receiverso requires, be in such form or verified in such m anner asthe Official Receiver may sp ecify.

(6) An application made under subsection (1)may be withdrawn at any time before it is granted orrefused.

9. 1) As soon as practicable after receiving anapplication made under section 8 (application to act asinsolvency practitioner), the Official shall either grant orrefuse the ap plication.

(2) The Official Receiver shall grant anapplication made under section 8 if satisfied that—

(a ) the application complies with therequirements of that section; and

(b ) that the applicant is qualified to act asan insolvency practitioner and is a fit


and prop er person to•act as such.



(3 ) The Official Receiver may not refusean application for an authorisationwithout having given the applicant anopportunity to show why theapplication should be granted.

(4 ) On granting an authorisation underthis section, the Official Receivershall notify the applicant in writing ofthe authorisation and specify the dateon which the authorisation is to takeeffect.

(5 ) An authorisation granted under this sectioncontinues in force for such period, and subject to suchconditions, as are specified in the authorisation.

10. (1) The Official Receiver may revoke anauthorisation granted under subsection (1) if satisfied thatthe holder of the authorisation—:

(a ) is no longer qualified to act as aninsolvency practitioner;

(b ) is no longer a fit and proper person toact as an insolvency practitioner; .

(c ) has been found guilty of an offenceunder this Act, or of an offence underany other Act involving fraud,dishonesty or breach of trust;

(d ) has contravened or failed to complywith, or is contravening or failing tocomply with, a condition of theauthorisation; or

(d) in making the application for anauthorisation, has provided the

Power of OfficialReceiver to revokeauthorisation.


Official Receiver with false ormisleading information



misleading information.

(2 ) An authorisation granted under this sectionmay be revoked by the Official Receiver at the request, orwith the consent, of the holder of the authorisation.

(3 ) The Official Receiver may not revoke anauthorisation (otherwise than at the request or with theconsent of its holder) without having given its holder anopportunity to show why the authorisation should not berevoked.

(4 ) A revocation of an authorisation does nottake effect until the period within which an appeal withinwhich the holder of the authorisation can appeal againstthe revocation has expired or, if within that period, theholder lodges such an appeal, until the appeal is finallydetermined o r is withdrawn, wh ichever first occurs.

Right to appealagainst decisions ofOfficial Receiver.

11. (1) A person whose application for anauthorisation to act as an insolvency practitioner is refusedmay appeal to the Co urt against the refusal.

(2) A person whose authorisat ion to act asinsolvency practitioner is revoked otherwise than at theperson's request or with the person's consent may appealto the Court again st the refusal.

(3 ) An appeal must be lodged with the Courtwithin twenty-eight days after. the decision of the OfficialReceiver refusing the application or revoking theauthorisation is notified to the applicant or holder of theauthorisation, or within such extended period as the Courtmay allow.

(4) The appeal must be in the form, and complywith any other requirements, prescribed by the insolvencyregulations for the purposes o f this section

(5) The Official Receiver is entitled to be served


with a copy of the appeal and to appear at the hearing ofthe appeal as respondent.



the appeal as respondent.

(6) On the hearing of an app eal lodged inaccordance with this section, the Court shall, if itconsiders that the refusal of the app ellant's app lication, orthe revocation of the appellant's authorisation, was notwarranted, make an order quashing the decision of theOfficial Receiver refusing the application, or revoking theauthorisation, but otherwise, it shall m ake an order

confirming the Official Receiver's decision.(7) The Court m ake such ancillary or

consequential orders as it considers ap propriate, includingan order as to Payment of costs of the app eal proceedings.

PART III—BANKRUPTCY OF NATURAL PERSONS

Division 1—Bankruptcy: introductory provisions

12. In this Part— n t e r p r e t a t i o n : P a r t

bankruptcy application means an application forIII.

a debtor to be ad judged bankrupt;

bankruptcy order , in relation to a debtor, meansan order'of the Court adjudging the debtor bankrupt;

creditor's application mean s a bankruptcyapplication mad e in accordance with section 17 by one ormore creditors of a debtor;

debtor means a natural person who owes mo neyto one or m ore creditors; and , if a trust, partnersh ip or

• other unincorporated body owe s mon ey to a creditor,includes all of the trustees of the trust, all of the partners




or

(c ) at any time during the three years



immediately preceding that date-(i) has been ordinarily resident, or

has had a placed of residence; or

(ii) has carried on business inKenya.

(4) In subsection (3)(c), the reference to a debtorcarrying on business includes—

(a) the carrying on of a business by a firmor partnership of which the debtor is amem ber, and

(b ) the carrying on of a business by anagent or man ager for the debtor forsuch a firm o r partnership.

Proceedings on abankruptcyapplication.

16. (1) A bahkruptcy application may not bewithdrawn without the leave of the Co urt.

(2) The Court has a general power to dismiss abankruptcy application or to stay proceedings on such anapplication on the ground that the Court is of the opinion

that a requirement of this Part or the insolvencyregulations has not been complied with in a materialrespect.

(3) If the Court stays proceedings on a bankruptcyapplication, it may do so o n such terms as it considersappropriate.

Division 2 ankruptcy ap plications by cred itors

Creditor may apply 7. (1) One or more creditors of a debtor may makef o r b a n k r u p t c y an app lication to the Court for a bankruptcy order to be

The _,.solvency Bill, 2012 735

order in respect ofdebtor.

made in respect of the debtor in relation to a debt or debts



debto .

owed by the debtor to the creditor or creditors.(2) Such an app lication may be m ade in relation

to a debt or debts ow ed by the deb tor only if, at the timethe application is made—

(a) the amount of the debt, or theaggregate amount of the debts, isequal to or exceeds the prescribed

bankrUptcy level;the debt, or each of the de bts, is for aliquidated, amount payable to theapplicant creditor, or one or m ore ofthe ap plicant creditors, eitherimm ediately or at some certain, futuretime, and is unsecured;

(c ) the debt, or each of the deb ts, is a debtthat thq debtor appears either to beunable to pay or to have no-reasonableprospect of being able to pay; and

(d ) there is no outstanding app lication toset aside a statutory dem and in respectof the debt or any of the debts.

(3) For the purposes of subsection (2)(c), a •debtor app ears to be unable to p ay a debt if, but only if,the debt is payable immediately and either—

(a ) the applicant creditor to whom.thedebt is owed has served on the debtora dem and requiring the debtor to paythe debt or to secure or compound forit to the satisfaction of the creditor, atleast twenty-one days have elapsedsince the demand wa s served, and thedem and has been neither compliedwith nor set aside in accordance w iththe insolvency regulations; or

(b )



The Insolvency B ill, 2012 73 7

it.



(7) A debtor comp lies with a dem and thatoverstates the amount owing by—

(a ) taking steps that would have beencom pliance with the dema nd had itstated the correct amo unt owing (forexamp le, by paying the creditor thecorrect amount owing p lus costs); and

(b ) taking those steps within the periodspecified in the demand for the debtorto. comply.

18. (1) A debt that is the debt, or one of the d ebts, inrespect of which a creditor's application is m ade need not

be unsecured if either—(a ) the application contains a statement

by the person having the right toenforce the security that creditor iswilling, in the even t of a b ankruptcyorder being made, to give up thesecurity for the bene fit of all the

bankrupt's creditors; or(b ) the app lication is expressed not to be

made in respect of the secured part ofthe debt and contains a statement bythat person of the estimated value atthe date of the ap plication of thesecurity for the secured p art pf the

debt.

(2) In a case to which subsection (1)(b) applies, thesecured and unsecured p arts of the debt are to be treatedfor the purposes of sections 17, 19 and 20 as separatedebts.

When court canmake bankruptcyorder onapplication bysecured creditor

4738

Expeditedcred'itor'sapplication.

The Insolvency 8ild 2012

1 9 . If a creditor's app lication is m ade w holly orpartly in resp ect of a debt that is the subject of a statutory



ppdem and, the application may be m ade before the end ofthe twenty-one day referred to in that section if—

(a ) there is a serious po ssibility that thedebtor's prop erty, or the value of anyof that prop erty, will be significantlyreduced during that period; and

(b ) the app lication contains a statemen t tothat effect.

Proceedings oncreditor'sapplication.

20. (1) The Court may not make a bankruptcy orderon a creditor's application unless it is satisfied that thedebt, or one of the debts, in respect of w hich theapplication was made is either—

(a ) a debt which, having been payable atthe date of the ap plication or havingsince become payable, has beenneither paid nor secured orcomp ounded for; or

(b ) a debt that thcdebtor has no

reasonable prospect of being able topay wh en it falls due.

(2 ) If the app lication contains a statement of thekind referred to in section 19, the Court m ay not m ake abankruptcy order until at least twenty-one days haveelapsed since the service of any statutory demand undersection 17 (creditor may app ly for bankruptcy order in

respect of debtor).(3 ) The Court may dism iss the application if it is

satisfied that the debto r is able to pay all of the debtor'sdebts or is satisfied-

T h e In s o 1 v e n cy 1 3 1 1 1 2 0 1 2 7 9

(a ) that the debtor has made an offer tosecure or compound for a debt in



respect of which the application ismade;

(b ) that the acceptance of that offer wouldhave required the dismissal of theapplication; and

(c ) that the offer has been un reasonablyrefused.

(4 ) In determining for the purposes ofsubsection (4) w hether the debtor is able to pay all of thedebtor's debts, the Court shall take into account thedebtor's contingent and prospective liabilities.

(5 ) In determining for the purposes of thissection what constitutes a reasonable prospect that adebtor w ill be able to pay a debt w hen it falls due, it is tobe assumed that the prospect given by the facts and othermatters know n to the creditor when the creditor enteredinto the transaction resulting in the debt w as a reasonableprospect.

(5) Nothing in sections 17 to 19 prevents the Courtfrom allowing a creditor's application to be amended by

the omission of any creditor or debt and to be proceededwith as if action taken for the purposes of those sectionshad been taken on ly by or in relation to the remainingcreditors or debts.

21. (1) A creditor w ho m akes an application for abankruptcy order in respect of a debtor m ay not issue anexecution process against the debtor in respect of theproperty of the debtor to recover a debt on w hich theapplication is based.

(2) If the creditor has already issued the

Cred i to r sexecut ion processnot to be i ssued orcon t inued .


execution process, the creditor may not continue it.

(3 ) The creditor may make an application to the



relevant court for permission to issue or continue theexecution process.

(4 ) On the hearing of an application made undersubsection (3), the relevant court may make an orderpermitting the applicant to begin or continue the executionprocess but only if it is satisfied after considering allrepresentations made to it that the interests of the othercreditors will not be detrimentally affected.

(5 ) Any action taken in contravention ofsubsection (1) or (2) is void,

Power of relevantcourt to haltexecution

processes by othercreditors or allowthem on terms.

22. (1) After a creditor's application has been made,the debtor or any creditor may apply to the relevant court

for an order stopp ing-the issue or continuance by any othercreditor of an execution process against the debtor inrespect of the property of the d ebtor.

(2) On the hearing of an application undersubsection (1), the Court may make an order—

(a ) stopping the execution process onsuch terms (if any) as the Court

considers appropriate; or(b ) allowing the execution process to

continue on such terms as courtconsiders app ropriate.

Execution process

issued by othercourt.

-23. (1) This section applies if an execution processhas been issued by a court other than the High Court.

(2) If it is proved to the issuing court that anapplication for a bankruptcy order in respect of the debtorhas been made to the High Court, the issuing court may

The Insolvency Bill, 2012 7 4 1

either—

(a ) stop the execution process on suchterms as it considers app ropriate; or



(b ) perm it the execution process tocontinue on such terms as it considersappropriate.

24. The restrictions in sections 21 to 2 3 on issuing orcontinuing an execution process do n ot apply if anapplication is withdrawn or dismissed.

25. (1) The Court may ma ke a bankruptcy order inrespect of the debtor if the creditor has comp lied with

section 17 (creditor may app ly for bankruptcy order inrespect of debtor).

(2) The Court may refuse to adjudge a debtorbankrupt if—

(a ) the app licant creditor has not satisfiedthe requirements specified in section17;

(b ) the debtor is able to pay the deb tor'sdebts; or

(c ) it is' just and equitable that the C ourtshould not make a bankruptcy order.

No restriction onexecution process,

if bankruptcyapplicationwithdrawn ordismissed.

When court mayadjudge debtorbankrupt.

When the Courtmay haltapplication.

26. The Court may, at any time, halt an app licationby a ,creditor for bankruptcy on such term s, and for suchperiod, as the Co urt considers appropriate.


Orders if more thanone application.

27. (1) If there is mo re than one bankruptcyapp lication in respect of a debtor, and one app lication hasbeen halted by an order of the Court, the Court may, if it

b li th i d t d k



Orders if there ismore than oneorder.

Power of the Courtto make orderhalting bankruptcyapplication, etc.

believes there is a good reason to do so, m ake abankruptcy order in respect of the app lication that has notbeen halted.

(2) On making a bankruptcy order undersubsection (1), the Court shall dismiss the app lication thathas been halted on such terms a s it considers appropriate.

28. If an application made by a creditor for abankruptcy order relates to more than one debtor, theCourt may refuse to make such an order in respect of oneor some of the debtors without affecting the app licationmad e in relation to the remaining debtor or debtors.

29. (1) This section app lies if a debtor—

(a ) has m ade a disposition of all, orsubstantially all, of the property of thedebtor to a trustee for the benefit ofthe creditors of the debtor;

(b ) has made a proposal under Division 1of Part IV (Voluntary arrangements:natural persons); or

(c ) has applied for a summ ary instalmentorder under that Division.

(2) The debtor, the bankruptcy trustee or anycreditor may app ly for an order under this section.

' (3) On the hearing of an application under thissection, the Court may ma ke any of the following orders:

(a) an order halting the bankruptcy

The Insolvency BiI1•2012 743

application;

(b ) an order halting any other bankruptcy

application;



application;(c) an order as to costs;

(d ) if it orders costs to be paid to thecreditor who applied for thebankruptcy application—an order thatthe costs be paid out of the assets ofthe debtor.

(4) This section does not limit the pow ers of theCourt under section 39 (when court may adjudge debtorbankrupt).

30. (1) This section app lies if a debtor appears inopposition to a creditor's application and the debtor claimsthat the debtor —

(a ) does not ow e a specified debt to thecreditor; or

(b ) ow es a specified debt to the creditor,but the debt is less than the prescribedbankruptcy level.

(2) The Court may, instead of refusing theapplication, halt the application so that the issue of—

(a ) whether the debt is owed; or

(b ) how much of the debt is owed,

can be resolved at a trial.

(3) As a condition of halting the application, theCourt may require the debtor to g ive security to thecreditor for any debt that may be established as owing bythe debtor to the creditor, and for the cost of establishingthe debt.

Court may haltapplication whileunderlying debt isdetermined.


Court may allowone creditor to besubstituted foranother.

31. In the case of a creditor's application, the Courtmay substitute another creditor for the creditor m aking theapplication if—

(a ) the applicant creditor has not



(a ) the applicant creditor has notproceeded with due diligence, or atthe hearing of the application offersno evidence; and

(b ) the debtor owes the other creditor twohundred and fifty thousand shillingsor more.

Division 3 ankruptcy app lications by debtors

When debtor maymake applicationfor bankruptcyorder.

32. (1) A debtor may make an application to theCourt for an order adjudging the debtor bankrupt only on

the grounds that the debtor is unable to pay the debtor'sdebts.

(2) The Court may decline to deal with such anapplication if it is not accompanied by a statement of thedebtor's affairs containing—

(a ) such particulars of the debtor'screditors and of the debtor's debts andother liabilities and assets as may beprescribed by the insolvencyregulations; an d

(b) such other information as may be soprescribed.

(3) The Court may reject a statement of affairs

that in its opinion is incorrect or incom plete.(4) A debtor who makes an application under

this section shall publish a notice of the application in-


(a ) a daily newspaper that circulatesgenerally in Kenya or the region inwhich the debtor ordinarily resides;and



and(b ) in such other publications (if any) as

may be prescribed by the insolvencyregulations for the purposes of thissection.

(5) The Court may decline to hear the application if

subsection (4) has not been complied with to itssatisfaction.

33. (1) Subject to section 34, on the hearing of adebtor's application, the Court may not make a bankruptcyorder if it appears to the Court—

(a ) that if a bankruptcy order were madethe total amount of the applicant'sdebts, so far as unsecured, would beless than the small bankruptcies level;

(b ) that if a bankruptcy order were made,the value of the bankrupt's estatewould be equal to or more than the

prescribed minimum value;(c ) that, during the five years

immediately preceding the debtor'sapplication, the debtor has-

(i) neither been adjudged bankrupt;nor

(ii) made a composition with thedebtor's creditors in satisfactionof the debtor's debts or ascheme of arrangement of thedebtors affairs; and

Appointment ofinsolvencypractitioner by theCourt.


(d) that it would be appropriate to appointan authorised insolvency practitionerto prepare a rep ort under section 34.

(2) If, on the hearing of the application, it



Action on report ofinsolvencypractitioner.

( ) , g pp ,appears to the Court that it would be ap propriate to makean appointment as referred to in subsection (1)(a), theCourt shall appoint an authorised insolvency practitionerin relation to the debtor—

(a ) to prepare a rep ort under section 34;or

(b) subject to Divis ion 1 of Part IV(Voluntary arrangements), to act inrelation to any voluntary arrangementto which the report relates assupervisor for the purpose ofsupervising its implem entation.

(3) In this section—(a ) prescribed minimum value means

the amount for the time beingspecified in the insolvency regulationsfor the purp oses of this section;

(b ) small bankruptcies level means theamount fct the time being so specified

for the putposes of this section

34. (1) The insolvency practitioner appointed undersection 33 shall—

(a) inquire into the debtor's affairs; and

(b ) within such period as the Court mayspecify—submit a report to the Courtstating w hether the d ebtor is willing tomake a proposal for a voluntaryarrangement in accordance with


Division 1 of Part IV (Voluntaryarrangements: natural p ersons).

(2) If the insolvent p ractitioner prop oses to state



( ) p p pthat the debtor is willing to m ake such a p roposal, theinsolvency practitioner shall also state—

(a ) whether, in the insolvencypractitioner's opinion, a m eeting ofthe debtor's creditors should beconvened to consider the proposal;and

(b ) if, in the insolvency practitioner'sopinion such a meeting should beconvened— the date on which, andtime and place at which, the meetingshould be held.

(3) On considering a repo rt submitted under thissubsection (1), the Court may—

(a ) without any application, make aninterim order under section 305(interim ord er of the Cou rt), if itbelieves that it is app ropriate to do sofor the purposes of facilitating the

consideration and implem entation ofthe debtor's proposal; or

(b ) if it believes it would be inapp ropriateto make such an order—m ake abankruptcy order ill respect of theapplicant.

(4) An interim order m ade in accordance with

subsection (3)(a) ceases,to have effect at the end of suchperiod as tle -Court may specify for the purpose o fenabling the debtor's propo sal to be considered by thedebtor's creditors in accordance with the applicableprovisions of Division 1 of Part IV.

(5) If the insolvent practitioner has prop osed in


the report that a meeting of the debtor's creditors shouldbe convened, the insolvent practitioner shall, unless the

Court otherwise directs, convene such a meeting for thetime date and place propo sed in the report



time, date and place propo sed in the report.

(6) Such a meeting is to be taken to have beenconvened under section 308 (when provisional supervisoris to convene creditors' meeting to consider debtor'sproposal) in which case subsections (2) and (3) of thatsection and sections 309 to 314 apply to the m eeting.

Joint applicationcan be made bytwo or moredebtors.

35. Two or more debtors, who are partners in abusiness partnership, may make a joint application undersection 32 (when debtor may make application forbankruptcy order).

Division 4—Appointment of interim trustee in respect of debtor sproperty

Appointment ofinterim trustee ofdebtor's propertyon app lication ofcreditor.

36. (1) After a creditor's application has been made,the creditor or any other creditor of the debtor may applyto the Court for an order for the appointment of anauthorised insolvency practitioner as interim trustee inrespect of all or a specified part of the debtor's property.

(2 ) The Court may make such an order at anytime before a bankruptcy order is made in respect of thedebtor.

(3) In making an order under subsection (1), the

Court may authorise the interim trustee to do all or any ofthe following:

(a ) take control of any property of thedebtor;

(b ) sell any perishable property or


property of the debtor that is likely tofall rapidly in value;

. (c) control the affairs Or p roperty of the



( ) p p ydebtor as directed by the Court.

(4) An o rder authorising the trustee to control adebtor's business m ay not extend beyond what, in theCourt's opinion, is necessary to conserve the debtor'sproperty.

(5) The Official Receiver and any authorisedinsolvent practitioner are suitably qualified persons for thepurpo se of subsection (1).

(6) In this section, debtor's business includesany business in which the debtor has a financial interest.

3 7 . (1) After the appointm ent of an interim trusteeunder section 36 (app ointment of trustee of debtor'sprop erty on application of creditor), the COUP m ay, on anapplication made under subsection (2), make additionalorders under that section.

(2) An ap plication for the purpose of subsection (1)made by a creditor or the interim trustee or, with the leaveof the Court, by any other person.

Additional ordersafter appointmentof interim trustee.

3 8 . (1) As soon as practicable after the appo intmentof an interim trustee, the trustee shall publish a notice ofthe appOintment-

(a ) in one or mo re newspap ers circulatingin Kenya or in the region where thedebtor ordinarily resides; and

(b ) in such other publication as m ay beprescribed by the insolvencyregulations for the p urposes of this

Notice ofappointment ofinterim trustee tobe published.


section.

(2) The app ointment of the interim trustee does

not take effect until subsection (1) has been com pliedwith



with.

Execution processnot to be issuedafter notice ofappointment oftrustee ispublished.

39. (1) A creditor of the debtor may not issue anexecution process under section 23 (execution processissued by another court) after notice of the app ointment of

the interim trustee has been published.(2 ) A creditor may not continue an execution

process already issued before notice of the app ointment ofthe interim trustee has been published.

(3 ) A creditor or any other interested p ersonmay apply to the Court for an order allowing the issue orcontinuation of an execution process, and the Court m aymake an order on such terms as it considers appropriate.

(4) Any action taken in contravention ofsubsection (1) or (2) is vo id.

Effect of haltingexecution.

40. If executionis halted under section 39, thefollowing sections ap ply as if the order halting executionwere a bankruptcy order:

(a ) section 109 (when execution creditormay retain execution proceeds);

(b ) section 110 (effect of notice tojudicial enforcement officer ofbankruptcy);

(c ) section 111 (judicial enforcem6ntofficer to retain proceed s of executionfor fourteen days);

(d ) section 112 (purchaser und er sale byjudicial enforcement officer acquires


good title);

(e ) section 113—(Court may set asiderights conferred on trustee);



(f ) section 116 (when execution orattachment completed for purposes ofsection 109 or section 115).

Division 5 djudication of bankruptcy applications

41. A bankruptcy under this Act commences on thedate and at the time when a bankruptcy order is made inrespect of the debtor.

42. On making a bankruptcy order, the Court shallrecord the date and time when the order was made.

(2) If the debtor is adjudged bankrupt on theapplication of the debtor, the Official Receiver shallrecord on the application the date and time when thedebtor made the application.

Bankruptcycommences onmaking ofbankruptcy order.

Date and timebankruptcy order tobe recorded.

43. As soon as practicable after the Court has made a Registrar of court

bankruptcy order in respect of a debtor, the Registrar of to notify trustee of

the Court shall forward a copy of the order to the Officialbankruptcy order.

Receiver.

44. (1) As soon as practicable after receiving a cop:of a bankruptcy order, the Official Receiver shallnominate a qualified person to be bankruptcy trustee inrespect of the debtor's property.

(2) In this subsection (I), "qualified person"

Official Receiverto nominatebankruptcy trustee.



4754 he Insolvency Bill, 26 12

(2 ) The Official Receiver shall serve the noticeat the address of the bankrupt given in the bankruptcyapplication or at the bankrupt's last address last known.to

the Official Receiver.(3 ) This section does not apply if the bankrupt



( ) pp y phas already lodged a statement under section 32 (whendebtor may m ake application to be adjudged bankrupt).

Bankrupt to lodgestatement of affairswith bankruptcytrustee.

50. (1) Within fourteen days after being served with

the notice in accordance with section 49 (or within suchextended p eriod not exceeding sixty days. as the OfficialReceiver may allow), the bankrupt shall lodge with theOfficial Receiver a statement of the bankrupt's affairssetting out—

(a) particulars of the bankrupt's assets;

(b ) the bankrupt's debts and liabilities;•

(c ) the names, residences and occupationsof the bankrupt's creditors;

(d ) the securities held by the bankrupt'screditors;

(e ) the dates when the securities weregiven; and

(f) such other information as may beprescribed by the insolvency ,regulations or as the bankruptcytrustee may reasonably require.

(2 ) A bankrupt who fails to comply withsubsection (1) is in contem pt of the Co urt.

(3 ) At any time after lodging a statement ofaffairs with the bankruptcy trustee, the bankrupt maylodge additional or amended statements or answers withthe bankrup tcy trustee.


51. (1) A person w ho in writing claims to be a

creditor of the bankrupt is entitled, at all reasonable times(either personally or through an agent)—

Creditors entitled

to inspect and takecopies ofstatement.



(a ) to inspect the bankrup t's statement ofaffairs; and

(b ) to take a cop y it or of part of it.

(2) A person w ho falsely claim s to be a creditor

is in contemp t of the Court.

52. (1) Within the p rescribed period, the OfficialReceiver shall convene the first meeting of the bankrupt'screditors, unless the O fficial Receiver dispenses with themeeting in accordance with section 53 (circumstances inwhich O fficial Receiver m ay dispense with first creditors'meeting). This subsection is subject to subsection (5).

(2) The Official Receiver shall convene themeeting by giving notice of the time, date and p lace of themeeting to—

(a ) the bankrupt;

(b ) each creditor named in the bankrupt'sstatement of affairs; and

(c ) any other creditors known to thebankruptcy ‘stee.

(3) The Official Receiver shall publish—

(a ) in one or mo re newspap ers circulatinggenerally in Kenya or in the regionwhere the bankrupt ordinarily resides;and

(b ) in such other p ublications (if any) asthe O fficial Receiver con sidersnecessary publish

Official Receiverto convene firstmeeting ofcreditors.


a notice advertising the time, date and place of themeeting.

(4) For the purpose of subsection (1), theprescribed period is—



(a ) twenty-eight days after the bankrupt'sstatement of affairs is lodged with theOfficial Receiver; or

(b) if the bankrupt is late in lodging thestatement or fails to lodge a statementat all—twenty-eight days after thedate on which the bankruptcy orderwas m ade.

Circumstances inwhich OfficialReceiver maydispense w ith firstcreditors' meeting.

(5) The Official Receiver may delay conveningthe first creditors' meeting if the Official Receiverconsiders that there are special circumstances justifyingthe delay.

5 3. (1 ) A first creditors' meeting need not be calledif the Official Receiver—

(a) decides that the m eeting isunnecessary;

(b ) sends each creditor named in thebankrupt's statement of affairs, andany other creditor known to thebankruptcy trustee, a notice thatcomplies with section 54 (documentsto be sent with noticeof meeting); and

(c ) does not receive, within fourteen days

after the Official Receiver's noticewas sent, notice from a creditorrequiring the Official Receiver to callthe meeting.

(2 ) In d e c i d in g w h e t h e r th e m e e tin g s h o u ld o r


should not be convened, the Official Receiver shall haveregard to—

(a ) the bankrupt's assets and liabilities;

(b ) the likely result of the bankruptcy;



( ) y p y;and

(c ) any o ther relevant matters.

(3) The Official Receiver shall state in thenotice—

(a ) the Official Receiver's view that thefirst creditors' meeting need not beconvened;

(b ) the reasons for not convening themeeting; and

(c ) that the Official Receiver will not call

the meeting unless a creditor gives theOfficial Receiver a notice, withinfourteen days after the sending of thenotice, requiring the Official Receiverto call such a meeting.

54. (1) The Official Receiver shall send thefollowing documents with the notice of the first creditors'meeting:

(a ) a summary of the bankrupt'sstatement of assets and liabilities;

(b ) extracts from, or a summary of, thebankrupt's explanation of the causes

of the bankruptcy; and(c ) any comments on the bankruptcy that

the Official Receiver chooses tomake.

(2) However, subsection (1) does not apply if

Documents to besent with notice of

meeting.


the Official Receiver has not received the bankrupt'sstatement of affairs when the notice is sent.

(3) A failure in sending or receiving thedocuments in subsection (1) does not affect the validity ofthe proceedings at the meeting.



Power of creditorsto requisitionmeeting.

p g g.

55. (1) If, in the case of a bankruptcy, the OfficialReceiver has not yet convened a first creditors' meeting,or has decided not to convene such a meeting, any creditorof the bankrupt may request the Official Receiver toconvene such a meeting.

(2) If such a request appears to the OfficialReceiver to be made with the concurrence of not less thanone-quarter in value of the bankrupt's creditors (includingthe creditor making the request), the Official Receivershall convene the requested meeting.

Execution processnot to be begun orcontinued afterbankruptcy orderadvertised.

56. (1) A creditor may not begin or continue anexecution process in respect of the bankiupt's property orperson for the recovery of a debt provable in thebankruptcy, after the Official Receiver—

(a) has published an advertisementnotifying the bankruptcy; or(b) has given notice of the bankruptcy to

the creditor.(2) After the notice of the bankruptcy notice has

been advertised, or after being given notice of thebankruptcy by the Official Receiver, a creditor may not.

seize or sell any property by means of distress for rentowed by the bankrupt.(3) However, such a creditor may continue with

the distress procedure if it has already begun.

The Insolvency Rill 7R 12


57. If a bankrupt dies after being adjudged b ankrupt,the bankruptcy continues in all respects as if the bankrupt

were still alive.

Effect ofbankrupt's deathafter banki-uptcyorder.



58 . The role of the creditors in the bankruptcy isprimarily—

(a ) to attend m eetings of the creditors;

(b ) to submit proofs of the de bts of thebankrupt; and

(c ) to examine the bankrupt at thosemeetings.

Creditors' role atcreditors'meetings.

Division 7— Appointment and functions of bankruptcy trustees

59. (1) The pow er to appoint a person as abankrup tcy trustee in respect of a bankrupt's estate of abankrupt, or to fill a vacancy in such an ap pointment, isexercisable—

(a ) except as provided by p aragraph (b),(c) or (d)—by a creditors' meeting;

(b ) under section 60— by the OfficialReceiver;

(c ) under section 61—by the CabinetSecretary; or

(d). under sectiorl 62— by the Court.

(2) A person m ay hold office as a bankruptcy

trustee only if the p erson is an authorised insolvencypractitioner.

. (3) A power to ap point a person N I bankruptcytrustee includes power to app oint two or more pe rsons asjoint bankrup tcy trustees, butsuch an appointment must

Power to appointbankruptcy trustee.




under a provision of this Division (other than section 62),the Official Receiver may apply to the Cabinet Secretary

to appoint a person as bankruptcy trustee instead.(2) On receiving an application under

subsection (1) the Cabinet Secretary shall either make an

trustee in certaincases.



subsection (1), the Cabinet Secretary shall either make anappointm ent or decline to m ake one.

(3) An application may be made undersubsection (1) even if the Cabinet Secretary has previouslydeclined to make such an appo intment.

(4) If a pers.on is appointed as bankruptcytrustee in accordance with subsection (2), the personshall—

(a) give notice of the appointment to eachof the bankrupt's creditors; or

(b ) instead advertise the appointment in

accordance with the directions of theCourt, but only if the Co urt so allows.

(5) In the notice or advertisement, the personappointed shall—

(a ) state whether that person proposes toconvene a general meeting of thebankrupt's creditors for the purpose ofestablishing a creditor's committeeunder section 79 (comm ittee, ofcreditors may be established); and

(b ) if the bankruptcy trustee does notpropose to convene such a meeting—state that the creditors are entitledunder this Part to require one to beconvened.

• 62. 1) If a bankruptcy order is made when there isa supervisor of a summary instalment order approved in

Special case inwhich the Courtmay appoint


bankruptcy trustee. relation to the bankrupt under (Division 2 of Part IV, theCourt may, if it considers it appropriate to do so on

making the order, appoint the supervisor of the order asbankruptcy trustee in respect of the bankrupt's estate.

(2) If an appointment is made under subsection



( ) pp(1), the Official Receiver is not required to decide undersection 60(1) to decide whether or not to convene acreditors' meeting.

(3 ) Section 61(4) and (5) apply to a bankruptcytrustee ap pointed und er this section.

Powers ofbankruptcy trustee.

63. (1) A bankruptcy trustee may—

(a ) with the permission of the creditor'scommittee or the exercise any of thepowers specified in Part 1 of the FirstSchedule; and

(b ) without that permission, exercise anyof the general poW ers specified in Part2-of that Sche dule.

(2) With the permission of the creditors'committee or the Court, a bankruptcy trustee may appoint

the bankrupt—(a ) to superintend the management of the

bankrupt's estate or any part of it;

(b ) to carry on the bankrupt's business (ifany) for the benefit of the bankrupt'screditors; or

(c ) in any other respect to assist inadministering the estate in suchmanner and on such terms as thebankruptcy trustee may direct.

(3) A perm ission given for the purposes ofsubsection (1)(a) or (2) must be a sp ecific one and must

The Insolvency Bill,.2012 763

relate to a particular exercise of the relevant power. Aperson dealing with the bankruptcy trustee in good faithand for value is not to be concerned to ascertain whether apermission required in either case has been given.

(4) If a bankruptcy trustee has done anythingwithout the permission required by subsection (1)(a) or



without the permission required by subsection (1)(a) or(2), the Court or the creditor's committee (if any) may, forthe purpose of enabling the bankruptcy trustee to meet thebankruptcy trustee's expenses out of the bankrupt's estate,ratify what that trustee has done. However, the committee

may do so only if satisfied that the bankruptcy trustee hasacted because of urgency and has sought its ratificationwithout undue delay.

(5) Part 3 of the First Schedule has effect withrespect to the things that the bankruptcy trustee is able todo for the purposes of, or in connection with, the exerciseof any of the bankruptcy trustee's powers under this Act.

(6) If, in exercising a power conferred by thisAct, a bankruptcy trustee who is not the OfficialReceiver—

(a) disposes of property comprised in thebankrupt's estate to an associate of thebankrupt; or

(b) employs an advocate,the bankruptcy trustee shall, if there is a creditor'scommittee, give notice to the committee of that exercise ofthat power.

(7) A bankruptcy trustee may use his or herdiscretion in administering a bankrupt's property, but, indoing so, is required to have regard to the resolutions

passed by the creditors at creditors' meetings.

64. A bankruptcy trustee may not sell any of thebankrupt's property before the first creditors' meeting,

Bankruptcy trusteenot to sellbankrupt's


property beforefirst creditors'meeting.

unless—

(a ) the property is perishable property oris likely to fall rapidly in value;

(b ) in the bankruptcy trustee's opinion,the sale of the property might beprejudiced by delay; or



prejudiced by delay; or

(c ) expenses will be incurred by thedelay, and before selling thebankruptcy trustee consults a creditoror creditors.

Title of purchaserfrom bankruptcytrustee.

Bankruptcy trusteeto bank money;power to investsurplus.

65. The title of a purchaser of the bankrupt'sproperty from a bankruptcy trustee under a document thatis made in the exercise of the bankruptcy trustee's powerof sale in the First Schedule—

(a) cannot be challenged except on theground of fraud; and

(b ) is not affected by an absence ofauthority to sell, or the improper orirregular exercise of the po wer of sale.

66. (1) A bankruptcy trustee shall establish andmaintain a bank account in respect of bankrupt estatesadministered by the bankrup tcy trustee and shall pay intothat account all money that that trustee receives in thatcapacity.

(2 ) If money h eld by a bankruptcy trustee inrespect of a bankrupt's estate is not immediately required

to be paid in connection with the administration of theestate, the bankruptcy trustee may invest the money in aninvestment of a kind prescribed by the insolvencyregulations for the purposes o f this section.

(3 ) A bankruptcy trustee who invests money in


V accordance with subsection (2) shall credit to thebankrupt's estate the interest, dividends or other moneythat accrues in respect of the investment.

67. (1) A bankruptcy trustee may, if the Court has Bankruptcy trustee



( ) p y y,first approved it, assign a right to sue that is conferred onthe bankruptcy trustee by this Aet.

(2) An application for such an approval maybe—

p ymay assign right tosue under this Act.

(a) made by the bankruptcy trustee or theperson to whom it is proposed toassign the right to sue; and

(b) opposed by a person who is adefendant to the bankruptcy trustee'saction, if already begun, or a proposed

defendant.

68. (1) If a member of a business partnership isadjudged bankrupt, the Court may authorise thebankruptcy trustee to bring proceedings in the names ofthe bankruptcy trustee and the bankrupt's partner. ,

(2) The bankruptcy trustee shall serve notice ofthe application on the partner for authority to bring theproceedings, and the partner may oppose the application.

(3) The partner may apply to the Court for adirection that—

(a) the partner is to be paid the partner'sproper share of the proceeds of theproceedings; or

(b) the partner is to be indemnified by thebankruptcy trustee against any costsincurred in the proceedings on thecondition that the partner does not

Proceedings bybankruptcy trusteewhen bankrupt ispartner in businesspartnership.


claim any benefit from them.

(4) Any purported release by the partner of thedebt or dem and to which the p roceedings relate is void.

Discharge ortransfer of

69. (1) If a person is apprenticed or is an articled



transfer ofindenture ofapprenticeship orarticles ofagreement onbankruptcy of

employer.

clerk to an employer who is adjudged bankrupt, either ofthem may give notice to the bankruptcy trustee (or theOfficial Receiver if there is no bankruptcy trustee)requesting that the indenture of apprenticeship or articles

of agreement be d ischarged.(2 ) On receiving a notice under subsection (1),

the bankruptcy trustee (or Official Receiver) shalldischarge the indenture of apprenticeship or articles ofagreement, but only if satisfied that it would be in theinterests of the ap prentice or clerk to do so.

(3 ) If money has been paid to the bankrupt by oron behalf of the apprentice or clerk as a fee, thebankruptcy trustee may, on the application of theapprentice or clerk, or of the agent of the apprentice orclerk, pay from the bankrupt's estate such amount as thetrustee considers reasonable to or for the use of theapprentice or clerk,

(4 ) In deciding whether to make a payment

under subsection (3), the bankruptcy trustee shall take intoconsideration—

(a) the amount paid by or on behalf of theapprentice or clerk being had to theamo unt paid by him or on his behalf;

(b ) the time during which the apprenticeor clerk served with the bankruptunder the inden ture or articles beforethe comm encem ent of the bankruptcy,and


(c ) the other circumstances of the case.

(5 ) The ban kruptcy trustee (of the OfficialReceiver, if there is no bankruptcy trustee) may, on theapplication of any ap prentice or articled clerk to thebankru pt, or an agent of the appren tice or articled clerk,instead of acting u nder sub section (2), transfer the



indenture of app renticeship or articles of ag reement tosome oth er person. This sub section is subject to section12 of the Industrial Training Act.

(6 ) Any person dissatisfied w ith a decision ofthe bankruptcy trustee under subsection (3) may app ly tothe Court for an order qu ashing or varying the decision.

(7 ) On the hearing of an application made undersubsection (6), the Court may m ake the order sought bythe applicant or such other order as it considersappropriate.

70. (1) A bankruptcy trustee may apply to the Courtfor directions on any question concerning the operation ofthis Act.

(2 ) A bankruptcy trustee who acts under adirection of the Court discharges the ba nkruptcy trustee'sduty in relation to the m atter for which a d irection w assought, and it does not m atter that subsequ ently thedirection is invalidated, overruled, or set aside or becom esineffective.

(3 ) How ever, the bankruptcy trustee is notprotected by subsection (2) it in obtaining o r follow ingthe Court's direction, the bankrup tcy trustee was g uiltyof—

(a ) fraud: or

(b ) deliberate concealment ormisrepresentation.

Bankruptcy trusteemay ap ply fordirections by theCourt.

4768 he Insolvency Bill. 20/2

Application to theCourt to reverse ormodify bankruptcytrustee s decision.

71. (1) A person (including the bankrupt or acreditor) whose interests, monetary or otherwise, aredetrimentally affected by an act or decision to which thissection applies may ap ply to the Court to reverse ormo dify the act or decision.

(2) This section applies to—



( ) pp

(a) an ac t or decision of the bankruptcytrustee; or

(b) a decision of the Court in carrying outan exam ination under section 169(bankruptcy trustee may sum mo nbankrupt and others to be exam ined).

(3) The application must be made—

(a ) within twenty-one days of the act ordecision; or

(b ) within such extended period as theCourt allows.

(4) On the hearing on an application made undersubsection (1), the Court shall—

(a) confirm the bankruptcy trustee's actor decision (with or without suchmo difications as it con sidersappropriate); or

(b ) if it is of the opinion that the act ordecision was unfair or unreasonable,quash it.

Bankruptcy trustee

to keep properaccounting records.

72. (1) A bankruptcy trustee shall—

(a) keep proper accounting records foreach bankruptcy in the form andman ner prescribed by the insolvency

The Insolvency Bill, 2012 769,

regulations; and

(b) if required by the Court to do so—verify those records by statutory

declaration.(2) A creditor or other person who has an

interest in a particular bankruptcy is entitled to inspect theb k i d l i h



bankruptcy trustee's accounting records relating to theparticular bankruptcy.

73. (1) The bankruptcy trustee shall prepare a finalstatement of receipts and payments that complies withsubsection (2)-

(a ) as soon as practicable after thedistribution of the final dividend hasbeen determined; or

(b ) when the whole of the bankrupt'sproperty has been realised, if there areinsufficient assets to pay all the proofsof debt.

(2) A final statement of receipts and paymentscomplies with this subsection if it—

(a ) shows indetail the receipts and

payments in respect of the bankrupt'sestate; and

(b ) can be inspected without fee by anycreditor or other person who has aninterest in it.

(3) The bankruptcy trustee shall publish thefinal statement of receipts and payments in the prescribedform, and advertise in the prescribed manner that it hasbeen published.

Bankruptcytrustee s finalstatement ofreceipts andpayments.


Audit ofbankruptcytrustee s accounts.

74. (1) If, in relation to a bankruptcy, the OfficialReceiver is not the bankruptcy trustee, the OfficialReceiver may from time to time audit—

(a ) the bankruptcy trustee's accountingrecords for any particular bankruptcy;

(b ) any statement of accounts andstatement of financial position



Bankruptcy trusteemay return ordestroy accountingrecords.

statement of financial positionprepared by the bankruptcy trusteeunder section 73 (bankruptcy trustee'sfinal statement of receipts and

paym ents); and(c) the account (i f any) mainta ined by the

bankruptcy trustee for the purposes ofthis Act.

(2) If, in relation to a bankruptcy, the OfficialReceiver is the ban kruptcy trustee, the Auditor-Generalmay from time to time audit the records, statements and

account referred to in subsection (1)(a) to (b).

75. After the end of twelve months from thedischarge of a bankrupt, the bankruptcy trustee maydispose of the accounting records deposited with thebankruptcy trustee for the purposes of the bankruptcy

by—(a ) delivering them to the bankrupt or the

bankrupt's personal representative, ifrequested; or

(b ) destroying or otherwise disposing ofthem.

Removal of trustee; 6. (1) Subject to subsections (2) to (7), avacation of office. bankruptcy trustee appointed in respect of a bankrupt's

The insolvency Bill 2012 771

estate can be removed from office only by—

(a ) an order of the Court; or(b ) a creditor's m eeting con vened

specially for that purpose inaccordance with the insolvency



yregulations.

(2) If the Official Receiver is bankrup tcytrustee, or a bankrup tcy trusteeis appo inted by the Official

Receiver or the Cabinet S ecretary, or by the Court(otherwise than under section 62), a creditors meeting m aybe convened for the purpose of replacing the bankruptcytrustee only if—

(a ) the Official Receiver or that trusteeconsiders it appropriate to do so;

(b ) the Court so directs; or

(c ) the m eeting is requested by one of thebankrupt's creditors with theconcurrence of not less than one-quarter, in value, of the creditors(including the creditor m aking therequest).

(3) A bankruptcy trustee appointed by theCabinet Secretary may be removed only in accordancewith a decision of the Cabinet Secretary.

(4) A bankruptcy trustee who is not also theOfficial Receiver vacates office on ceasing to beauthorised as an insolvency practitioner.

(5) A bankruptcy trustee who is not also theOfficial Receiver may resign of by giving notice of theresignation to the Court.

(6) A bankruptcy trustee vacates office ongiving notice to the Court that a final meeting has beenheld inaccordance with section 252 (procedure at meeting


of creditors) and of the decision (if any) of that m eeting.

(7) A bankruptcy trustee also vacates office ifthe relevant bankruptcy order is ann ulled.

When bankruptcy 77 (1) If the Official Receiver has ceased to be the



When bankruptcytrustee and OfficialReceiver releasedfrom theirobligations.

77. (1) If the Official Receiver has ceased to be thebankruptcy trustee in respect of a bankrupt's estate and aperson is appointed in the Official Receiver's place, theOfficial Receiver is released w ith effect from thewhichever of the following is approp riate:

(a) i f the person is appointed by a generalmeeting of the bankrupt's creditors orby the Cabinet Secretary—the time atwhich the Official Receiver givesnotice to the Court that another personhas been appo inted as a replacement;

(b) i f the person is appointed by theCourt— such time as the Court maydetermine.

(2 ) If the Official Receiver, while acting asbankruptcy trustee, gives notice to the Cabinet Secretarythat the administration of the bankrupt's estate is forpractical purposes complete, the Official Receiver'srelease takes effect from'such time as the CabinetSecretary determines in writing.

(3 ) A person other than the Official Receiverwho has ceased to be a bankruptcy trustee is released witheffect from the following times:

(a) in the case of a person who has been

removed from office by a generalmeeting of the bankrupt's creditorsthat has not resolved against theperson's release or who has died—thetime at which a notice is given to theCourt inaccordance with the

The Insolvencv B ill. 2012

insolvency regulations that the personhas ceased to hold o ffice;

(b) in the case of a person who has beenremoved from office-

(i) by a general meeting of thebankrupt's creditors that has

l d i h b k '

4773



resolved against the bankrupt'srelease;

(ii) by the Court; or

(iii) by the Cabinet Secretary,

such time as the Cabinet Secretarymay, on an application by that person,determine;

(c) in the case of a person who hasvacated office under section 76(4)—

such time as the Cab inet Secretarymay. on an application by that person.determine;

(d) in the case of a person who hasresigned—such time as m ay bedetermined in accordance with theinsolvency regulations;

(e) in the case of a person who hasvacated office in accordance withsection 76(6)-

(i) if the final meeting referred to inthat subsection has resolvedagainst that person's release—such time as the C abinetSecretary may. on an ap plicationby that person.- determine: and

(ii) i that meeting has not soresolved—the time at which the


person vacated office.

(4 ) If a bankruptcy order is annulled, the personwho is the bankruptcy trustee at the time of the annulmentis released with effect from such time as the Court m aydetermine.

(5 ) On being released under this section, theOffi i l R i b k t t t i ith ff t



Official Receiver or a bankruptcy trustee is, w ith effectfrom the time specified in accordance w ith this section,discharged from all liability both in respect of acts o romissions occurring in the course of , or in relation to,administering the estate of the bankrupt concerned.

(6 ) How ever, nothing in this section preventsthe Court from exercising its powers under section 76(liability of bankruptcy trustee for m isapplication ofmoney, etc.) in relation to a person w ho has been releasedunder this section,

Vacancy in officeof bankruptcytrustee.

78 . (1) This section app lies to a v acancy in theoffice of bankruptcy trustee that has arisen because—

(a ) the appointment of a person asbankruptcy trustee has failed to takeeffect; or

(b ) when such an appointment has takeneffect, the person appointed has died,resigned or otherwise ceased to holdthe office.

(2 ) When this section applies to a vacancy, theOfficial Receiver holds off ice as bankruptcy trustee untilthe vacancy is filled.

(3 ) The Official Receiver may at any timeconvene a creditors' meeting for the purpose of fillingsuch a vacancy.

(4) If the O fficial Receiver has not convened


and does not propose to convene, a creditors' meeting forthe purpose of f illing such a vacancy, any creditor of the

bankrupt may request the Off icial Receiver to convenesuch a meeting.

(5 ) If such a request appears to the OfficialReceiver to be made w ith the concurrence of not less than



one-quarter in value of the bankrupt's creditors (includingthe creditor making the request), the Official Receivershall convene the requested meeting.

(6 ) A reference in this section to a vacancyincludes a case in w hich it is necessary, in relation toparticular property that is or may be included in abankrupt's estate, to revive the trusteeship of the estateafter the holding of a final meeting convened undersection 252 (final meeting of cred itors) or after theOfficial Receiver has given notice under section 7 7(2).

79. (1) If, in relation to the ban kruptcy trustee inrespect of a bankrupt's estate, a person (including thebankrupt or a creditor of the bankrupt) is dissatisfied withany act, omission to act or decision of that trustee, theperson may apply to the Court for an order undersubsection (2).

(2) On the hearing of such an app lication, theCourt may—

(a ) confirm, reverse or modify the act,omission or decision concerned; or

(b ) give the'bankruptcy trustee directions;Or

(c) make such o ther order as it considersappropriate.

(3) The Court m ay, on the app lication of abankruptcy trustee, give directions in respect of thebankrupt's estate in relation to any particular matter

General control obankruptcy trusteby the Court.


arising under the bankruptcy.

Liability ofbankruptcy trusteefor misapplicationof money, etc.

80. (1) Any of the following persons make anapplication to the Court for an order und er this sectionrelating to a bankruptcy trustee's administration of abankrupt's estate



(a ) the Official Receiver;

(b ) the Attorney Gen eral;

(c ) a c redito r of the bankrupt;(d ) the bankrupt (whether or n ot there is,

or is likely to be, a surplus available atthe end of the bankruptcy).

(2 ) Leaye of the Court is required for themaking o f such an application if it is to be made b y thebankrupt or if it is to be m ade after the bankruptcy trusteehas been released in accordance with section 77 (whenbankruptcy trustee and O fficial Receiver released fromtheir obligations).

(3 ) If on hearing an application made undersubsection (1), the Court is satisfied that the bankruptcytrustee in respect of a bankrupt's estate has misapplied orretained, or become accountable for money or otherproperty com prising the estate., the Court shall m ake eitheror both of the following orders:

(a) an order d irec ting the bankruptcytrustee, for the benefit of thebankrupt's estate, to repay, restore oraccount for the relevant money orother prop erty, together w ith interestat such rate as the C ourt considersappropriate;

(b) an order d irec ting the bankruptcytrustee to be disquali lied from acting


as such for such period as may bespecified in the order.

(4) If, on hearing an application made undersubsection (1), the Court is,satisfied that the bankrupt'sestate has sustained a loss as a result of misfeasance or abreach of fiduciary or other duty by the bankruptcy trusteein performing that trustee's functions the Court shall



in performing that trustee s functions, the Court shallmake either or both of the following orders:

(a ) an order directing the bankruptcy

trustee to pay such amount ascompensation in respect of themisfeasance or breach of fiduciary orother duty as the Court considers fairand reasonable;

(b ) an order directing the bankruptcytrustee to be disqualified from acting

as such for such period as may bespecified in the order.

(5) If—

(a ) the bankruptcy trustee has seized ordisposed of property that is notcomprised in the bankrupt's estate;and

(b ) at the time of the seizure or disposal,the bankruptcy trustee reasonablybelieves that that trustee is entitled(whether under an order of the Courtor otherwise ) to seize or dispose ofthe prop erty,

that trustee is not liable to anyone for any loss or damageresulting from the seizure or disposal, except in so far asthat loss or damage is caused by the negligence of thattrustee.

(6) In such a case the bankruptcy trustee has alien on the property, or the proceeds of its sale, for such of


the expenses of the bankruptcy as were incurred inconnection w ith the seizure or disposal.

(7) The power of the Court to make an orderunder this sect ion does not affect a liability of abankruptcy trustee that may arise apart from this section.



Division 8 reditors meetings and creditors committee

Kinds of creditors'meetings.

Subsequent

meetings ofcreditors.

81. There are two kinds of creditors' meetings:

(a ) the first creditors' meeting; and

(b ) subsequent creditors' meetings.

82. (1) The bankruptcy trustee may at any timeconvene a meeting of creditors after the first creditors'meeting.

(2) The bankruptcy trustee shall convene such ameeting if—

(a ) requested to do so by a creditor of thebankrupt; and

(b ) the request is made with theconcurrence of not less than one-quarter in num ber and value of thecreditors who have p roved their debts.

(3) The bankruptcy trustee shall convene themeeting by giving notice of the time, date and place of themeeting to—

(a) the bankrupt; and

(b ) each creditor named in the bankrupt'sstatement of affairs; and

(c ) any other creditors known to the

The Insolvency Bill 2012 7 7 9

bankruptcy trustee.

(4 ) The bankruptcy trustee shall advertise thetime, date and place of the meeting in the manner

prescribed by the insolvency regulations for the purpose ofthis section.

(5 ) Nothing in this section limits the general effect ofsection 63(5) or Part 3 of the First Schedule.



83. A meeting of creditors convened by notice tocreditors, and a resolution passed at the m eeting, is valideven if some creditors may not have received the notice,unless the Court orders otherwise.

84. (1) The chairperson of a & editors' meeting isthe bankruptcy trustee or a person appointed by thebankruptcy trustee to be the chairperson.

(2 ) How ever, if neither the bankrup tcy trusteenor the person (if any) appointed by the bankruptcy trusteeto be the cha irperson attends the meeting, the creditor orcreditors may appoint one of them to act as chairperson forthe purpose of the meeting, but only if that person isentitled to vote at the meeting.

(3 ) A person appointed by the bankruptcytrustee or elected by the creditors to act as chairpersonmay adm inister any oath that the bankruptcy trustee couldhave administered if the bankruptcy trustee had attendedthe meeting.

Meeting andr e s o l u t io n n o td e f e c t i v e f o r l a c ko f n o t i c e .

Appointment ofc h a i r p e r s o n t oc o n d u c t c r e d i t o r s 'm e e t i n g s .

85. The chairperson of a creditors' meeting mayadjourn the meeting from time to time and place to place.

Power ofc h a i r p e r s o n t oa d j o u r n c r e d i t o r s 'm e e t i n g .


Bankruptcy trusteeto report tocreditors' meeting.

86. If the bankruptcy trustee attends a creditors'meeting or an adjournm ent of the meeting, the bankruptcytrustee shall-

(a ) report on the administration of thebankrupt's estate;

(b ) give any creditor any furtherinformation that the creditor mayproperly require; and



(c) on being reasonably required to do so,produce for the meeting (or its

adjournment) all documen ts in thebankruptcy trustee's possession thatrelate to the bankrupt's property.

Who can attendcreditors' meeting.

87. (1) A person may attend a creditors' meeting—

(a ) by being p hysically present at thetime, date pnd place app ointed for themeeting; or

(b ) if the bankruptcy trustee makes itavailable—by means of an audio oraudio-visual link, so that all thoseparticipating in the meeting can hearand be heard b y each other.

(2) A creditor may also attend—

(a ) by voting by p ostal or electronic voteunder section 94 (what votes can becounted for passing of resolutions atcreditors' meeting); or

(b ) by proxy on any resolution to be put

to the meeting.




Minutes and recordof creditors'meeting.

90. (1) The bankruptcy trustee shall ensure thatminutes are kept of each creditors' meeting.

(2) The minutes are invalid unless signed by the

bankruptcy trustee or the chairperson of the m eeting.(3) The bankruptcy trustee may record the

meeting, but only with the consent of each personattending the m eeting.



Number of personsrequired forcreditors' meetingto be valid.

91. (1) A creditors' meeting is not valid unless at

least the following persons attend:(a ) the bankruptcy trus tee or a per son

who represents the bankruptcy trustee;

(b) a creditor or a person who representsa creditor.

(2) The meeting lapses if those persons do notattend, in which case the bankruptcy trustee may conveneanother creditors' meeting.

Who can representcreditors andbankrupt atcreditors' meeting.

92. (1) Any of the following persons may representa creditor at a creditors' meeting:

(a ) an advocate;

(b) a cer tif ied public accountant;(c ) a person who keeps the creditor's or

bankrupt's accounting records;

(d ) in the case of a creditor—a personwho is the creditor's authorised agentunder a pow er of attorney:

(e) a person who sa ti sf ies the bankruptcytrustee that the person represents thecreditor or bankrupt:


(f) in the case of a partnership—apartner.

(2) If the bankrupt attends a creditors' meeting,any of the following persons may represent the bankrupt:

(a ) an advocate;

(b ) a certified public accountant;



(c ) a person who keeps the creditor's orbankrupt's accounting records;

(d ) a person who satisfies the bankruptcytrustee that the person represents thecreditor or bankrupt;

(e ) in the case of a partnership—apartner.

(3) In addition to the persons listed in

subsection (1), a creditor may be represented—(a ) in the case of the State—by any

officer of the appropriate governmentdepartmen t or agency;

(b ) in the case of a public body—by anofficer of that body;

(c ) in the case of a company or otherbody corporate--by a director, or itschief executive or secretary or by aperson authorised in writing by one ofthose persons.

93. (1) At a creditors' meeting-

, (a) an ordinary resolution is passed if amajority in number and value of thecreditors (or their proxies) who attendand who vote on the resolution vote infavour of it; and

Passing of

resolutions atcreditorsmeetings.


(b) a special resolution is passed if three-quarters in num ber and value of thecreditors (or their proxies) who attendand who vote on the resolution vote infavour of it.

(2) For the purposes only of deciding whetherthe requisite majority by value has voted in favour of aresolution, the following provisions app ly:



What votes can becounted for passingof resolutions atcreditors' meeting.

, g p pp y

(a ) the bankruptcy trustee may admit orreject proofs of deb t;

(b ) the chairperson of the meeting mayadjourn the meeting in order to admitor reject proofs of debt;

(c ) a person whose debt has beenadm itted is a creditor.

(3) If a bankruptcy trustee or creditor allegesthat a resolution of the creditors-

(a ) conflicts with this or any other Act orany rule of law; or

(b ) is unfair

the bankruptcy trustee or creditor may apply to the Courtfor an o rder under subsection (4).

(4) If, on the hearing of an application madeunder subsection (3), the Court finds that the allegation issubstantiated, it may make such order, and give suchdirections, as it considers appropriate to address theconflict or unfairness.

(5) This section is subject to section 310.

94. (1) A creditor who is entitled to vote at acreditors' meeting may vote on a resolution to be put tothe m eetin•--


(a) by postal vote; or

(b ) by electronic vote, :1' the voting pa perfor the resolution allows it, inaccordance with the procedurespecified in the voting paper.

(2 ) A postal or electronic vote can be countedonly if it reaches the bankruptcy trustee at least seventy-



only if it reaches the bankruptcy trustee at least seventytwo hours before the meeting begins.

(3 ) A voting paper for each resolution to be putto a creditors' meeting must accompany the notice of themeeting, together with instructions for returning the votingpaper or electronic vote (if allowed by the voting paperunder subsection (1)(b)) to the bankruptcy trustee at leasttwo working days before the meeting begins.

Who m ay vote atcreditors meeting.

95. Creditors of the bankrupt who are entitled to• vote, or their representatives, may vote at a creditors'

meeting, but this rule is subject to sections 96 to 98.

96. A debt that is secured only entitles the creditor tovote at a creditors' meeting if the creditor has—

(a ) sur rendered the cha rge:

(b ) valued the charge; or

(c ) rea lised the cha rge.

When securedcreditor may voteat creditorsmeeting.

When creditor

under ill ofexchange orpromissory notemay vote atcreditors meeting.

97. (1) A debt on, or secured by, a current bill ofexchange or promissory note entitles the creditor to voteonly if the creditor is willing to take the following steps:

(a) to treat a qualifying liability (which isdefined in subsection (2)) as a chargein the creditor's hands;


(b) to estimate the value of the charge;

(c ) to deduct the value of the charge from

the creditor's claim for the purposesof voting (but not for the purposes ofdistribution under this Part);

(d ) to show the bill or note to thebankruptcy trustee when thebankruptcy trustee requires it



bankruptcy trustee requires it.

(2) In this section, "qualifying liability" means

the liability to the creditor on the bill or note of everyperson who—

(a) is liable on the b il l or noteantecedently to the debtor; and

(b ) is not a bankrupt.

Person disqualifiedfrom voting atcreditor's meetingthroughpreferential effect.

98. (1) A person is not entitled to vote in favour of aresolution that would, if passed, directly or indirectlyenable that person or any of the following persons toreceive remuneration from the bankrupt's estate except asa creditor sharing rateably with the other creditors. Thosepersons are—

(a) that person's business partner,employer or employee;

(b) a creditor that that person represents;and

(c ) a business partner, employer, oremployee of a creditor whom thatperson represents.

(2) A vote cast in contravention (1) is invalid.

Entitlement ofpartner's creditor

99. T h e b a n k r u p t cyof a p a r tn e rof a firm who isindebted to a creditor jointly with one or more of the other


partners entitles the creditor to prove the debt for theto prove debt at

purpose of voting at any creditors meeting, and to vote. creditors' meeting.

100. (1) A creditors' meeting may pass an ordinaryresolution—

(a ) appointing an expert to assist thebankruptcy trustee in the

Creditors mayappoint expert orcomm ittee to assistbankruptcy trustee.



administration of the bankrupt'sestate; and

(b ) providing for the expert'sremuneration out of the estate.

(2) A creditors' meeting may, by ordinaryresolution, appoint a committee of persons to assist thebankruptcy trustee in the administration of the bankrupt'sestate, but if it does so, the members of such a committeeare entitled to receive remuneration from the bankrupt'sestate in their capacity as members of the committee onlyif it has been approved by an order of the Court.

101. A creditor, or an advocate or a certified publicaccountant who is acting for the creditor, who has lodgeda creditor's claim is entitled at any reasonable time toinspect or take copies of—

(a ) the bankrupt's accounting records;

(b ) the bankrupt's answers to questionsunder section 88 (bankrupt may berequired to attend creditors' meetingand be questioned);

(c ) the bankrupt's statement of affairs;(d ) all proofs of debt; or

(e ) the minutes of a creditors' meeting.

Creditors' right- toinspect rine iments.


Committee ofcreditors m ay beestablished.

102. (1) A general meeting of the creditors of abankrupt may establish a creditors' committee to performthe functions conferred on it by or under this Part.

(2) A general meeting of the creditors of abankrupt may not establish such a committee, or imposefunctions on such a committee, while the Official Receiveris the bankruptcy trustee in respect of the bankrupt'sestate, except in relation to appointing a person to bebankruptcy trustee instead of the Official Receiver.



Exercise byCabinet Secretaryof functions ofcreditor'scommittee.

103. (1) A creditors' committee may not perform itsfunctions if at any time the Official Receiver is bankruptcytrustee in respect of the bankrupt's estate.

(2) If, in the case of a bankruptcy, no creditors'committee exists and the bankruptcy trustee in respect ofthe bankrupt's estate is a person other than the OfficialReceiver, the functions of the creditors committee are tobe performed by the Cabinet Secretary, except in so far asthe insolvency regulations otherwise provide.

Division 9—Bankrupt s property after bankruptcy

Status of propertyacquired duringbankruptcy.

104. (1) Until the bankrupt is discharged—

(a ) all property (whether in or outsideKenya) that the bankrupt acquires orthat passes to the bankrupt vests in thebankruptcy trustee without that trusteehaving to intervene or take any otherstep in relation to the property, andany rights of the bankrupt in theproperty are extinguished; and

(b ) the powers that the bankrupt could


have exercised in, over, or in respectof that property for the bankrupt'sown ben efit vest in the bankruptcy

trustee.(2 ) This section is subject to section 106

(property held in trust by bankrupt) and section 124(bankruptcy trustee canno t claim interest in land ifbankrupt remains in possession until discharge).

(3 ) This section does not apply to prop erty that



(3 ) This section does not apply to prop erty thatis vested in the bankrupt under an order made under

section 121(3) (position of person w ho suffers loss asresult of disclaimer).

105. If the bankruptcy trustee is replaced, the prop ertyProperty vests in

and p owers vested in the former ban kruptcy trustee underreplacement

this Act vest in the rep lacement bankruptcy trustee.ankruptcy trustee.

106. Property held by the bankrupt in trust for anotherProperty held in

person vests in the bankruptcy trustee, who shall assumetrust by bankrupt.

control of the pro perty and deal with it for the bene fit ofthe bene ficiaries of the trust.

107. (1) If a ban kruptcy trustee con siders it necessaryto do so, the bankruptcy trustee may apply to the Court foran order under subsec tion (2).

(2 ) On the hearing of an application made undersubsection (1), the Court may o rder that any mon ey due tothe bankrupt, or any mon ey to become due or payable to

the bankrupt, is assigned or charged to, or in favour of, thebankruptcy trustee.

(3 ) The assignme nt or charge is a discharge tothe person wh o pays the bankruptcy trustee.

Court may ordermoney due tobankrupt to beassigned tobankruptcy trustee.




execution or attachment as if—

(a ) the payme nt was the proceeds of theexecution or attachment; and

(b ) the execution or attachm ent wascompleted when the payment w asmade.

(4) The right of a creditor under this section toretain the benefit of an execution or a ttachment is subject



to Division 19 (irregular transactions involving bankrupt).

110. (1) This section app lies if a judicial enforcemenofficer who has taken the p roperty of a debtor in executioris served with notice of the debtor's bankruptcy—

(a ) before the prop erty is sold; or

(b ) before the execution is completed bythe receipt or recovery of the fullamount de rived from the execution.

(2 ) If required to do so b y the bankruptcytrustee, the judicial enforcement officer shall deliver to thebankruptcy trustee all money and goods seized or receivedin satisfaction or part satisfaction of the execution.

(3 ) The costs of the execution are a first chargeon the m oney or goods delivered to the bankruptcy trustee,who m ay sell all or any of the goods to satisfy the charge.

Effect of notice tojudicialenforcementofficer ofbankruptcy.

111. (1) This section app lies if, under execution of ajudgment for an am ount exceeding ten thousand shillings,the judicial enforcement officer—

(a ) sells property of the deb tor; or

(b ) is paid mo ney in order to avoid a sale.

(2) The judicial enforcem ent officer is entitled

Judicialenforcementofficer to retainproceeds ofexecution forfourteen days aftersale.


to-

(a ) deduct the costs of the execution fromthe proceeds of sale or the mo ney

paid; and(b ) retain the balance for the requisite

period, to be applied in accordancewith subsection (3) or (4).

(3 ) If the judicial enforcement officer is servedwith notice within the requisite period that a debtor's



with notice within the requisite period that a debtor sapplication has been m ade, the judicial enforcementofficer shall pay the balance to the b ankruptcy trustee,who is e ntitled to retain it as against the executioncreditor.

(4) If the judicial enforcement officer is servedwith notice within the requisite period that a creditor'sapplication has been made in respect of a debtor--

(a ) the judicial enforcement officer shallretain the balance until the app lication(and any other app lication of whichnotice is served on the judicialenforcement officer pending disposalof the first application) has beendisposed of; and

(b ) the judicial enforcement officershall-

(i) if a bankruptcy order is mad e inrespect of the debtor— pay theWan ce to the bankruptcytrustee; or

(ii) if such an order is not made—

pay the balance to the executioncreditor, who is entitled to retainit as against the bankruptcytrustee (subject to section 11 3).


(5) If the judicial enforcement officer is notserved with notice within the requisite period that abankruptcy application has been m ade in respect of thedebtor, the judicial enforcement officer shall pay thebalance to the execution creditor, who is entitled to retainit as against the bankruptcy trustee.

(6) The requisite period for the purpo se of thissection is fourteen days from the date of the sale orpayment to avoid sale.



112. On the sale by the judicial enforcement officer ofa debtor's property on which execution has been levied,the purchaser, if acting in good faith, acquires a good titleto the prop erty as against the bankruptcy trustee.

Purchaser undersale by judicialenforcementofficer acquiresgood title.

113. (1) An execution creditor may ma ke anapplication to the Court for an order setting aside therights of the bankruptcy trustee under section 110 or 1 11.

(2 ) On the hearing of an application made undesubsection (1);the Court may make an order setting asidethose rights in favour of the execution creditor to the

extent and on such terms (if any) as the Court considersappropriate.

(3 ) The Court may not ma ke an order undersubsection (2) unless. satisfied that the bankruptcy trusteehas been served with a copy of the application.

(4) The bankruptcy trustee is entitled to app earas respondent at the hea ring of the application.

Court may setaside rightsconferred onbankruptcy trustee.

114. (1) This section applies to a transaction betweenTransaction inv a ode f f ta i thr and fora person a nd the bankrupt in relation to property that the


bankruptcy. bankrupt has acquired, or that has passed to the b ankrupt,after the bankruptcy has com men ced.

C2) Tne transaction is valid as against the

bankruptcy trustee if—(a) the person concerned deals with the

bankrupt in good faith and for value;and

(b ) the transaction is completed withoutan intervention by the bankruptcy



an intervention by the bankruptcytrustee.

(3) If the person concerned is a bank of whichthe bankrupt is a client, a transaction by that persondealing with the bankrupt for value includes—

(a) the receipt by that person of anymo ney, charge, or negotiableinstrumen t from the bankrupt or by

the bankrupt's order or direction;(b ) a payment by that person to the

bankrupt or by the bankrupt's order ordirection; an d

(c) the del ivery by tha t person of a chargeor negotiable instrument to thebankrupt or by the bankrupt's order or

direction.(4) A payment of money or delivery of property

by a legal personal representative to, or by the direction ofthe bankrupt is a transaction for value.

Executions and

attachments ingood faith.

1 1 5 . If a bankrupt acquires property, or propertypasses to a bankrupt, after the bankruptcy has commenced,an execution or attachment against the property is valid asagainst the bankruptcy trustee if it—

(a) is ma de in good faith;


(b) is made in respect of a debt or liabilityincurred by the bankrupt after thebankruptcy commenced; and

(c) is completed before an intervention bythe bankruptcy trustee.

1 1 6 . For the purposes of section 109 (when executioncreditor may retain execution proceeds) and section 115

When execution orattachmentcompleted for



y(executions and attachments in good faith)—

(a) an execution against goods iscompleted by seizure and sale;

(b) an attachment of a debt is completedby receipt of the debt; and

(c) an execution against land iscompleted by sale or, in the case of anequitable interest, by the appointmentof a receiver.

completed forpurposes ofsections 109 and115.

117. If the banktuptcy trustee'sinterest in property isacquired by or passes to a bankrupt after bankruptcy hascommenced—

(a) the bankruptcy trustee's interest in theproperty ends; and

(b) that interest passes in the manner, andto the extent necessary, to give effectto a transaction, execution, orattachment to which section 114(executions and attachments in goodfaith) or section 115 (executions andattachments in good faith) applies.

Bankruptcytrustee's interest inproperty passes totransferee.


Bankruptcy trusteemay disclaimonerous property.

118. (1) The bankruptcy trustee may disclaim

onerous property, subject to section 121 (bankruptcytrustee m ay be required to elect whether to disclaim).

(2 ) Subsection (1) applies even if thebankruptcy trustee has taken possession of the prop erty,tried to sell it, or otherwise exercised rights of ownershipin relation to it.

(3) Within fourteens after the disclaimer, thebankruptcy trustee shall send a notice of the disclaimer to



bankruptcy trustee shall send a notice of the disclaimer to

every person whose rights are, to the bankruptcy trustee'sknowledge, affected by it.

(4) Property is onerous for the purposes of thissection if it is or com prises—

(a) an un profitable contract;

(b ) property of the bankrupt that isunsalable, or not readily saleable, orthat may give rise to a liability to paymo ney or perform an onerous act; or

(c ) a litigation right that, in the opinion ofthe bankruptcy trustee, has noreasonable prospect of success orcannot reasonably be funded from theassets of the bankrupt's estate.

Effect ofdisclaimer.

119. A disclaimer by the bankruptcy trustee—

(a) terminates, on and from the date ofthe disclaim er, the rights, interests,and liabilities of the bankruptcy

trustee and the bankrupt in relation to


the property disclaimed; and

(b) does not affect the rights, interests, orliabilities of any other person, excep tin s o far as is necessary to release thebankruptcy trustee or the bankruptfrom a liability.

120. (1) A person wh o sustains loss or dam age as a o s i t i o nof personl f di l i b h b k ho suffers loss as



result of disclaimer by the bankruptcy trustee m ay— ho suffers loss as

result of(a ) claim as a creditor in the bankruptcy isclaimer.

for the amount of the loss-or damage,taking account of the effect of anorder made b y the Court underparagraph (b); or

(b ) app ly to the Court for an order that thedisclaimed prop erty be delivered to,or vested in, the person.

(2 ) The bankrupt m ay also apply to the Courtfor an order that the disclaimed p roperty be delivered to;or vested in, the bankrupt.

(3 ) On the hearing of an application made undersubsection (1)(b) or (2), the Court m ay m ake the order

sought if satisfied that it is fair and reason able that theproperty should be delivered to, or vested in, the app licant.

121. The bankruptcy trustee loses the right to disclaimonerous property if—

(a ) a person who se rights would be

'affected by the disclaimer has sent thebankruptcy trustee a notice requiringthe bankruptcy trustee to electwhether to disclaim that prop erty;

(b ) the notice specifies a de adline for the

Bankruptcy trusteemay be required toelect whether todisclaim.


disclaimer that is not less than twenty-one days after the bankruptcy trusteehas received the notice; and

(c) the bankruptcy trustee does notdisclaim that property before thatdeadline.

Liability forrentcharge onbankrupt's land

122. (1) If land disclaimed by the bankruptcy trusteeis subject to a rentcharge, the vesting of that land in an y



bankrupt s landafter disclaimer.

Transmission ofinterest in land.

(No. 3 of 2012)

other person (including the State), or the person'ssuccessors in title, does not make an y of them personallyliable for the rentcharge.

(2) Subsection does not affect the liability of aperson for a rentcharge accruing after the person has takenpossession or control of the land.

123. (1) This section applies to an interest in landthat—

(a ) is owned by the bankrup t;

(b) is subject to a mortgage or a charge;and

(c ) is not disclaimed by the bankruptcytrustee.

(2) The bankruptcy trustee shall—

(a ) arrange for the transmission of theinterest in the land to the bankrup tcytrustee to be registered under the LandRegistration Act, 2012; or

(b ) give motice to the mortgagee or otherperson entitled under the charge thatthe bankruptcy trustee cannot, of doesnot intend to, register transmission of


the interest in the land.

(3) A notice given under subsection (2)(b) is

notice that—(a ) the interest has vested in the

bankruptcy trustee; and

(b ) the mortgagee or holder of the chargeis, on taking possession of, or selling,the interest, liable to account to thebankruptcy trustee as if that trustee



bankruptcy trustee as if that trustee

were the proprietor of the interest.

124. (1) The bankruptcy trustee cannot, after thebankrupt's discharge, claim an interest in land to whichsection 123(1) applies and for which the bankruptcytrustee has not registered a transmission if the bankrupt—

(a ) was in possession of the interest whenthe bankruptcy commenced; and

(b ) remained in possession until dischargefrom bankruptcy.

(2 ) Subsection (1) applies whether or not thebankruptcy trustee gave a notice under section 113(2)(b).

(3 ) However, the bankruptcy trustee may applyto the Court for an order that the bankruptcy trustee isentitled, after discharge, to claim the bankrupt's interest inthe land.

(4 ) In deciding whether or not to make an orderon the hearing of an application made under subsection(3), the Court shall have regard to—

(a ) the good faith of the bankrupt;

(b ) the time that has elapsed since thebankruptcy commenced;

(c ) the value of any improvements made

Bankruptcy trusteecannot claiminterest in land ifbankrupt remainsin possession untildischarge.


by the bankrupt; and

(d) all other relevant matters.

Bankruptcy trusteemay transfer sharesand othersecurities.

125. (1) The bankruptcy trustee may transfer thefollowing property belonging to the bankrupt in the sameway as the bankrupt could have transferred it but for thebankruptcy:

(a ) secur itie s o f a company ;.



(b) secur it ies of the Governmento

Kenya;

(c ) securities issued by a local authority;

(d ) shares in ships;

(e ) any other prop erty transferable in therecords of a company, office or

person.(2 ) A person whose act or consent is necessary

for the transfer of the p roperty shall, on being requested todo so by the bankruptcy trustee, do whatever is necessaryfor the transfer to be com pleted.

(3 ) If the bankruptcy trustee proposes to transfershares of a company, a shareholder- -

(a ) to whom the shares are required to beoffered for sale in accordance with thecompany's constitution; and

(b ) who agrees to purchase them,

shall pay a fair price for the shares, whether or not thatconstitution provides a procedure for fixing the price.

Bankruptcy trusteemay disclaimliability unde r

127. (1) The bankruptcy trustee may disclaim al ia b i l it y u n d e r s h a r e sowned by the bankrupt in a companyby disclaiming them as onerous property in accordance


with section 118 (bankruptcy trustee may disclaimonerous p roperty).

(2) Neither section 120 (which relates to theposition of a person who sustains loss as result ofdisclaimer) nor section 121 (which provides that thebankruptcy trustee may be required to elect whether todisclaim) applies to a disclaimer of liability under shares.

127. The bankruptcy trustee loses the right to disclaim

shares.

Bankruptcy trustee



p y g

liability under shares if—(a ) the company or a person who has an

interest in the shares has sent thebankruptcy trustee a notice requiringthat trustee to elect whether todisclaim liability under the shares;

(b ) the notice specifies a deadline for thedisclaimer that is not less than twenty-one days after the bankruptcy trusteehas received the notice; and

(c ) the bankruptcy trustee does notdisclaim liability under the sharesbefore that dead line.

may be required toelect whether todisclaim liabilityunder shares.

128. (1) After disclaimer, the bankruptcy trusteemay, subject to any other written law and to thecompany's constitution, transfer the relevant shares to anyperson who has an interest in them.

(2) If that person refuses to accept the transfer,or if no person has an interest in them, the bankruptcytrustee may transfer the shares to the bankrupt if thebankrupt consents, and in that case the bankrupt is entitledas against the bankruptcy trustee to retain the shares andthe proceeds if the bankrupt sells them.

Transfer of sharesafter disclaimer.

4 8 0 2 he Insolvency Bill, 2012

(3) If the bankruptcy trustee does not transferthe shares to a person who has an interest in them or to thebankrupt, the directors of the company may—

(a ) sell the shares; or(b ) with the Court's approval and

whatever any other written law mayprovide—cancel the shares if theybelieve it is in the company's bestinterests to do so.

(4) The bankruptcy trustee is a director of the



(4) The bankruptcy trustee is a director of thecompany for the purposes of transferring, selling, orcancelling the shares under this section if—

(a) immediately before the bankruptcycommenced, the bankrupt was adirector of the company; and

(b ) the number of directors is fewer than

the minimum number of directorsrequired by the Companies Act, 2012or the company's constitution as aresult of the bankrupt'sdisqualification as a director.

Company mayprove for unpaidcalls.

129.(1) This section applies if the bankruptcy trustee

has disclaimed liability under shares and the company isnot in liquidation.

(2) The company may prove in the bankruptcyfor—

(a) the amount of unpaid calls madebefore the bankruptcy commenced in

respect of the bankrupt's shares; and(b ) the value of calls to be made in

respect of the bankrupt's shareswithin one year after the bankruptcy


commenced.

(3) If the bankruptcy trustee and the companycannot agree, the Court, may on the application of either

of them, make an order determining the value of the callsto be made

Division 11—Goods held by bankrupt under credit purchasetransaction



130. In this Division—

cash price , in relation to a sale of goods,means—

Interpretation:Division 11.

(a) the lowest price at which a personcould have bought those goods from

the creditor on the basis of paymentin full at the time the sale was made;- or

(b ) if there is no such price—the fairmarket value of those goods at thetime the sale was made

creditor , irprelation to a credit purch asetransaction, means—

(a ) the person disposing of the goodsunder the transaction; and

(b ) if the rights of that person aretransferred by assignment or byoperation of law, means the person

for the time being entitled to thoserights:

ebtor", in relation to a credit purchasetransaction, means-


(a ) the person to whom good s aredisposed of under the transaction; and

(b) i f the rights of that person are

transferred by assignment or byoperation of law, means the persOnfor the time being entitled to thoserights:

hirer , in relation to a credit purchasetransaction, means—



(a ) the person who is entitled to the useof the goods under the transaction;and

(b ) if the rights of that person aretransferred by assignment byoperation of law, means the personfor the time being entitled to those

rights.

Restrictions oncreditor dealingwith goods.

1 3 1 . (1) If a bankrupt acquired coons under a creditpurchase transaction before the bankruptcy commencedand the creditor either—

(a ) took possession of the goods within

the twenty-one days immediatelybefore the time when the bankruptcycommenced, and after that time stillpossesses them; or

(b ) takes possession of the goods afterthat time,

the creditor may not sell or dispose of the goods or partwith possession of them until the expiry of thirty daysfrom and including the date when the creditor serves apost-possession notice on the bankruptcy trustee.

(2) Subsection (1) doesnot apply if the creditor,


with the consent of the bankruptcy trustee, sells or partswith possession of the goods before the end of the thirty-day period.

(3) A sale or disposal in contravention ofsubsection(1) is void as against the bankruptcy trustee.

132. (1) In the case of goods to which section 131applies, the bankruptcy trustee may—

(a ) within the thirty-day period referred

Bankruptcytrustee's powers inrelation to goodsthat are subject to acredit purchase



to in that section, exercise any rightconferred by any relevant written lawto introduce a buyer for the goods; or

(b ) at any time before the creditor sells oragrees to sell the goods under a powerconferred by any such law or by therelevant credit purchase transaction—

settle the bankrupt's obligations asdebtor in accordance with that law orthat transaction.

(2) This section applies irrespective any otherwritten law to the co ntrary.

transaction.

133. (1) If—(a ) a creditor has taken possession of

consumer goods purchased under acredit purchase transaction, whetherbefore or after the bankruptcy of thedebtor; and

(b ) the bankruptcy trustee has not actedunder section 132 (bankruptcytrustee's powers in relation to goodsthat are subject to a credit purchasetransaction) in relation to the goods.

Creditor inpossession ofgoods may provein bankruptcy ifbankruptcy trusteehas not exercisedpowers.


the creditor may prove in the bankruptcy for the amount(not exceeding that limited by any relevant written law)that the creditor was entitled to recover from the bankruptas debtor.

(2) If a creditor has proved in a bankruptcy inaccordance with under subsection (1)-

(a) the creditor shall submit with thecreditor's claim form the documents(if any) prescribed by the regulationsfor the purpose of this section; and



(b ) the bankruptcy trustee may exercisethe rights conferred on the debtor byany relevant written law that appliesafter the creditor takes possession ofgoods in accordance with that law.

Creditor mayassign goods tobankruptcy trustee.

134. If—

(a) the bankrupt purchased goods under acredit purchase transaction before thetime the bankruptcy commenced; and

(b ) at that time the creditor either-

(i) has not taken possession of thegoods; or

(ii) has taken possession of themand has not sold or disposed ofor parted with possession ofthem.

the creditor may assign the goods to the bankruptcytrustee. and, if the creditor does so, may prove in thebankruptcy for the net balance due to the creditor underthe transaction.


Division 12— Second bankruptcies

135. (1) This section applies to and in respect of abankrupt who, before discharge, is adjudged bankrupt fora second time.

(2) Property that is acquired by, or has. passedto, the bankrupt since the first bankruptcy, includingproperty acquired or that has passed since the secondbankruptcy, vests in the bankruptcy trustee in the secondbankruptcy.

Status of

bankrupt'sproperty on secondbankruptcy.



(3) However, the Court may, if it considers itappropriate to do so, order that all or part of the followingassets or their proceeds vest in the bankruptcy trustee inthe first bankruptcy:

(a ) assets in the second bankruptcy that,in the Court's opinion, were acquiredindependently of the creditors in thesecond bankruptcy;

(b ) assets in the second bankruptcy thatdevolved on the bankrupt.

(4) A surplus in the second bankruptcy is anasset in the estate in the first bankruptcy, and is payable tothe bankruptcy trustee in the first bankruptcy.

(5) This section has effect despite section 104(status of property acquired during bankruptcy).

136. (1) This section applies if the bankruptcy trusteein respect of a bankrupt's estate receives notice that acreditor has lodged an application for another bankruptcy.

(2) The bankruptcy trustee shall hold property inthat trustee's possession that has been acquired by, orpassed to, the bankrupt since the first bankruptcy until the

Effect of notice tobankruptcy trusteeof application forbankruptcy.


application for the other bankruptcy has been dealt with.

(3) The bankruptcy trustee shall transfer theproperty and its proceeds, less any deduction for thebankruptcy trustee's costs and expenses, to the bankruptcytrustee in the other bankruptcy if—

(a ) the creditor's application results inanother bankruptcy; or

(b ) the bankrupt is automaticallyadjudged bankrupt on the bankrupt'sown application.



Division 13 ersons jointly adjudged bankru pt

Separate accountsto be kept for eachbankrupt.

How joint andseparate estates are

to be applied.

137. If two or more persons are adjudged bankruptjointly, the bankruptcy trustee shall keep distinct accounts

in respect of—(a ) the joint estate; and

(b ) the separate estate of each bankrupt.

138. (1) When two or more persons have beenadjudged bankrupt jointly, the bankruptcy trustee shallfirst apply—

(a ) the joint estate to the debts due by thebankrupts jointly; and

(b ) the separate estate of each bankrupt tothe debts of that b ankrupt.

(2) The bankruptcy trustee shall then—

(a) apply any surplus in the joint estate tothe separate estate, of each bankrupt inproportion to the right and interest of


each bankrupt in the joint estate; and

(b) credit any surplus in the separateestate of a bankrupt to the joint estate.

Division 14 uties of bankrupt

139. (1) A bankrupt shall, to the best of thebankrupt's ability, assist in the realisation of the

bankrupt's property and the distribution of the proceeds

General duty ofbankrupt.



bankrupt's property and the distribution of the proceedsamo ng the creditors.

(2) The duty imposed by subsection (1) is inaddition to any other duty imposed on the bankrupt by thisAct or by an y other written law.

140. (1) As soon as practicable after acquisition, thebankrupt shall notify the bankruptcy trustee of anyproperty that—

(a ) was acquired by, or passed to, thebankrupt before discharge; and

(b ) is divisible among the creditors.

(2) A bankrupt who, without reasonable excuse,fails to comply with subsection (1) commits an offenceand on conviction is liable to a fine not exceeding twohundred thousand shillings or to imprisonment for a termnot exceeding six months, or to both.

Bankrupt todisclose propertyacquired beforedischarge.

Bankrupt to deliverproperty tobankruptcy trusteeon demand.

141. (1) On demand by the bankruptcy trustee, thebankrupt shall deliver to the bankruptcy trustee, or to aperson authorised by the bankruptcy trustee to receive it,all of the bankrupt's property that—


(a ) is divisible am ong the creditors;And

(b ) is under the bankrupt's control.

(2) On demand by the bankruptcy trustee, the

bankrupt shall deliver to the bankruptcy trustee, or to aperson authorised by the bankruptcy trustee to receive it,all prOperty that is acquired by, or p asses to, the bankruptbefore the bankrupt's discharge.

(3) A bankrupt shall take all the steps (includingthe steps specified in subsection (4)) in relation to thebankrupt's property, and the distribution of the proceeds to

the creditors that are



the creditors, that are—(a ) required by the b ankruptcy trustee;

(b ) prescribed by the insolvencyregulations;

(c ) directed to be taken by the Court byan order made in reference to thebankruptcy; or

(d ) directed to be done by the Court on anapplication by the bankruptcy trusteeor a creditor.

(4) The steps referred to in subsection (3)include the execution by the bankrupt of powers ofattorney, transfers, and other relevant docum ents.

(5) A bankrupt who, without reasonable excuse,fails to comply with a requirement imposed by or underthis section is guilty of contempt of the Court and is liableto be punished accordingly (in addition to any otherpunishment to which the bankrupt may be subject).

Court may imposecharge onbankrupt'sproperty.

14 2. (1 ) If—

(a) any property consisting of an interestin a dwelling house that is occupied


by the bankrupt or by the bankrupt'sspouse or former spouse is, comprisedin the bankrupt's estate; and

(b) the bankruptcy trustee is, for anyreason, unable for the time being torealise that property,

that trustee may apply to the Court for an order imposing acharge on the property for the benefit of the bankrupt'sestate.

(2) If, on the hearing of an application underthis section theCourt imposesachargeon anyproperty



this section the Court imposes a charge on any property—(a) the benefit of that charge is included

in the bankrupt's estate; and

(b) is enforceable up to the charged valuefrom time to time, for the payment ofany amount that is payable otherwise

than to the bankrupt out of the estateand of interest on that amount at therate prescribed by the insolvencyregulations for the purposes of thissection.

(3)means—

In subsection (2), the charged value

(a) the amount specified in the chargingorder as the value of the bankrupt'sinterest in the property at the date ofthe order; and

(b) interest on that amount from the dateof the charging order at t h e prescribedrate.

(4) In determining the value of an interest forthe purposes of this section, the Court shall disregard anymatter that it is required to disregard by the insolvencyregulations.


Bankrupt to givebankruptcy trustee

(5) In making an order under this section inrespect of property vested in the bankruptcy trustee, theCourt shall provide, in accordance with the insolvencyregulations, for the property—

(a ) to cease to be included in thebankrupt's estate; and

(b ) to vest in the baukn ?pt subject to thecharge (and any p rior charge).

144. (1) As soon as practicable after being adjudged



p gbankruptcy trusteeaccounting recordsand otherdocuments.

( ) p g j gbankrupt, the bankrupt shall—

(a ) deliver to the bankrupts y trusteerelevant documents that are in thebankrupt's possession or control; and

(b ) notify that trustee of relevantdocuments that are in the possessionor control of any other person.

(2) In subsection (1), "relevant documents"means all accounting records and other documents relatingto the bankrupt's estate.

Bankrupt to givebankruptcy trusteeinformationrelating toproperty.

144. A bankrupt shall—(a) as soon as practicable after being

adjudged bankrupt-

(i) give the bankruptcy trustee acomplete and accurate list of thebankrupt's property and o f thebankrupt's creditors and debtors,and up date the lists as necessary;

(ii) give the bankruptcy trustee anyother information relating to thebankrupt's property that that


trustee requires;

attend before the bankruptcy trustee atall reasonable times wheneverrequired by that trustee torso; and

verify any statement by statutorydeclaration when required by thattrustee to do so.

145. (1) Whenever the bankruptcy trustee requires it,the bankrupt shall provide the bankruptcy trustee withBankrupt to givebankruptcy trustee



( ) p y qthe bankrupt shall provide the bankruptcy trustee withdetails of the bankrupt's income and expenditure since thebankruptcy comm enced.

(2) A bankrupt who, without reasonable excuse,fails to comply with a requirement of the bankruptcytrustee under subsection (1) commits an offence and onconviction is liable to a fine not exceeding two hundredthousand shillings or to imprisonment for a term notexceeding twelve months, or to both.

146. (1) Within seven days after any change occursin the bankrupt's=

(a) address;(b ) employment;

(c) nam e; or

(d ) income,

the bankrupt shall notify the bankruptcy trustee o hechange.

(2) A bankrupt who, without reasonable excuse,fails to comply with subsection (1) commits an offenceand on conviction is liable to a fine not exceeding twohundred thousand sh i ll ings or to im pr isonm ent for a. te rm

p yinformationrelating to incom eand exp enditure.

-Bankrupt to notifybankruptcy trusteeof change inpersonalinformation.


not exceeding six months, or to both.

(3) If, after being convicted of an offence undersubsection (2), a bankrupt, without reasonable excuse,

continues to fail to notify the bankruptcy trustee of therelevant change, the bankrupt commits a further offenceon each day during which the failure continues and onconviction is liable to a fine not exceeding twentythousand shillings for each such offence.

Bankrupt to give

bankruptcy trusteefinancial

147. (1) The bankrupt shall give the bankruptcytrustee (or any person employed by the bankruptcy trustee)



financialinformation.

( y p p y y p y )the information and details that are necessary to prepare afinancial statement that shows the financial position of thebankrupt's estate.

(2) If required to do so by the bankruptcytrustee, the bankrupt shall, before the deadline, prepareand deliver to the bankruptcy trustee a full, true, anddetailed financial statement that shows—

(a ) details of the bankrupt's trading andstocktaking; and

(b ) details of the bankrupt's profit andlosses during any period within thethree years immediately preceding the

date on which the bankruptcycommenced.

(3) To enable the bankrupt to prepare thefinancial statement referred to in subsection (2)-

(a ) the bankruptcy trustee shall'give thebankrupt full access to the bankrupt'saccounting records that are in the

bankruptcy trustee's possession; and(b ) if the bankruptcy trustee believes it

necessary to do so—that trustee shallprovide the bankrupt with the

The n s o l v e n c y 8 W 2 0 2 813

assistance of a certified publicaccountant at the expense of thebankrupt's estate.

(4 ) A bankrupt w ho, without reasonable excuse,fails to comply with a requirement of this section commitsan offence and on conv iction is liable to a fine notexceeding tw o hundred thousand shillings or toimprisonment for a term not exceeding six months, or toboth.

(5 ) If, after being convicted of an offence undersubsection (4), a bankrupt, without reasonable excuse,continues to fail to comply w ith the relevant requirement,



p y q ,the bankrupt commits a further offence on each day duringwhich the failure continues and on conviction is liable to afine not exceeding tw enty thousand shillings for each suchoffence.

(6 ) For the purposes of this section, the deadlineis the expiry of twenty-one days after the bankrup tcycommenced or of such extended period as the bankruptcytrustee may allow

Division 15— Restrictions on bankrupt du ring bankruptcy

148. In this Division— Interpretation:Division 15.

"building", in relation to a bankrupt, includes areference to a part of a building in which the bankruptholds a proprietorial interest;

"place" includes building, premises, aircraft, ship,or other means of transporting people or goods;

"relevant property" , in relation to a bankrupt,means—

4.816 he Insolvency Bill, 2012

(a) property of the bankrupt; or(b) a document relating to the bankrupt's

property, conduct, or dealings.

Bankrupt can berequired tocontribute topayment of debts.

149. (1) If required by -the bankruptcy trustee to doso, the bankrupt shall pay an amount or periodic amountsduring the bankruptcy as a contribution towards paymentof the bankrupt's debts.

(2) The bankruptcy trustee may imposeconditions with respect to the payments, includingconditions as the dates on which and the manner in which



they are to be made, and may from time to time amendany such conditions or substitute new conditions forexisting ones.

(3) In deciding whether to require the bankruptto make the payment or payments, the bankruptcy trusteeshall—

(a) have regard to all the circumstances ofthe bankruptcy and the bankrupt'sconduct, earning power,responsibilities, and prospects; and

(b) make reasonable allowance for themaintenance of the bankrupt and the

bankrupt's relatives and dependants.(4) If the bankrupt fails to comply with a

requirement made under subsection (1), or with acondition imposed in respect of such a requirement undersubsection (2), the bankruptcy trustee may make anapplication to the Court for an order under subsection (5).

(5) On the hearing of an application made undersubsection (4), the Court may order the bankrupt to paythe amount or amounts required by the bankruptcy trusteeunder subsection (1), or to comply with any condition


imp osed in respect of the requiremen t under subsection(2).

(6) On the hearing of an application mad e to theCourt by the bankruptcy trustee, the bankrupt, or a •creditor, the Court may—

(a ) amen d, suspend, or cancel thebankrupt's obligations to makepaym ents under this section:

(b ) amen d, suspend or discharge an ordermad e under subsection (5):

(c ) remit any arrears owing by thebankrupt.



p

150. If a bankrupt fails to m ake a p aymen t requiredunder section 149 (bankrupt can be required to contributeto paym ent of debts), the onus is on the bankrupt in any

proceedings arising out of the failure to show that thea failure was not deliberate.

Onus of proof ifbankrupt defaultsin makingpayment.

Prohibit ion ofbankrupt enteringbusiness.

151. (1) An undischarged bankrupt shall not, withoutthe consent of the bankruptcy trustee or the Court (eitherdirectly or indirectly)-

(a ) enter into, carry on, or take part in themana gement or control of anybusiness;

(b ) be em ployed by a relative of thebankrupt or

(c ) be emp loyed by a comp any, trust,

trustee, or incorpo rated body that isowned, m anaged, or controlled by arelative of the bankrupt.

(2) A bankrupt who contravenes subsection (1)


comm its an offence and on conviction is liable to a finenot exceeding five hundred thousand shillings or toimprisonm ent for a term not exceeding two years, or toboth.

Warrant to searchfor.and seizebankrupt'sproperty.

152. (1) The Court may issue a search warrant to thebankruptcy trustee or any other p erson if it reasonablybelieves that any relevant property is concealed in aspecified place.

(2) The warrant m ay authorise the bankruptcy

trustee or other person n amed in the warrant, together withany assistants that may be necessary—



(a ) to enter and search the place;

(b ) to seize and take po ssession o frelevant property;

(c ) if necessary, to use force to ente r theplace (including by breaking opendoors); and

(d ) to open any co ntainer found in theplace, by force if necessa ry.

•

Seizure ofbankrupt'sproperty.

156. (1) If authorised by a warrant issued by the

Court, the bankruptcy trustee or (if not the bankruptcytrustee) the Official Receiver, with such assistants as areconsidered necessary—

(a ) may seize any part of the bankrupt'sproperty that is under the control ofthe bankrupt or of any o ther person;and

(b ) with a view to seizing the bankrupt'sproperty, may-

(i) break open any building or room

The Inso lvenc y Bil l 2012 819

o f th e b a n k r u p t w h e r e t h eb a n k r u p t is b e l ie v e d t o b e ;

( i i) b r e a k o p e n a n y b u i ld i n g , r o o m ,o r r e c e p t a c l e o f t h e b a n k r u p tw h e r e t h e b a n k r u p t 's p r o p e r t y isbelieved to be; and

( i i i ) s e i z e a n d t a k e p o s s e s s i o n o f th eb a n k r u p t ' s p r o p e r t y f o u n d i n t h eb u i l d in g , r o o m , o r re c e p t a c l e .

(2) For the purposes of this section and section1 5 2 (w a r r a n t t o s e a r c h f o r a n s e i z e b a n k r u p t ' s p r o p e r t y ), i f



t h e e x e c u t i o n o f a w a r r a n t t a k e s p la c e w i th o u t t h eb a n k r u p t b e i n g p r e s e n t , t h e p e r s o n e x e c u t in g t h e w a r r a n ts h a l l l e a v e in a p r o m i n e n t p l a c e a t t h e p l a c e s e a r c h e d an o t i c e t h a t —

(a ) s t a te s t h e d a t e a n d t im e w h e n t h e

w a r ra n t w a s e x e c u t e d ; a n d(b ) s t a te s t h e n a m e o f th e p e r s o n w h o

e x e c u t e d i t .

(3) Fo r the purposes of this section and section1 5 2 , th e p e r s o n e x e c u t i n g t h e w a r ra n t s h a l l le a v e w i th t h eb a n k r u p t , o r l e a v e in a p r o m i n e n t p l a c e a t t h e p l a c es e a r c h e d i f t h e b a n k r u p t is n o t p r e s e n t , a li s t o f a n yp r o p e r t y s e iz e d d u r in g t h e c o u r s e o f t h e s e a r c h .

(4) Sub section (3) does n ot apply if it isi m p r a c t i c a l t o l e a v e a l is t o f p r o p e r t y s e i z e d o r i f t h eb a n k r u p t c o n s e n t s t o r e c e iv i n g a l i st s e n t i n a c c o r d a n c ewith subsection (5). •

(5) If sub section (4) applies, the perso n

e x e c u t in g t h e s e a r c h s h a l l le a v e w i th t h e n o t ic e r e f e r re d t oi n s u b s e c t io n (2 ) , o r w i t h t h e b a n k r u p t i f t h e b a n k r u p t i sp r e s e n t , a n o t i c e s t a ti n g t h a t —

(a) relevant property has b een seized int h e c o u r s e o f t h e s e a r c h ; a n d


(b) within seven days after the executionof the warrant—a list of the propertyseized will be delivered or sent to the

bankrupt or left in a prominentposition at the place searched.

(6) If subsection (5) applies, the personexecuting the warrant shall ensure that within seven daysafter the execution of the warrant there is delivered or sentto the bankrupt, or left in a prominent position at the placesearched, a notice listing the property seized and

identifying the place w here the property w as seized.



Bankrupt to vacateland or buildings ifrequired to do so.

154. (1) The bankruptcy trustee may require thebankrupt and relatives of the bankrupt to vacate any landor building that is part of the property vested in thebankruptcy trustee under the b ankruptcy.

(2 ) If the bankruptcy trustee's demand is notcomplied with, the bankruptcy trustee may apply to a courtof competent jurisdiction for an order for possession of theland or building.

(3 ) On the hearing of an application made undersubsection (2), the court may make an order for thepossession of the land or building if it believes that the

bankrupt or relatives of the bankrupt have no justificationfor remaining there.

(4 ) The bankrupt or the bankrupt's relativesconcerned are entitled to appear and be heard asrespondents at the hearing

Bankrupt s right toinspect documents.

155. A bankrupt is entitled at any reasonable time toinspect and to take copies of—

(a ) t h e b a n k r u p t s a c c o u n t in g r e c o rd s ;

(b ) the bankrupt's answers to questions

The Insolvency Bill, 2012 8 2 1 .

put to the bankrupt in the c ourse of anexamination under this Act;

(c ) the bankrup t's statemen t of affairs;

(d ) all proofs of debt;

(e ) the minutes of any creditors' meeting;and

(f) the record of any exam ination of thebankrupt.

Restrictions on156. (1) After the bankruptcy com me nces, the



bankrupt dealingwith prop erty.

( ) p ybankrupt, and any p erson (other than the bankruptcytrustee) who claim s through or under the bankrupt, ceasesto be entitled—

(a ) to recover property that is part of thebankrupt's estate; or

(b ) to give a release or discharge inrelation to that property.

(2) Subsection (1) a pplies subject to sections114 and 115 (transactions entered into in good faith).andwhether or not the bankruptcy trustee has intervened.

Bankruptprohibited fromtaking steps todefeat beneficialinterests of othersin bankrupt'sproperty.

157. (1) After the bankruptcy has comm enced, thebankrupt may not execute a power of app ointment, or anyother power vested in the bankrupt, if the result would beto defeat or destroy any contingent or other estate orinterest in any property to which the bankrupt m ayotherwik be ben eficially entitled at any time before the

bankrupt's discharge.(2) The restriction o n the bankrupt in subsection

(1) applies—

(a) both before and after the bankrupt


obtains a discharge; and(b) subject to sections 114 and 115

(transactions entered into in goodfaith).

Responsibility ofbank to notifybankruptcy trusteeof bankrupt'saccount.

158. (1) As soon as practicable after becoming awareor forming s reasonable suspicion that a customer is anundischarged bankrupt, a bank shall—

(a) notify the bankruptcy trustee of anyaccount that the customer holds withthe bank; and



(b) not pay any money from the account,unless subsection (2) applies.

(2) The bank may pay money out of the accountif—

(a) the bank is authorised by an order ofthe Court or instructed by thebankruptcy trustee to .do so; or

(bj the bank has notified the bankruptcy' trustee of the account and has not,

within one month after thenotification, received any instructions

from the bankruptcy trustee.(3) At the same time as the bank notifies the

bankruptcy trustee under subsection (1)(a), it shall informthe customer that it has notified the bankruptcy trustee inaccordance with subsection (1).

(4) A bank that—

(a) without reasonable excused, fails tocomply with subsection (1)(a) or (3);or

( b ) c o n t r a v e n e s s u b s e c t io n ( 1 )( b ) ,

T h e I n s w h o t h e y B i l l 2 0 1 2 1 4 3

comm its an offence and on conviction is liablelo a finenot exceeding two million shillings.

(1 ) The bankruptcy trusteemay, by notice,require a bank to search its account records by comparingthe names of its customers with the names (including anyaliases) of undischarged bankrupts specified in the noticeor in a list that is attached to it.

(2 )Within'seven days after receiving the notice,

the bank shall search its account records and provide thebankruptcy trustee with written results of the search in so

Bankruptcy trusteeentitled to requirebank to searchrecords relating tobankrupt's account.



•

p yfar as the search reveals the names of undischargedbankrupts specified in the notice or list.

(3 ) If a'bank fails to comply with subsection (2),the bankruptcy trustee may maketan application to theCourt for an order under subsection (4).

(4 ) On the hearing of an application made under.

subsection (3), the Court shall, unless it considers that thebankruptcy trustee's requirement was unjustified, make anorder directing the bank to comply with the requirement.

(5) The bank is entitled to be served with a copyof the application and to appear and be heard as

respondent at the hearing of the application.

Division 16—Provision allowed for bankrupt during bankruptcy

160. (1) A bankrupt may chooseand retain as the

bankrupt's own property assets of a description specifiedin subsection (2) up to a maximum value detettnined inaccordance with subsection (3).

(2) The assets are--

Bankrupt entitled

to retain certainassets.

4 8 2 4 The Insolvency Bill, 2012

(a ) the bankrupt's necessary tools oftrade;

(b ) necessary househo ld furniture 'and

personal effects (including clothing)for the bankrupt and the bankrupt'srelatives and dep endants; and

(c ) a motor vehicle.

(3) The maximum value of those assets are—

(a ) in the case of the bankrupt's necessary

tools of trade—the value fixed by thebankruptcy trustee;

h f h h ld



(b ) in the case of necessary householdfurniture and p ersonal effects— thevalue fixed by the bankruptcy trustee;and

(c ) a m otor vehicle—one million shillingsor, if a greater amount is prescribedby the insolvency regulations, thatamount.

Bankrupt mayretain certain assetswith consent ofcreditors.

161. A bankrupt m ay retain necessary tools of tradeand necessary ho usehold furniture and effects that are

worth more than the maxim um value fixed in accordancewith section 160 (bankrupt entitled to retain certainassets), if the bankrupts' creditors con sent to it by anordinary resolution pa ssed at a creditors' meeting.

Retention of assetsnot to affect rightsunder charge orcredit purchasetransaction.

162. 1) Subject to subsection (2), the retention of an

asset by the ban krupt under section 160 (bankrupt entitledto retain certain assets) or section 161 (bankrupt mayretain certain assets with consent o f creditors) does notaffect rights arising under a valid charge, bailmentcontract or credit purchase transaction in respect of the


asset.

(2) In relation to goods that that are in thepossession of the bankrupt under a bailment contract orcredit purchase transaction, the Court may make an orderauthorising the bankruptcy trustee to d ispose of the goodsas if all the rights of the owner under the contract oragreement w ere vested in the bankrupt.

• (3) An order under subsection (2) m ay bemade—

(a ) only on the ap plication of thebankruptcy trustee; and

(b ) only if the Court is satisfied that



(b ) only if the Court is satisfied thatdisposal of the goods would be in theoverall best interests of the bankrup t'screditors.

(4) An order under subsection (2) is subject to

the condition that—(a ) the net proceeds of d isposal of the

goods; and

(b ) any additional money required to beadded to thene t proceeds so as toproduce the amo unt determined by theCourt as the net amount that would berealised on a sale of the goods a tmarket value,

be app lied towards discharging the amo unts payable underthe bailment con tras or credit purchase transaction.

165. The fact that the net value of the assets that thebankrupt retains is less than the maximum values specifiedin section 160 (bankrup t eRtitled to retain certain assets)does not give-the bankrupt any rights in relation to otherassets in th e bankrupt s estate.

Retentionprovisions not toconfer rights toother assets.


Relative ordependant entitledto exercisebankrupt's right toretain assets.

Bankruptcy trusteemay make

allowance tobankrupt.

164. If the bankrupt has died, a relative or dependantof the bankrupt, who has been ap proved for this purposeby the bankruptcy trustee or the Court, may exercise the

right to retain assets under section 160 (bankrupt entitledto retain certain assets) or section 161 (bankrupt mayretain certain assets with consent of creditors) for thebenefit of the bankrupt's relatives and dependants.

165. The bankruptcy trustee ma y make an allowanceout of the property of the bankrupt to the bankrupt, or toany relative or dependant of the bankrupt, for the supp ortof the bankrupt and the bankrupt's relatives and



Bankruptcy trusteemay allowbankrupt to retainmoney.

dependants.

166. (1) The bankruptcy trustee may allow thebankrupt to retain, for the immed iate maintenance of thebankrupt-and the bankrupt's relatives and dep endants,mo ney up vi the prescribed limit that the bankru pt has inthe bankruptpossession or in a bank account when thebankruptcy commenced.

(2) For the purpo se of subsection (1), theprescribed limit is one hundred thousand shillings or, if agreater amount is p rescribed by the insolvency regulationsfor the purposes of this section, that amount.

Division 17— Pow ers of bankruptcy trustee and the Court to exam inebankrupt and others

Subdivision 1—Ex amination by bankruptcy trustee

The Insolvency B ill. 2012


167. (1) The bank ruptcy trustee may, at any time ankruptcybefore or after a bankrupt's discharge— rustee may ,

summon bankrupt(a ) serve on any of the person.; listed in nd others to b.e

subsection (2) a summ ons.to appear examined.

before the bankruptcy trustee or theCourt to be examined on oath in relationto the bankrupt's conduct, affairs orproperty; and

(b ) require that person—

(i) to produce and surrender to thebankruptcy trustee or the Courtany document under that person'scontrol that relates to theb k ' d ff i



bankrupt's conduct, affairs orproperty; or

(ii) to answer any question put to thatperson relating to the bankrupt'sconduct, affairs or property. ,

(2) The follow ing are the persons refer red to insubsection (1):

(a ) the bankrupt;

(b ) the bankrupt's spouse;

(c ) a person known o r suspected to be in

possession any of the bankrupt'sproperty or any document relating to thebankrupt's conduct, affairs or property;

(d ) a person believed to owe the bankruptmoney;

(e ) a person believed by the bankruptcytrustee to be able to provide information

regarding-(i) the bankrup t; or


(ii) the bankrupt's conduct, affairs orproperty;

(f) a trustee of a trust of which thebankrupt is a settlor or of which the

bankrupt is or has been a trustee.

Conduct ofexamination ofperson summonedby bankruptcytrustee.

168. (1) The bankruptcy trustee may exam ine on oaththe persons summ oned for examination in accordance withsection 167.

(2 ) The bankrup tcy trustee shall ensure that the

examination is recorded in writing, and that the personsumm oned signs the written record unless excused fromdoing so.



(3 ) If person, without reasonable exc use, refusesto sign the refusal to sign the written record o f the person 'sexamination before the bankruptcy trustee, the bankruptcytrustee may report the person's conduct to the Court, in

which case the Court m ay, if satisfied that the refusal wasunjustified, find the person to be in co ntemp t of the Court.

(4) If a person summ oned for examination by thebankruptcy fails to appea r at the appointed time and has noreasonable excuse, the Court—

(a ) may, on the bankruptcy trustee'sapp lication, by warrant, have the personarrested and brought before the Courtfor examination; and

(b ) if it does so, may order the p erson topay all the expen ses arising out of thearrest and exam ination before the Courtif it believes that that person's evidencewas required for the purpose ofascertaining the bankrupt's estate.




(b) any matter arising in the course of theexamination.

(2 ) A person w ho wishes to publish a report ofsuch an examination or matter may m ake an app lication to

the Court for leave to p ublish it.(3 ) On the hearing of an application made under

subsection (2), the Court may give leave for the publicationof a report subject to such c onditions (if any) as the Courtmay specify.

(4) A p erson who con travenes subsection (1)comm its an offence and on conviction is liable to a fine notexceeding five hundred thousand shillings or toimp risonment for a term not exceeding three mon ths, or toboth.



Examinationprovisions alsoapply whenbankruptcytrustee appointedinterim trustee inrespect ofdebtor's property.

No lien overbankrupt'sdocuments andother records,

173. Sections 167 to 172 also apply when thebankruptcy trustee has been app ointed as interim trustee in

respect of all or part of a debtor's property under section 32(when debtor may m ake app lication for bankruptcy order),and, for that purpose, references in sections 167 to 172 tothe bankrupt are to be read with as if they were references tothe debtor.

174. (1) A p erson is not en titled as against thebankruptcy trustee to withhold possession of, or claim a lienover—

(a ) a docum ent that belongs to thebankrupt; or

(b ) the bankrupt's business records.

(2) However, a person m ay claim as a preferentialcreditor under paragraph 3(1)(f) of the Second S chedule ifthe person--

(a) has performed services in connection


with the bankrupt's business records ora docum ent belonging to the bankrupt;and

(b ) has not been paid, or has not been p aidin full, for those service s; and

(c ) would, but for subsection (1), ordinarilyhave had a lien over the businessrecords or document.

(3) The limit to which the person can claim as apreferential creditor under p aragraph 3(1)(f) of the SecondSchedule is ten pe rcent of the total value of the servicesspecified in subsection (2), up to a maxim um am ount of twohundred thousand sh illings.



175. (1) A person who , without reasonable excuse—

(a ) fails to comp ly with a summons attendthe public examination of a bankrupt asrequired by section 167(1);

(b ) fails without reasonable excuse toproduce a docum ent that the person isrequired to p roduce as required bysection 167(1)(b)(i);

(c ) fails to answer a question as required bysection 1 67(b)(ii); or

(d ) in purporting to answer such a question,gives an answer that the person knows,or ought reasonably to know , is false ormisleading in a m aterial respect,

comm its an offence and on conviction is liable to a fine notexceeding one m illion thousand shillings or to im prisonmentfor a term not exceed ing twelve months, or to both.

(2) A person w ho is questioned und er section167(1)(b)(ii) shall answer all questions put tothe person in

Offences relatingto conduct ofexaminations bybankruptcytrustee.


relation to the bankrupt's conduct, affairs and property tothe extent that the person is able to do so.

(3 ) A person is not excused from answering a

question because the question may incriminate or tend toincriminate the person.

(4 ) Except as provided by subsection (5), astatement made by a person examined or questioned undersection 167(1)(b)(ii) in response to a question put to theperson in the exercise of a power conferred by this Part isnot admissible in criminal proceedings against the person.

(5 ) Such a statement is adm issible in any suchproceedings if—

(a) the person was examined or questioned



( ) p qunder oath and is charged with anoffence under—

(i) section 107 of the Penal Code(perjury and subornation ofperjury); or

( ii ) sec tion 114 of tha t Code ( fa lseswearing); or

(b) the statement was made by the bankruptand the bankrupt is charged with anoffence under section 167(1)(b) or (c)

(refusal to an swer questions or givingfalse or m isleading answ ers).

Subdivision —Public examination before the Court

Court to holdpublicexamination ifbankruptcyt r u s t e e o rcreditors require.

176. (1) At any time before an absolute order for abankrupt's discharge is made—

(a ) the bankruptcy trustee; or

(b ) if a ordinary resolution has been passed


at a creditor's meeting seeking thepublic examination of the bankruptbefore the Court—any of the creditorsconcerned,

may make an application to the Court for an order that thebankrupt be publicly examined before the Court.

(2 ) On the hearing of an application made undersubsection (1), the Court shall, subject to subsection (3),make an order directing the bankrupt to be publiclyexamined before the Court and shall fix a time and date for

the holding of the examination. The date must not be earlierthan fourteen days from the date of the order unless theCourt is of the opinion that there are compelling reasons forholding the examination sooner.



holding the examination sooner.

(3 ) The Court shall reject a copy of a creditors'ordinary lodged under subsection (1) unless it isauthenticated by either the bankruptcy trustee or the

chairperson of the meeting at which the resolution waspassed.

1 7 7 . (1) As soon as practicable after the Court hasmade an order under section 176, the bankruptcy trusteeshall serve a copy of the order on the bankrupt.

(2) At least seven days before the date fixed forholding the examination, the bankruptcy trustee shall—

(a) publish a notice advertising theexamination in such publications asmay he prescribed in the insolvencyregulations: and

(h) send a notice to each creditor a noticegiving details of the time, date andplace of the examination.

Bankruptcytrustee to servenotice of

examination onbankrupt.


Bankruptcytrustee to lodgereport with theCourt before startof examination.

178. Before the public exam ination of a bankrupt beforethe Court begins, the bankruptcy trustee shall lodge with theCourt a report on—

(a ) the bankrup t's estate; and

(b ) the bankrupt's conduct; and

(c ) all other matters of which the Courtshould be informed.

Conduct of publicexamination

before the Court.

179. (1) At the time and date fixed by the Court for

holding the public exam ination of a bankrupt, the bankruptshall attend the exam ination, and may be exam ined as to thebankrupt's conduct, affairs and property.

(2) At the examination the following persons m ay



(2) At the examination, the following persons m ayexamine the bankrupt:

(a ) the bankruptcy trustee, or an advocatefor the bankruptcy trustee;

(b ) a creditor who has proved a claim, or anadvocate for the creditor.

(3) A person exam ining the bankrupt shallexamine the bankrupt on oath.

(4) At the examination, the bankrupt shall—

(a ) produce all docum ents relevant to theexamination that the person conductingthe exam ination requires the bankrupt toproduce; and

(b ) answer all questions that that person_asks the bankrupt or that the Courtallows the bankrupt to be asked.

(5) The bankrupt is no t entitled to ad vance no ticeof who will ask the questions or wha t the questions will be.


Bankruptcytrustee to ensurerecord ofexamination iskept.

1 8 0 . (1) On the holding of a public examination of abankrupt before the Court, the Court shall ensure that awritten record is made of the examination.

(2) The Court shall also ensure that the record ofthe examination—

(a ) is read over to the bankrupt; and

(b ) is made available for inspection at allreasonable times by the bankrupt'screditors or their advocates.

(3) If required by the Court to do so, the bankruptshall sign the record of the examination.

(4) A bankrupt who, without reasonable excuse,f l l h d d b ( )



fails to comply with a request made under subsection (3) isin contemp t of the Court.

- 1 8 1 . (1) The public examination of a bankrupt endswhen the Court makes an order declaring that theexamination is ended.

(2) The Court may make an order declaring thatthe examination has ended only if it is satisfied that thebankrupt's conduct, affairs and property have beensufficiently investigated and that the investigation iscomplete.

Whenexamination ends.

Consequence ofbankrupt's failingto attendexamination.

1 8 2 . If the bankrupt does not appear for the examinationat the appointed time and has no reasonable excuse—

(a) the Court may, either on the bankruptcytrustee's application or its owninitiative, by warrant, have the bankruptarrested and brought before the Courtfor examination; and


(b) the Court may order the bankrupt to payall the expenses arising out of the arrestand exam ination before the Court, if itbelieves that the bankrupt's evidence

was necessary for the purposes ofascertaining the bankrupt's estate.

Bankrupt entitledto be paidexpenses forattendingexamination.

183. (1) A bankrupt is entitled to be paid suchexpenses for attending a pub lic examination before theCourt as are p rescribed by the insolvency regulations.

(2) If the relevant expenses have not been paid ortendered to the bankrupt, the bankrupt person is not obligedto attend the examination.



Power to extendexaminationcompaniescontrolled bybankrupt andbankrupt'sassociates.

184. (1) If authorised by the Court, the bankruptcytrustee or a person appointed by that trustee may exercise

the powers specified in subsection (2) in relation to a bodycorporate with which the bankrupt is associated or apartnership of which the bankrupt is a mem ber.

(2) The powers referred to in subsection (1) arethe powers—

(a ) to examine the docum ents of the bodycorporate or partnership; and

(b ) to examine—

(i) any p ast or present officer,employee or mem ber of the bodycorporate about the affairs of thatbody; or

(ii) any past or present member or

employee about the affairs of thepartnership.

(3) The bankruptcy trustee shall ensure that arecord of the examination of a person under subsection


(2)(b) is recorded in writing, and the person examined signsthe written record unless for good reason the bankruptcytrustee excuses the person from doing so.

(4) For the purposes of this section, a company isassociated with the bankrupt if the bankrupt is an officer oremployee of the company or is in a position to appoint orcontrol the appointment of its directors.

1 8 5 . (1) A person (including the bankrupt) who isexamined or questioned at a public examination of abankrupt shall answer all questions put to the person inrelation to the bankrupt's conduct, affairs and property tothe extent that the person is able to do so.

(2 ) A i d f i

No privilegeagainst self-incrimination, butstatements notgenerallyadmissible incriminalproceedings



(2 ) A person is not excused from answering aquestion because the question may incriminate or tend toincriminate the person.

(3 ) Except as provided by subsection (4), astatement made by a person examined or questioned underthis Part in response to a question put to the person in thecourse of the public examination of a bankrupt is notadmissible in criminal proceedings against the person.

(4 ) Such a statement is admissible in any suchproceedings if—

(a) the person was examined or questionedunder oath and is charged with anoffence under—


(ii) section 114 of that Code (falseswearing); or

(b) the statement was made by the bankruptand the bankrupt is charged with an

proceedingsagainst theirmaker.

('up 63.

4838 he insolvency Bill, 2012

offence under section 1 85(1)(b) or (c)(refusal to an swer questions or givingfalse or m isleading answ ers).

Offences relatingto examinationsof bankrupts.

186. (1) A person who, without reasonable excuse—

(a ) fails to attend an examination asrequired by section 1 79(1);

(b ) fails to deliver a d ocumen t as requiredunder section 179(4)(a);

(c) fails to answer a quest ion as requiredunder section 179(4)(b); or

(d) in purporting to answer such a question,gives an answer that the person knows



gives an answer that the person knows,or ought reasonably to kno w, is false ormisleading in a material respect,

commits an offence and on conviction is liable to a fine notexceeding one million shillings or to imprisonment for aterm not exceeding twelve months, or to both. -

(2) The fact that a bankrupt may be charged with,tried for and convicted of an offence under subsection (1)does not prevent the Court from punishing the bankrupt forcontemp t of the Court.

Entitlement ofexaminee to berepresented.

187. (1) A person (including the bankrupt) who isexamined or questioned at a public examination of abankrupt is entitled to be represented by an ad vocate.

(2) Such a person may be questioned by thebankrupt's advocate, and any answers given by the personform p art of the examination.


Division 18 —Status of bankrupt's contracts

188. If a bankrupt is a party to a co ntract, the

bankruptcy trustee may—(a ) continue the contract, subject to the

terms of the contract and all relevantrules of law; or

(b ) if the contract is onerous prop erty forthe purposes of section 118 (bankruptcytrustee m ay disclaim onerousproperty)—d isclaim it under thatsection.

Bankruptcy

trustee maycontinue ordisclaimbankrupt scontracts enteredinto beforebankruptcycommenced.



189. (1) A provision of a contract to the effect that thecontract is terminated if a p arty to the contract is adjudgedbankrupt, or that purports a confer a right on a p arty to acontract a right to terminate the con tract if the other oranother party to the contract is adjudged bankrupt, is void.

(2) Subsection app lies to a contract whetherentered into before or after the comm encem ent of thissubsection.

(1) This section applies if the other party to a contractto which the bankrupt is a party, in accordance with a termof the contract, terminates the contract in consequence of thebankruptcy.

(2) Irrespective of w hat the con tract provides, thebankruptcy trustee m ay recover such amount from the othercontracting party as the Court considers to be fair andreasonable, but that amount m ay not be greater than theamo unt calculated in accordance with the formula set out insubsection (3).

Contractterminated byother contracting

party:


(3) The formula is as follows:

A = B - C, where—

A is the amount to be calculated for thepurpose of subsection (2);

B is the amount p ayable to the bankruptunder the contract; and

C is the total of—

(a ) the amount paid to thebankrupt;

(b ) the cost to complete thecontract; and

(c ) a reasonable amount as apenalty for delay in



com pleting the contract.

Transaction withbankrupt made inignorance ofbankruptcy.

190. (1) This section applies to a payment of money ora delivery of property—

(a) to a per son who is or who issubsequently adjudged bankrupt;

(b ) to the order of the person; or

(c ) to an assignee, or to the order of anassignee, from the person.

(2) The payment or delivery is a good dischargeto the person Who m ade the payment or delivery if—

(a) the payment or delivery was madebefore the bankruptcy of the personreferred to in subsection (1)(a) was

advertised; and(b ) the person making the payment or

delivery satisfies the Court that-


(i) that person had no knowledge ofthe bankruptcy or that anappliCation for a bankruptcy orderhad been made; and

(ii) the payment or delivery was madein the ordinary course of businessor was otherwise made in goodfaith.

191. If the bankrupt is jointly liable under a contractwith another person, that other person may stir and be suedon the contract without the bankrupt being joined as a partyto the proceeding.

Bankrupt's co-contractor maysue and be sued ifthere is a jointcontractualliability.



192. (1) The bankruptcy trustee may recover money

paid by a bankrupt to the bankrupt's advocate for costs inobtaining a bankruptcy order, except for those (if any)prescribed for the purpose of this section by the insolvencyregulations.

(2) Subsection (1) applies whether the relevantpayment was made before or after the bankruptcycommenced.

Bankruptcy

trustee m ayrecoveradvocate's costs.

Division 19 rregular transactions involving bankrupt

193. (1) This Division applies to the following irregulartransactions by the bankrupt before the bankruptcy

commenced:(a ) an insolvent transaction;

(b ) an inso lven t cha rge;

Application ofDivision 19.


(c ) an insolvent gift;

(d ) a transaction at undervalue;

(e ) a contribution by the bankrupt to the

property of another person.(2) The general effect of this Division is—

(a ) to enable irregular transactions of thekinds listed in subse ction (1)(a) to (c) tobe cance lled on the initiative of thebankruptcy trustee; and

(b ) to enable that trustee, in app ropriatecases, to recover property or m oney froma p arty to an irregular transaction w iththe bankrupt.



Power to extentcertain periods

specified in thisDivision.

194. For the purposes of this Division, a two year periodor a sixmonthsperiod referred to in this Division can beextended—

(a ) in the case of a bankruptcy order madeon a creditor's application— by theperiod between the time when theapplication was served on the bankruptand the time wh en the bankruptcy orderwas made; and

(b ) in the case of a bankruptcy order madeon the bankrupt's own app lication whilea creditor's application was pending— bythe period between the time when thecreditor's app lication wa s served on thebankrupt and the time when thebankruptcy order was made.

insolventtransactions may

195. A transaction by a bankrupt can be can celled on the


bankruptcy trustee's initiative if it—

(a ) is an insolvent transaction; and

(b ) was made within two years immediatelybefore the bankruptcy commenced.

be cancelled bybankruptcytrustee.

Meaning ofinsolventtransaction forpurposes ofsections 195.

196. (1) For the purposes of sections 195, a transactionis an insolvent transaction by a bankrupt if it—

(a ) is entered into or made at a time whenthe bankrupt is unable to pay the

bankrupt's debts; and(b ) enables a creditor to receive more

towardq satisfaction of a debt by thebankrupt than that pe rson would receive,or would be likely to receive in the



or would be likely to receive, in thebankruptcy.

(2) Any of the following actions by'a bankrup t is a

transaction for the purpose of subsection (1):(a ) conveying or transferring the bankrupt's

property;

(b ) giVing a charge over the bankrupt'sproperty;

(c ) incurring an obligation;

(d ) undergoing an execution process;(e ) paying money (including money paid in

accordance with a judgment or an orderof a court);

(0 any other .act done or omitted to be donefor the purpose of entering into such atransaction or giving effect to it.

197. For the purposes of section 195, a transaction that Insolvent


transactionpresumed.

When series oftransactions areto be regarded assingletransaction.

was entered into within the six mo nths before a bankrup t is,adjudged bankrup t is presumed, until the contrary is proved,to have been made at a time when the bankrupt is unable topay the bankrupt's debts.

198. (1) This section applies if a series of transactionsmade for commercial purposes forms an integral part of acontinuing business relationship (such as a running acco unt)between a bankrupt and a creditor in circumstances in which,during the course of the relationship, the level of thebankrupt's net indebtedness to the creditor is increased andreduced from time to time.

(2 ) For the purposes of subsection (1), it does notmatter whether persons other than the bankrupt or thecreditor are parties to any of the transactions.



(3 ) Wh en this section applies—

(a) section 195 applies in relation to all of

the transactions forming part of therelationship as if they together formed asingle transaction; and

(b ) any p articular transaction of the seriesreferred to in subsection (1) may betreated as an insolvent transaction thatcan be cancelled by the bankruptcy

trustee only if the effect of applying thatsection as p rovided by p aragraph (a) isthat the single transaction referred to inthat paragraph is treated as an insolventtransaction that can be cancelled by thebankruptcy trustee.

Insolventcharges can becancelled onb a n k r u p t c y

199. A charge over any property of a bankrupt can becancelled on the bankruptcy trustee's initiative if-

The Insolvency Bill, 2012

the charge was created within the twoyears immediately before the bankruptcycomm enced; and

immediately after the charge was given,the bankrupt was unable to pay thebankrupt's due debts.'

200: (1) A charge may not be cancelled under section199 (insolvent charges can be cancelled on bankruptcytrustee's initiative) if it secures—

(a ) money actually advanced or paid;

(b ) the actual price or value of property soldor transferred; or

(c ) any other valuable consideration given

4845

trustee'sinitiative.

Charge for newconsideration orreplacementcharge not

affected.



(c ) any other valuable consideration given,

in good faith by the secured creditor to the bankrupt at thetime when, or at any time after, the charge was created.

(2) A charge may not be cancelled under section199 if the charge is a replacement for an earlier charge thatwas given by the bankrupt more than two years before thebankruptcy commenced, except to the extent that—

(a ) the amount secured by the substitutedcharge is greater than the amount thatwas secured by the earlier charge; or

(b ) the value of the property that was subjectto the substituted charge at the date ofsubstitution was greater than the value ofthe property subject to the earlier chargeat that date.

201. A bankrupt who,gave a charge within the six resumption thatmonths immediately preceding the commencement of the ankrupt unablebankruptcy is presumed, until the contrary is proved, to have to pay due debts.


been unable to p ay the bankrupt's debts imm ediately after thecharge was created.

Charge forunpaid p urchaseprice given aftersale of property.

Appropriation of

202. If, in relation to prope rty purchased by a ba nkrupt,the bankrupt has given to the seller a charge over the p ropertywithin the two years immediately preceding the bankruptcy,section 199 (insolvent charges can be cancelled onbankruptcy trustee's initiative) does not affect the charge tothe extent that it secures unpaid p urchase mon ey (whether itis unpaid in relation to the prop erty over which the charge isgiven or some other prop erty), but only if the charge was

given not more than fourteen days afteithe date of the sale ofthe prope rty to the bankrupt.

203. (1) This section ap plies if the bankrupt h as ma de a



payments bybankrupt tosecured creditor.

203. (1) This section ap plies if the bankrupt h as ma de apaym ent or paym ents to a secured creditor after the bankrupthas given a charge to which section 201 (charge for new

consideration or replacement charge not affected) or section202 (charge for unpaid purchase p rice given after sale ofproperty) applies.

(2) The bankruptcy trustee shall credit thebankrupt's payment or p aymen ts (as far as is necessary)towards—

(a ) repaymen t of the m oney actually

advanced o r paid by the secured creditorto the bankrupt wh en or after thebankrupt gave the charge;

(b ) paym ent of the actual price or value ofproperty sold or supplied by the securedcreditor to the bankrupt whe n or after thebankrupt gave the charge; or

(c ) paym ent of any other liability of thebankrupt to the secured creditor inrespect of any other valuable


consideration given in good faith whenor after the bankrupt gave the charge.

(3) This section does not apply to paymentsreceived by a bank in good faith in the ordinary course of

business and without negligence.

204. A charge given by the bankrupt under an agreementto give the charge that was made before the two yearsimmediately before the bankruptcy is not liable to becancelled under section 199 (insolvent charges can be

cancelled on bankruptcy trustee's initiative).

205. A gift made by a bankrupt to another person can becancelled on the bankruptcy trustee's initiative if the

Charge agreedbefore specifiedperiod not to becancelled.

Insolvent giftsmade within twoyears before



p ybankrupt made the gift within the two years immediatelypreceding the commencement of the bankruptcy.

years beforebankruptcy canbe cancelled.

Gift by bankruptbetween two andfive years beforebankruptcy canbe cancelled bybankruptcytrustee ifbankrupt wasunable to paydebts.

206. (1) A gift by a bankrupt to another person can bealso cancelled on the bankruptcy trustee's initiative if—

(a ) the bankrupt made the gift during theperiod of three years beginning fiveyears, and ending two years, before the

commencement of the bankruptcy; and(b ) at the time when the gift was made, the

bankrupt was unable to pay thebankrupt's debts.

(2) A bankrupt is presumed to have been unable topay the bankrupt's debts for the purpose of subsection (1)(b)unless the person claiming the gift proves that—

(a ) immediately after the gift was made; or

(b ) at any later time before the

4848. he Insolvency Bill, 2012

Procedure forcancellingirregulartransactions.

commencement of the bankruptcy,

the bankrupt was able to pay the bankrupt's debts without theaid of the property of which the gift was com posed.

207. (1) The procedure set out in this section applies tothe following irregular transactions:

(a ) an insolvent transaction;

(b ) an insolvent charge;

(c ) an inso lven t g ift;

(d ) any other transaction of a classprescribed by the insolvency regulationsfor the purp oses of this section.

(2) A bankruptcy trustee who wishes to cancel anirregular transaction to which this section applies shall—



irregular transaction to which this section applies shall

(a ) lodge a notice with the CO urt thatcomplies with subsection (3); and

(b ) serve the notice on—

(i) the other party to the transaction;and

(ii) any other party from wh om thebankruptcy trustee intends torecover.

(3 ) A notice complies with this subsection if it—

(a ) is in writing;

(b ) states the bankruptcy trustee's postal andstreet addresses and e-mail address (ifany);

(c )specifies the irregular transaction to becancelled;

(d ) describes the prop erty, or states the


amount, that the bankruptcy trusteewishes to recover;

(e ) includes a statement that the personnamed in the notice may object to thecancellation of the transaction bysending to the bankruptcy trustee anotice of objection to be received by thebankruptcy trustee at that trustee'spostal, street or email address withintwenty-one days after service on thatperson of that trustee's notice;

(f) states that a person making an objectionis required to specify the reasons for theobjection;

(g ) states that the transaction will becancelled as against the person named inthe notice if that person does not object;



the notice if that person does not object;and

(h ) states that if the person named in thenotice does object, the bankruptcytrustee may apply to the Court for thetransaction to be cancelled.

(4 ) An irregular transaction is automaticallycancelled in relation to a person on whom the bankruptcytrustee has served a bankruptcy trustee's notice, if the personhas not objected by sending to the bankruptcy trustee a noticeof objection that is received by the bankruptcy trustee at thattrustee's postal, street or email address within twenty-onedays after the bankruptcy trustee's notice has been served onthat person.

(5 ) The bankruptcy trustee may disregard a noticeof objection that fails to specify the reasons for the objection.

(6 ) The Court may, on the application of thebankruptcy trustee, cancel an irregular transaction that is notautomatically cancelled by subsection (4).


Court may orderretransfer ofproperty orpayment of anequivalent value.

208. (1) On the cancellation of an irregular transactionunder which property of the bankrupt, or an interest inproperty of the bankrupt, was transferred, the Court maymake an order—

(a ) for the retransfer to the bankruptcytrustee of the property or interest in theproperty; or

(b ) for payment to the bankruptcy trustee ofsuch amo unt as the Court considersappropriate, but the amount may not begreater than the value of the property, orinterest in the property, at the time whenthe transaction was can celled.

(2 ) The Court may m ake any other order for thepurpose of giving effect to an order under subsection (1).

(3 ) An order under subsection (1) is in addition to



any other rights and remedies available to the bankruptcytrustee, and this section does not affect those rights and

remedies.

Limits on whatcan berecovered.

209. The Court may not make an order under section 208(Court may order retransfer of property or payment of value)against a person if the person proves that when the personreceived the property or interest in the property—.

(a ) the person acted in good faith;(b ) a reasonable person in the same position

would not have suspected that-

(i) in the case of an insolvent gift—thebankrupt was, or would become,unable to pay the bankrupt's debtswithout the aid of the property thatthe gift is composed of; or


(ii) in the case of any other irregulartransaction of a kind to whichsection 207 applies—the bankrupt

was, or would bccome, unable topay the bankrupt's due debts; and

(c) the person gave value for the property orinterest in the property or altered theperson's position in the reasonably heldbelief that the transfer of the property orinterest in the property to the person was

valid and would not be cancelled.

210. (1) Under section 211 (Court may order recipientof bankrupt's contribution to property of another to pay valueto bankruptcy trustee) the bankruptcy trustee may recover

Bankruptcytrustee mayrecover

ff



to bankruptcy trustee), the bankruptcy trustee may recoverfrom a party to a transaction with the bankrupt an amountcalculated in accordance with the following formula:

A = B — C

where—

A is the amount to be calculated;

B is the value that the party receivedfrom the bankrupt under the

transaction; andC is the value (if any) that the bankrupt

received from the party under thetransaction.

(2 ) In this section and in section 211, transactionincludes the giving of a guarantee by the bankrupt.

(3 ) The bankruptcy trustee may recover from theparty the amount calculated under subsection (1) if—

(a) the bankrupt entered into the transactionwith the party within the two yearsimmediately before the bankruptcy

difference invalue iftransaction is

found to beunder value.


comm enced; and

b) either-

the bankrupt was unable to pay thebankrupt's debts when thetransaction was entered into; or

the bankrupt became unable to paythe bankrupt's debts as a result ofhaving entered into the transaction.

Court may orderrecipient ofbankrupt'scontribution toproperty ofanother to pay

211. (1) The bankruptcy trustee may make anapplication to the Court for an order directing the recipient ofa contribution by the bankrupt to the recipient's property topay the value of the contribution to the bankruptcy trustee.



value tobankruptcytrustee.

(2) On the hearing on an application made undersubsection (1), the Court may make the order sought but only

if satisfied that—(a ) the bankrupt was not paid an adequate

amount in money or money's worth forthe contribution;

(b ) the value of the bankrupt's assets wasreduced by the contribution; and

(c) the bankrupt made the' contribution-(i) within the two years immediately

preceding the commencement ofthe bankruptcy; or

(ii) within the five years immediatelybefore that commencement, and therecipient is not able to prove thatthe bankrupt, either at the time ofthe contribution or at any later timebefore that commencement, wasable to pay the bankrupt's debts


without the aid of the contribution.

(3) For the purposes of this and section 212(Court's powers in relation to bankrupt's contribution to

recipient's property), a bankrupt has made a contribution tothe recipient's property if the bankrupt has—

(a) erected buildings on, or otherwiseimproved, land or any other property ofthe recipient;

(b ) bought land or any other property in therecipient's name;

(c ) provided money to buy land or any otherproperty in the recipient's name or onthe recipient's behalf; or

(d ) paid instalments for the purchase of, ortowards the purchase of land or any



towards the purchase of, land or anyother property in the recipient's name or

on the recipient's behalf.

212. (1) The Court may—

(a ) ascertain the value of the bankrupt'scontribution (including any payments oflegal expenses, interest, rates, and other

expenses or charges) for the purposes ofsection 211 (Court may order recipient_oft Inkrupt's contribution to property ofanot er to pay value to bankruptcytrustee); and

(b ) order the recipient to pay an amountequal to that value to the bankruptcy

trustee.(2) The Court may order the recipient to pay less

than the value of the contribution, or refuse to order therecipient to pay anything, if-

Court's powersin relation tobankrupt'scontribution torecipient'sproperty.


(a ) the recipient acted in good faith and hasaltered the recipient's position in thereasonably held belief that thebankrupt's contribution was valid and

that the recipient would not be liable torepay it in full or in part; or

(b ) in the Court's opinion, it is unfair thatthe recipient should repay all or part ofthe contribution.

(3) If the Court orders the recipient to repay thebankrupt's contribution or a part of it, it may also (in thesame or a subsequent order)—

(a) direct the bankruptcy trustee to sell thewhole or p art of the relevant property,and to convey or transfer it to thepurchaser; and



(b ) make vesting and other orders that are

necessary for the sale and transfer of theproperty,

How bankruptcytrustee is to userepayment ofbankrupt'scontribution to

property.

213. (1) The bankruptcy trustee shall apply—

(a ) the money repaid under section 211 bythe recipient of a contribution by the

bankrupt to property; or(b ) the proceeds of sale of that property,

by taking the steps specified in subsection (2) in the orderspecified in that subsection.

(2) The steps to be taken by the bankruptcy trusteeare as follows:

Step 1: The bankrup tcy trustee shall keep asntuch of the proceeds as thebankruptcy trustee needs, whenadded to the other assets in the


bankrupt's estate, to pay the creditorsin full (including interest);

Step 2: If there is a surplus after the creditors

have been paid in full, thebankruptcy trustee shall pay as muchof the surplus to the recipient of theproperty to which the bankrupt hascontributed as was repaid undersection 211;

Step 3 The bankruptcy trusteemay not pay

anything to the bankrupt withouthaving taken steps 1 and 2.

Division 20 rocessing of creditors claims against bankrupt s estate



214. (1) For the purposes of this Division, a creditor's nterpretation:claim is a document that a creditor submits to the ivision 20.

bankruptcy trustee for the purpose of proving the debt.(2) A debt is proved when it is allowed by the

bankruptcy trustee.

220. (1) For the purpose of this Division, a provabledebt is a debt or liability that the bankrupt owes—(a) at the commencement of the

bankruptcy; or(b) after that commencement. but before

discharge, because of an obligationincurred by the bankrupt before thatcommencement.

(2) A fine, penalty or other order made by a courtordering the payment of money that has been made

What debts areprovable debts.


following a conviction—

(a) is not a provable debt; and

(b ) is not discharged when the bankrupt isdischarged from bankruptcy.

Procedure forproving debt:creditor to submitclaim form.

216. (1) A creditor (including a creditor who has apreferential claim) who wishes to claim in the bankruptcyshall submit a creditor's claim to the bankruptcy trusteebefore the deadline for submitting claims.

(2) Such a claim must be in the form prescribedby the insolvency regulations for the purposes of thissection.

(3) For the purpose of subsection (1), the deadlineis either—



(a ) the time specified by the bankruptcy

trustee by notice given to the creditor;or

(b ) the time specified in a notice specifiedin an advertisement published by thebankruptcy trustee in the prescribedmanner.

(4) In submitting a claim, a creditor shall comply

with the procedure and formalities (if any) prescribed by theinsolvency regulations.

(5) The creditor is required to bear the costs ofproving the debt, unless the Court makes an order as to thecreditor's costs under section 224.

(6) The creditor may amend or withdraw theclaim, but an amended claim has to comply with theformalities prescribed for the original claim.

Bankruptcy 17. (1) The bankruptcy trustee shall examine each


creditor's claim and the grounds of the debt, unless of theopinion that no dividend will be paid to creditors.

(2) As soon as practicable after examining aclaim, the bankruptcy trustee shall do one or more of thefolloWing:

(a ) wholly or partly allow the claim;

(b ) wholly or partly reject the claim;

(c ) require further evidence in support ofthe claim or an item contained in it.

trustee required toexaminecreditor's claim.

218. As soon as practicable after rejecting a creditor'sclaim, or a part of it, the bankruptcy trustee shall give thecreditor a notice rejecting the claim or part and specifying,the grounds for the rejection.

Bankruptcytrustee to givecreditor notice ofgrounds ofrejection.



the grounds for the rejection.

Bankruptcytrustee's power toobtain evidence ofdebt.

219. (1) The bankruptcy trustee may summon fOrexamination, and examine (on oath or otherwise), any of thefollowing persons:

(a ) a person who has submitted a creditor'sclaim;

(b ) a person who has made a declaration orstatement as part of a creditor's claim;

(c ) a person who is capable of givingevidence concerning a creditor's claimor the debt to which the claim relates.

(2) If a person who has been summoned underthis section fails to attend, or attends but refuses to be sworn

or give evidence, and has no reasonable excuse for doing so,the Court, on the bankruptcy trustee's application may—

(a) may issue a warrant directing the personto be arrested and brought before the


Court for examination; and

(b) if the Court believes that the person'sevidence was relevant to deciding

whether a creditor's claim should beallowed or rejected—make an orderdirecting the person to pay all or aspecified part of the expensesattributable to the arrest andexamination.

Notice bybankrupt orcreditor tobankruptcytrustee to allow orreject creditor'sclaim.

220. (1) The bankrupt or any creditor may give thebankruptcy trustee notice to allow or reject a creditor'sclaim.

(2 ) If the bankruptcy trustee has not made adecision allowing or rejecting the creditor's claim withinfourteen days after receiving the claim the creditor or the



fourteen days after receiving the claim, the creditor or thebankrupt may apply to the Court for an order undersubsection (3).

(3 ) On the hearing of an application made undersubsection (2), the Court shall—

(a) if i t f inds the claim to be substantiatedor partly substantiated—make an orderallowing the claim or partly allowing

the claim; or(b ) if it finds that the claim is wholly or

partly unsubstantiated—make an orderrejecting or pa rtly it,

and in either case may make such other order of an ancillarynature as it considers ap propriate.

Court may cancelcreditor's claim.

221. (1) The Official Receiver, the bankrupt or acreditor may m ake an application to the Court for an orderunder subsection (2) on the ground that the bankruptcy


trustee improperly allowed a creditor's claim.

(2) On the hedring of an application made undersubsection (1), the Court may make an order cancelling thecreditor's claim or reducing the amount claimed, if itconsiders that the claim was improperly allowed or wasimprop erly allowed in part.

2 2 2 . (1) A creditor whose claim has been rejected bythe bankruptcy trustee may apply to the Court to make anorder under subsection (3).

(2) An application can be made only withintwenty-one days after the creditor receives the bankruptcytrustee's notice of rejection of the claim, or within suchextended period as the Court may allow.

.(3) On the hearing of an application made undersubsection (1), the Court shall—

Power of court toquash or varybankruptcytrustee's decisionrejecting

creditor's claim.



(a ) if it considers that the bankruptcy

trustee's decision was whollyjustified—confirm the decision; or

(b ) if it considers that the decision was onlypartly justified—confirm the decision asto that part and quash the rest of thedecision,

but if it consider that the decision was wholly unjustified, itshall quash the d ecision.

(4) A creditor has no right to prove for a debt thathas been rejected by the bankruptcy trustee, unless thecreditor has made an application under this section.

2 2 3; (1) This section applies to an application madeunder section 220, 221 o r 222.

(2) If the applicant is not the bankruptcy trustee,

Applications tothe Court inrelation tocreditor's claim:who the parties to


the proceedingsare.

Court may makeorder as to costs.

the applicant shall serve a copy of the application on thebankruptcy trustee as a party to the proceeding.

(3 ) If the applicant is not the bankrupt or acreditor who is affected by the decision of the bankruptcytrustee, the applicant shall serve a copy of the application on

the bankrupt o r that creditor.(4 ) On being served with a cop y of the

application, the bankrupt or creditor may give notice to theCourt that the bankrupt or creditor wishes to appear and beheard at the hearing and, on doing so, becomes a party to theproceeding.

224. On the hearing of an application made undersection 220, 221 or 222, the Court may, if it considers itapprop riate to do so, make an order—

(a) directing specif ied costs of a creditor tobe added to the creditor's claim;



(b ) directing specified costs of a party tothe proceeding to be paid out of thebankrupt's estate; or

(c ) directing specified costs to be paid by aspecified party to the proceedings (otherthan the bankruptcy trustee).

Secured creditor'soptions in relationto property that issubject to acharge.

225. (1) If the property of a bankrupt is subject to acharge, the creditor who holds the charge may choose anoption specified in subsection (2).

(2) The options are as follows:

(a) Option 1: to realise the property byhaving it sold (but on ly if the creditor is

entitled to do so under the term s of thecharge); or




disposal of the property would be likely to provide a betteroverall outcome for the creditors of the bankrupt.

(3) An order under subsection (2) is subject to thecondition that the bankruptcy trustee apply towardsdischarging the amounts secured by the security—

(a ) the net proceeds of disposal of theproperty, and

(b ) any additional money required to beadded to the net proceeds so as toproduce the amount determined by theCourt as the net amount that would be

realised on a sale of the property atmarket value.

(4) If an order under subsection (2) relates tomore than one security, the bankruptcy trustee shall applythe money from the disposal in the order of the priorities ofthe securities.

( ) h f d f d d



Realisation ofproperty that issubject to asecurity.

(5) Within fourteen days after an order is made

under subsection (2), the bankruptcy trustee shall, not laterthan fourteen days after the date of the order, lodge a copyof the order with the Official Receiver for recording in thepublic register kept under Division 2 of Part X II.

(6) A bankruptcy trustee who, without reasonableexcuse, fails to comply with subsection (5) commits anoffence and on conviction is liable to a fine not exceeding

five hundred thousand shillings.

227. (1) A creditor who realises property that is subjectto a charge may prove as an unsecured creditor for anybalance due after deducting the net amount realised.

(2) However, subsection (1) does not apply if the

bankruptcy trustee has accepted a valuation and creditor'sclaim under section 230 (bankruptcy trustee's powers whensecured creditor values property subject to charge and


proves for balance).

(3) A secured creditor who realises prop ertysubject to a charge shall account to the bankruptcy trusteefor any surplus remaining after the following am ounts have

been paid:(a ) the amo unt of the debt;

(b ) interest payable on the debt up to thetime when it is paid;

(c ) any proper paym ents to the holder ofany other charge over the prop erty.

228. (1) This section ap plies to if a creditor who holdsa charge over a bankrupt's property has the property valuedand seeks to p rove as an unsecured creditor for the balancedue after deducting the am ount of the valuation.

(2) The creditor shall ensure that the valuation and

Valuation ofcharge held bycreditor and claimfor balance due.



(2) The creditor shall ensure that the valuation and

the claim for the balance—(a ) is made in the prescribed creditor's

claini form;

(b ) contains full particulars of the valuationand the debt;

(c ) contains full particulars of the charge

(including the date w hen it was given);and

(d ) identifies the documents (if any) thatsubstantiate the debt and the c harge.

(3) If required to d o so by the ban kruptcy trustee,the creditor shall produce for inspection the documents soidentified.

(4) Failure to com ply with subsection (2), or witha requirement of the bankruptcy trustee under subsection(3), renders the creditor's claim invalid.




before the creditor realises the property, redeem the chargeby paying the amount o f the valuation to the creditor.

(5) For the purpose of subsection (4), thebankruptcy trustee accepts the valuation and creditor's claim

if the bankruptcy trustee—(a ) accepts the original or an amended

valuation and creditor's claim; or

(b ) accepts a valuation and creditor's claimafter amending or revok ing a decisionto reject a valuation and creditor'sclaim.

231. (1) This section applies to a creditor who hasSurrendered a charge under op tion 3 in section 225(2) or istaken to have surrendered the charge under section 225(4).

(2) The creditor may, with the leave of the Court

Secured creditorwho surrenderscharge may w ithleave of the Courtwithdraw claim orsubmit a new



or the bankruptcy trustee and subject to the terms that theCourt or that trustee imposes—

(a ) withdraW the surrender and rely on thecharge; or

(b ) submit a new creditor's claim under thisDivision.

(3) Subsection (2) does not apply if thebankruptcy trustee has already realised the property that issubject to the charge.

claim

232. If a creditor's claim is subject to a contingency oris for damages, or if, for some other reason, the amount ofthe claim is uncertain, the bankruptcy trustee may estimate

the amount of the claim.

Bankruptcytrustee mayestimate amountof uncertain

creditor's claim.


Application to theCourt todetermine amountof uncertaincreditor's claim.

233. (1) If the bankruptcy trustee—

(a ) chooses not to estimate the amount of acreditor's claim in accordance withsection 23 2; or

(b ) has estimated the amoun t of the claimbut the creditor is dissatisfied with theestimate,

the creditor may apply to the Court to m ake an order undersubsection (2).

(2) On the hearing of an application made undersubsection (1), the Court shall make an order determ iningthe amount of the creditor's claim.

(3) The bankruptcy trustee is entitled to be servedwith a copy of the application and to appear and be heard atthe hearing of the app lication as responden t.



Creditor's claimpayable sixmonths or moreaftercommencementof bankruptcy.

234. (1) A creditor's claim that would, but for thebankruptcy, be payable six mon ths or more after thecom men cement of the bankruptcy is taken to be a claim forthe present value of the debt.

(2) The present value of the debt is to becalculated by deducting interest at the rate prescribed b y theinsolvency regulations for the period from the date on w hichthe bankruptcy commenced to the date when the debt wouldbe p ayable.

Bankruptcytrustee's dutywhen mutualdealings haveoccurred between

the bankrupt andother persons.

235. (1) If there have been mutual credits, mutual debtsor other mutual dealings between a bankrupt and anotherperson, the bankruptcy trustee shall—

(a) take an account of what is due from theone p arty to the other in respect of those


credits, debts or dealings;

(b ) set-off an am ount due from one p arty tothe other against an amount due fromthe other party; and

(c ) allow only the balance of the a ccount tobe proved in the bankruptcy.

(2 ) However,a person m ay not claim the benefitof a set-off against an amount due from the bankrupt if, atthe time w hen the credit was given to the ba nkrupt, theperson knew or had reason to know that the bankrupt was

insolvent at that time.(3 ) A creditor of the bankrupt who claims a set-

off shall declare in the creditor's claim form tha t, at the time. when the c reditor gave the bankrup t credit, the creditor did

not know and had no reason to know that the banknipt wasinsolvent at that time.

(4) The ban kruptcy trustee shall reject a claim



(4) The ban kruptcy trustee shall reject a claimform that does no t comp ly with subsection (3).

236. A creditor may claim interest up to the date onwhich the bankruptcy commences—

(a ) in the case of contract debt interest—atthe rate specified in the c ontract thatprovides for interest on the debt; or

(b ) in the case of judgmen t debt interest—at the rate payable on , the debt.

237. (1) The ban kruptcy trustee shall pay interest on allallowed cred itors' claims at the prescribed rate if surplusassets remain after the bankruptcy trustee has paid theclaims.

(2) The bankruptcy trustee' shall pay the interest

Creditor mayclaim pre-bankruptcyinterest.

Post-bankruptcyinterest payable at

prescribed rate ifsurplus remains.


from and including the date on which the bankruptcycommences to the date on which the debt is paid.

(3) If the surplus is not enough to pay the interestin full on all debts, payment of the interest is to abaterateably among those debts.

Example:

A and B are the only creditors of the bankrupt, C. A's conttprovided for interest of 20 p ercent but B's contract did not provideC's bankruptcy commenced on. 1 July 2012. At that date—(K.Sh100, 000 plus $10,000 contractual debt interest; and (2)K.Sh$2 00,000 but no interest. A can prove in the bankruptcy for $1B for KS2 00, 000.. The bankruptcy trustee pays their claims in fu2013, twelve months after the commencem ent of the bankruptcy.surplus assets after the bankrup tcy trustee has paid the claims offull, the bankruptcy trustee must use the surplus to pay interest orfor the period from 1 July 2012 to 1 July 2013. If there is eassuming that the prescribed rate is 10 percent, the bankruptcy tpay A K .Shl 1,000 and B KS2 0,000 in post-the bankruptcy intere:that the bankruptcy trustee has a surplus of only K.Sh1 5, 500. Inand B share pro rata so that A is paid K Sh5 500 in post the



and B share pro rata, so that A is paid K.Sh5, 500 in post-theinterest, and B is paid $10,000..

Additional post-bankruptcyinterest oncontract orjudgment debt ifsurplus remains.

238. (1) If there is a surplus after the bankruptcytrustee has paid post-bankruptcy interest as provided bysection 237, the bankruptcy trustee shall pay additionalinterest on allowed proofs for a contract debt or judgment

debt, by making up—(a) in the case of a contract debt—the

difference between the prescribed rateand the rate specified in the contract;and

(b) in the case of a judgment debt—thedifference between the prescribed rateand the rate payable on the debt.

(2) The bankruptcy trustee shall pay the additionalinterest from and including the date on which the


bankruptcy comm enced to the date on which the creditor'sclaim is paid.

(3), If the surplus is not enough to pay theadditional interest in full on the cred itors' claims that are

eligible for that interest, payment of the interest is to abaterateably among those claims.

239. For the purposes of sections 237 and 2 38, theprescribed rate of interest is the rate for the time beingprescribed by the insolvency regulations for the purposes ofthose sections.

Meaning pfprescribed rate forpurposes ofsections 237 and238.

240. A creditor shall deduct from the creditor's claimany trade discount that the creditor would have, given adebtor if the debtor had not becom e bankrupt.

41.

Creditor requiredto deduct tradediscounts'.



241. If a creditor's security over assets of the bankruptis wholly or partly void under a provision of this or anyother Act, the creditor mayprove as an unsecured creditor—

(a ) if the security is wholly void— for thewhole of the debt; or

(b ) if the security is partly void—to the

extent that the debt is unsecured.

242. A person w ho obtained an order for costs againstthe bankrupt before the com men cemen t of the bankruptcymay p rove for the amount of those costs even if that amountis not fixed until after that comm encem ent.

Secured creditorcan prove asunsecuredcreditor if securityis void or p artlyvoid.

Judgment creditormay prove forcosts.

243. (1) If a bankrupt is, at the com m encem ent of theCompany mayprove for unpaidcalls


bankruptcy, a shareholder of a company (not being acompany that is in liquidation), the company may provefor—

(a ) the amount of unpaid calls on the

bankrupt made before thatcommencement in respect of thebankrupt's shares; and

(b ) the value of the liability to calls to bemade during the twelve-month periodafter that commen cemen t.

(2) The value referred to in subsection (1)(b) is tobe estimated—

(a) as agreed by the bankruptcy trustee andthe company; or

(b ) if the bankruptcy trustee and thecompany cannot agree—as directed bythe Court.



When guarantorfor bankrupt mayprove claim.

244. (1) If, in relation to a bankruptcy—

(a ) a person is, at the commencement ofthe bankruptcy, a guarantor of, or isotherwise liable for a debt of, thebankrupt; and

(b ) the person discharge s. the debt orliability (before or after thatcommencement),

the person is entitled to the benefit to subsection (3) or (4),whichever is applicable to the person.

(3 ) If the creditor of the bankrupt has submittecta

creditor's claim for the debt or liability, the person maystand in the creditor's place in respect of the claim.

(4) If the creditor has not submitted a creditor's


claim form for the debt or liability—(a) the person may prove for the payment

that the person has made as if thepayment were a debt, without disturbingdividends already paid to the creditor inthe bankruptcy; and

(b) if the person does so, the person isentitled to receivedividends paidsubsequently.

Division 21 istribution of bankrupt's estate

245. In this Division, preferential claim means a claim Interpretation:in respect of a debt listed in paragraph 2, 3 or 4 of the ivision 21.

Second Schedule.



246. (1) For the purpose offtlis Act, a bankrupt'spreferential debts are those specified in paragraphs 2 to 4 ofthe Second Schedule and are payable as provided by thatSchedule in priority to the bankrupt's other debts.

(2) Debts of the bankrupt that are neitherpreferential debts nor debts to which section247 (debtsowed to bankrupt's spouse) applies also rank equallybetween themselves and, after the preferential debts, arepayable in full unless the bankrupt's estate is insufficient tosatisfy them, in which case they abate in equal proportionsamong themselves.

(3) Any surplus remaining after the payment ofthe debts referred to in subsection (2) is to be applied inpaying interest on those debts in respect of the periodsduring which they have been outstanding since thecommencement of the bankruptcy.

Preferential debts:priority of debts.


Priority ranking

(4) Interest on p referential debts ranks equallywith interest on debts that are not preferential debts.

(5) The rate of interest payable under subsection(4) in respect of a debt is the rate for the time being

prescribed by the insolvency regulations.(6) Neither this section no r section 247 limits the

effect of a provision of any written law under which thepaym ent of any debt or the making of any other paym ent is,in the event of bankruptcy, given a p articular priority orrequired to be postponed.

(7) If, before the comm encem ent of the

bankruptcy, a creditor agrees to accept a lower p riority inrespect of a debt than it would otherwise have under thissection, nothing in this section or the Second S cheduleprevents the agreement from having effect according to itsterms.



y gof debts owed tobankrupt'sspouse.

247. (1) This section applies to bankruptcy debts owe din respect of credit provided by a person who (whether ornot the bankrupt's spouse at the time the credit wasprovided) was the bankrupt's spouse at the comm encem entof the bankruptcy.

(2) Those debts—

(a ) rank in priority after the debts andinterest required to be p aid inaccordanc e with section 246(3) and (4),and

(b ) are payable with interest at the ratespecified in section 246(5) in respect ofthe period during which they have beenoutstanding since the commen cemen t of

the bankruptcy.(3) The interest payable under subsection (2)(b)


has the same priority as the debts on which it is payable.

248. If a payment has been made to a person on account

of a preferential creditor out of money advanced by anotherperson for that purpose, the other person has, in thebankruptcy, the same righ t of priority in respect of themoney so advanced as the preferential creditor would haveif the payment had not been made.

249. (1) If a landlord or other person has distrained ongoods or effects of the bankrupt during the twenty-eight dayperiod before the bankruptcy com menced, the preferentialclaims are a first charge on the goods or effects sodistrained, or the proceeds from their sale.

(2) However, if any m oney is paid to a claimantunder that charge, the landlord or other person has the samerights of priority as that claimant.

Person whomakes paymenton account ofpreferentialcreditor to besubrogated to therights of thatcreditor.

Priority given tolandlord or otherperson whodistrains on goodsand effects ofbankrupt.



250. If a bankrupt is a partner of a firm, any creditor towhom the bank rupt is indebted jointly w ith the otherpartners of the firm is not entitled to receive money obtainedfrom the realisation of the bankrupt's separate property untilthe claims of all of the other creditors have been paid in full.

Creditors to havepriority overcreditors of joint.

bankrupt.

251. (1) On realising the bankrupt: s estate or so m uchof it as can be realised without needlessly protracting thebankruptcy trusteeship, the bankruptcy trustee shall givenotice either—

(a ) of an to declare a finaldividend; or

(b ) that no dividend, or further dividend,

Final distributionof bankrupt'sestate.


will be declared.

(2) The bankruptcy trustee shall include in thenotice the prescribed information and a statement thatrequires all claims against the bankrupt's estate to be

established by a final date specified in the no tice.(3) The Court may, on the application of any

person, the Court may make an order postponing the finaldate.

(4) After the final date, the bankruptcy trusteeshall—'

(a ) pay any outstanding expenses of thebankruptcy out of the bankrupt's estate;and

(b ) if the bankruptcy intends to declare afinal dividend— declare and distributethat dividend without regard to theclaim of any person in respect of a debt



not already proved in the bankruptcy.(5) After—

(a ) paying the interest referred to in section237 (post-bankruptcy interest payable atprescribed rate if surplus remains); and

(b ) paying in full the claims referred to insection 246 (preferen tial. debts: priorityof debts),

the bankruptcy trustee shall pay any surplus to the bankrupt.

(6) Subsection (5) is subject to section 213 (howbankruptcy trustee is to use repayment of bankrupt'scontribution to prop erty).

Final meeting ofcreditors.

252. (1) Subject to this section, if—

(a) it appears to the bankruptcy trustee that


the administration of the bankrupt'sestate in accordance w ith this Divisionis for practical purposes com plete; and

(b) the bankruptcy trustee is not the OfficialReceiver,

the bankruptcy trustee shall summ on a final general m eetingof the bankrupt's creditors.

(2) The final general m eeting of the bankrupt'screditors shall—

(a ) receive and consider the bankruptcytrustee's report of the adm inistration ofthe bankrup t's estate; and

(b ) determine whether the bankruptcytrustee should be released under section77.

(3) The bankruptcy trustee may give the noticesumm oning the final general meeting at the same tim e asgiving notice under section 251 (1).



(4) If the final general meeting is summoned for,an earlier date, the bankruptcy trustee shall adjourn themeeting (and, if necessary, further adjourn the m eeting)until a date on which the bankruptcy trustee'is able to reportto the meeting that the administration of the bankrupt'sestate is for practical purposes co mp lete.

(5) In the administration of the estate it is thebankruptcy trustee's duty to retain sufficient sums from theestate to cover the expenses of summ oning and holding thefinal general meeting.

(6) If—

(a) the bankrupt's estate property consistsof or includes an interest in a dwellinghouse that is occupied by the bankruptor the bankrupt's spouse or former


spouse; and

(b) the bankruptcy trustee has for anyreason been unable to realise thatproperty,

the bankruptcy trustee m ay not summ on a final generalmeeting unless one o f the conditions specified in subsection(6) has been satisfied.

(7) The cond itions are as follows:

(a ) the Court has made an order undersection 142 imposing a charge on thatproperty for the bene fit of thebankrup t's estate;

(b ) the Court has declined, on anapplication under that section, to makesuch an order;

(c ) the Attorney General has issued acortificate to the bankruptcy trusteestating that it would be inapp ropriate for

h li i b d



such an application to be made.

Division 22 ischarge of bankrupt from bankruptcy

Automatic

discharge threeyears afterbankrupt lodgesstatement ofaffairs.

253. (1) A bankrupt is automatically discharged frombankruptcy three years after the bankrupt lodged a statementof affairs in accordance with section 50 (bankrupt to lodgestatement of affairs with bankruptcy trustee), but m ay app lyto be discharged ea rlier.

(2) How ever, a bankrupt is not autom aticallydischarged if—

(a) the bankruptcy trustee or a creditor hasobjected under section 255 (objection toautomatic discharge) and the objection


has not been withdrawn by the end ofthe three-year period referred to insubsection (1);

(b ) the bankrupt has to be publicly

examined in acco rdance with section179 (conduct of public exam inationbefore the Court) and has not com pletedthat examination; or

(c ) the bankrupt is undischarged from anearlier bankruptcy.

254. The automatic discharge of the bankrupt has thesame effect as if the Court made an order for the bankrupt'sdischarge.

255. (1) The bankruptcy trustee, the O fficial Receiver

(if not the bankruptcy trustee) or with the p ermission of thed b b k

Effect ofautomaticdischarge.

Right of creditorto object toautomatic



(if not the bankruptcy trustee) or, with the p ermission of theCourt, a creditor may object to a bankrupt's automaticdischarge.

(2) The objection must be made in the mann er andform p rescribed by the insolvency regulations.

automaticdischarge.

256. (1) An objection to the autom atic discharge of thebankrupt may be withdrawn in the man ner prescribed by theinsolvency regulations.

(2) A . bankrupt is automatically discharged on thewithdrawal of the objection if—

(a ) the three-year period referred to insection 253(1) has elapsed; and

there is no other o bjection to thedischarge that has not been w ithdrawn;

(b )

Objection can bewithdrawn.


and

(c) neither section 253(2)(b) nor (c)applies.

Bankrupt mayapply for earlydischarge.

257. (1) A bankrupt may at any time apply to the Courtfor an order of discharge from ban kruptcy.

(2 ) However, if the Court has p reviously refusedan app lication by the ban krupt for a discharge, and hasspecified the earliest date when the ban krupt m ay againapply, the bankrupt may not make another applicationbefore that date.

(3 ) The Court shall hear an application madeunder subsection (1) in the manner prescribed by section179 (conduct of exam ination by the Court).

When bankrupt isto be publicly

examined beforethe Court

258. (1) The bankruptcy trustee shall summon thebankrupt to be publicly examined before the Courtconcerning the bankrupt's discharge if—



the Courtconcerningdischarge.

concerning the bankrupt s discharge if

(a ) the bankruptcy trustee or a creditor hasobjected to the bankrupt's automaticdischarge and the objection has notbeen w ithdrawn;

(b) the bankrupt i s due for automatic

discharge but is still undischarged froman earlier bankruptcy;

(c ) the bankrupt has been required to bepublicly examined in accordance w ithsection 179 (conduct of pub licexamination before the Court) and hasnot com pleted that examination.

(2) The banIcruptc'y trustee shall summ on thebankrupt as soon as practicable after the end of the three-


year period referred to in section 253(1).

(3) The provisions of Division 17 (Powers o fbankruptcy trustee and Court to examine bankrupt and

others), so far as relevant, apply with any necessarymodifications to a public examination under this section.

259. (1) The bank ruptcy trustee shall prepare a reportand lodge it with the Court when—

(a ) the bankrupt has applied under section257 fOr a discharge; or

(b ) the bankruptcy trustee has summ onedthe bankrupt to be examined inaccordance with section 258.

(2) The bankruptcy trustee shall include in thereport a comprehensive review of—

(a ) the bankrupt's affairs;

B a n k r u p t c yt rus tee to lodgerepor t wi th theCour t i n s pec i f i edc i r c um s t a n c es .



(a ) p ;(b ) the causes of the bankruptcy;

(c ) the bankrupt's performance of thebankrupt's responsibilities under thisAct;

(d ) the manner in which, and the extent to

which, the bankrupt has complied withorders of the Court;

(e ) the bankrupt's conduct before and afterthe commencement of the bankruptcy;and

(f ) any other matter that is likely to assistthe Court in making a decision as to

whether or not to discharge thebankrupt.

4880 h e I n s o l ve n c y B i l l 2 0 1 2

When creditorrequired to givenotice ofopposition todischarge.

Power of theCourt to grant orrefuse discharge.

260. (1) A creditor shall give to the bankruptcy trusteeand the bankrupt a notice that complies with subsection (2)if the creditor intends to oppose the bankrupt's discharge ona ground that is not mentioned in the bankruptcy trustee's

report.(2) A notice complies with this subsection if it—

(a ) specifies the ground or wounds foropposing the discharge; and

(b ) is given within the period prescribed bythe insolvency regulations for thepurposes of this section.

261. (1) On hearing an application made under section257 (bankrupt may app ly for discharge), or the holding of apublic examination of the bankrupt under section 258 (whenbankrupt is to be publicly examined before the Courtconcerning discharge), the Court may—

(a ) immediately discharge the bankrupt;



(a ) immediately discharge the bankrupt;

(b ) discharge the bankrupt on conditions(which may include a condition that the •bankrupt consents to a judgment ororder for the payment of any sum ofmoney);

(c ) discharge the bankrupt but suspend theorder for a specified period; or

(d ) discharge the bankrupt, with or w ithoutconditions, at a specified future date,

or may refuse to make an order of discharge, in which casethe Court may specify the earliest date when the bankruptmay reapply for discharge.

(2) If the Court discharges the bankrupt on theCondition that the bankrupt consents to any judgment, and


the bankrupt does consent, the Court may vary the judgmentto such extent as it considers appropriate.

262. (1) On making an order of discharge or at anyearlier time, the Court may prohibit the bankrupt f rom doingafter discharge all or any of the following w ithout theCourt's permission:

(a ) entering into, carrying on, or taking partin the management or control of anybusiness or class of business;

(b ) being a director of a company or apartner of a firm;

(c ) directly or indirectly being concerned,or taking part, in the management ofany company;

(d ) being employed by a relative of thebankrupt;

(e) being employed by a company, trust or

Court may restr ic t

bankrup t f romengag ing inbus iness afterdischarge.



other body that is managed orcontrolled by a relative of the bankrupt.

(2) The Court may impose such a prohibition foraspecified period, or w ithout specifying a time limit.

(3 ) The Court may at any time vary or cancel a

prohibition imposed under this section.

263. (1) The bankruptcy trustee or a creditor of thebankrupt may make an application to the Court for an orderunder subsection (2).

(2) On the hearing of an application made under

subsection (1), the Court may make an order quashing thedischarge of a bankrupt at any time before—

(a) in the case of an a bsolute d i scharge—

Cour t may quashorder dischargingbankrupt .


two years after the discharge; or

(b) in the case of a discharg e that isconditional or suspended—tw o yearsafter the discharge has taken effect.

(3) The Court may make an order quashing adischarge only if it is satisfied that facts have beenestablished that—

(a ) were not know n to it when it m ade theorder of discharge; and

(b ) had it known of them, w ould havejustified it in refusing a discharge or in

imposing conditions in respect of thedischarge.

(4) The Court may not make an order q uashing adischarge if the facts relied on by the applicant, at the timewhen it made an order discharging the bankrupt—

(a ) were known to the applicant; or

(b ) could have been know n if the applicanthad inqu ired with reasonable diligence



had inqu ired with reasonable diligence.

(5) If the Court makes an order q uashing adischarge, it may then, or at any time afterw ards, make anew o rder of discharge.

(6) Such an order m ay be absolute, be suspendedfor a specified period or be made subject to conditions.

(7) The Court m ay not hear an application madeunder subsection (1) unless it is satisfied that the bankrupthas been given notice of the application (including thegrounds relied on by the applicant).

Effect of quashing

order dischargingbankrupt frombankruptcy.

264 . (1) The quashing of a discharge does not affectthe rights or remedies that a person other than the bank ruptwould have had if the discharge had not been quashed.


(2 ) If property acquired by the bankrupt afterdischarge is owned by the bankrupt at the date when theorder quashing the discharge is made, the property vests inthe bankrup tcy trustee subject to any securities or other

encumbrances.(3 ) The bankruptcy trustee shall apply any such

property in paying the debts that the bankrupt has incurredsince the date of discharge.

265. (1) A bankrupt may apply to the Court for an

absolute discharge even though the bankrupt is not able tocomply with any or all of the conditions of the bankrupt'sdischarge.

(2) The Court may discharge the bankruptabsolutely if satisfied that the bankrupt's inability to com plywith the conditions is due to circumstances for w hich the..bankrupt should not reasonably be held responsible.

Bankrupt may

apply for absolutedischarge onground thatconditions ofdischarge are tooonerous.



266. (1 ,) On b eing discharged, a bankrupt is releasedfrom all debts provable in the bankruptcy except those listedin subsection (2).

(2) The debts from w hich the bankrupt is notreleased are the following:

(a ) any debt or liability incurred by fraud orfraudulent breach of trust to which thebankrupt was a party;

(b ) any debt or liability for which thebankrupt has obtained forbearancethrough fraud to which the bankruptwas a party;

(c ) any judgment debt or amount payableunder any order for which the bankruptis liable under section 149 (bankrupt

Debts from whichbankrupt isreleased ondischarge.


Cap. 8.

can be required to co ntribute topaym ent of debts) or section 261 (Courtma y grant or refuse discharge);

(d ) amo unts payable under a Court ordermad e under the M atrimonial CausesAct;

(e ) amo unts payable under the ChildrenAct.

Discharge to be

conclusiveevidence ofbankruptcy andthe validity ofbankruptcyproceedings.

Discharge not to

release partners ofbankrupt and

267. A discharge of a bankrupt from bankruptcy isconclusive evidence of the ba nkruptcy and of the validity ofthe proceed ings in course of the bankrup tcy.

268. The discharge of a bankrupt does not release aperson who, at the comm encem ent of the bankruptcy, was—



others. (a ) a business partner of the bankrupt;

(b ) a co-trustee with the bankrupt;

(c ) jointly bound or had m ade any contractwith the bankrupt; or

(d ) a guarantor or in the nature of aguarantor of the bankrupt.

Dischargedbankrupt to assistbankruptcytrustee.

269. (1) A person who is discharged from bankrup tcyshall assist the bankruptcy trustee, as required by the Courtor the bankruptcy trustee, in the redlisation and distributionof the prop erty of the person that is vested in that trustee.

(2) If a person who has been discharged frombankruptcy fails to comp ly with subsection (1), the Courtmay, on the application of the bankruptcy trustee, order the

T h e I n s o l v e n c y B i l l 2 0 1 2

person to provide the bankruptcy trustee with suchassistance as is specified in the order.

270. If the Court refuses to discharge a bankrupt or

makes an order discharging the bankrupt but suspends thedischarge, the Of ficial Receiver shall record thatinformation in the relevant public register kept the O fficialReceiver under D ivision 2 of Part XII.

M a d R e c e i v e r

t o r e c o r d i n p u b l icr e g i s t e r d e c i s i o no f t h e C o u r tr e f u s i n g t od i s c h a r g eb a n k r u p t , e t c .

Division 23—Annulment of bankruptcy orders

271. (1) The Official Receiver or any other personclaiming to have a legitimate interest in the matter maymake an application to the Court for an order undersubsection (2).

(2) On the hearing of an application made under

subsection (1), the Court may annul a bankruptcy ordermade in respect of a bankrupt if—

C o u r t m a y a n n u lb a n k r u p t c y o r d e ri n c e r t a i nc i r c u m s t a n c e s .



p p

(a ) on reconsideration it fmds that thebankrupt should not have been adjudgedbankrupt;

(b ) it is satisfied that the bankrupt's debtshave been fully paid or satisfied andthat the bankruptcy trustee's fees andcosts incurred in the bankruptcy havebeen paid;

(c ) it considers that the liability of thebankrupt to pay the bankrupt's debtsshould be revived because there hasbeen a substantial change in thebankrupt's financial circumstancessince the bankruptcy commenced; or

4 8 1 6he Insolvency Bill, 2012

(d) it has approved a voluntary arrangementunder Division 1 o f Part IV.

(3) If an app lication is made by an applicant otherthan the Official Receiver on one of the grounds spec ified insubsection (2)(a) to (c)—

(a ) the applicant shall serve a copy of theapplication on the Official Receiver inthe manner and w ithin the perioddirected by the Court; and

(b ) on being served with a copy of theapp lication— the Official Receiver isentitled to ap pear at the hearing of the

application as a party to the proceeding.(4) A bankruptcy order is annulled—

(a) in the case of an application made onthe ground specified in subsection(2)(a)—from the time when it wasmade; or

(b ) in the case of an application m ade onone of the grounds specified insubsection (2)(b) to (d) from the time



subsection (2)(b) to (d)—from the timewhen the Court mad e the order ofannulment.

(5) If an app lication for annulm ent is made on theground that the bankrupt should not have be en adjudgedbankrupt because of a defect in fdrm or p rocedure, the Courtmay, in addition to annulling the bankruptcy order, exerciseits powers under section 699 to correct the defect and orderthat the bankruptcy application be reheard as if nobankruptcy order had been made.

(6) If a bankruptcy order is ann ulled on ope of thegrounds specified in subsection (2)(a) to (c)—

(a) the Court may, on the OfficialReceiver's application, fix an amount as


reasonable remune ration for the OfficialReceiver's services and ord er that it bepaid, in addition to any costs thit maybe awarded;

(b) the Official Receiver shall pay that

amo unt into the Consolidated Fund orinto some Other public accountprescribed by the insolvency regulationsfor the purposes of this section; and

• (c) the Official Receiver is not entitled toremuneration under section 710 forthose services.

272. (1) The Official Receivqr may annul a ban kruptcy.order on any o f the grounds spec ified in subsection (2), butonly if the order was made on a debtor's application.

(2) The grounds for annulm ent by the OfficialReceiver are as follows:

(a ) that the O fficial Receiver considers thatth b k t h ld t h b

When OfficialReceiver maya n n u l b a n k r u p t c yo r d e r.



the bankrupt should not have beenadjudged bankrupt;

(b ) that the Official Receiver is satisfiedthat the bankrupt's debts have beenfully paid or satisfied and that the

bankrup tcy trustee's fees and costsincurred in the bankruptcy have beenpaid;

(c ) that the Official Receiver considers thatthe liability of the bankrupt to pay thebankrupt's debts should be revivedbecause there lias been a substantialchange in the bankrupt's financialcircumstances since the bankruptcycommenced;

4 8 8 8 he Insolvency Bill 2012

Effect ofannulment ofbankruptcy order.

(d) that the Court has approved a voluntaryarrangement under Division 1 of PartIv.

(3 ) The Of ficial Receiver may annul thebankruptcy order on the application of any person interestodor on the Official Receiver's own initiative.

(4 ) The annulment of bankruptcy order undersubsection (3) takes effect—

(a ) in the case of an application on theground specified in subsection (2)(a)—from the time when the order was

originally made; and:(b ) in the case of an application on one of

the grounds specified in subsection(2)(b) to (d)—from the time of theOfficial Receiver's order of annulment.

273. (1) On annulmen t of a bankruptcy order, allproperty of the bankrupt vested in the Official Receiver onb k d ld h i di d f b h



bankruptcy and not sold or otherwise disposed of by theOfficial Receiver revests in the bankrupt without the needfor a transfer.

(2) A contract, sale, disposition or payment dulymade, or any action duly taken by the Official Receiver

before the annulment—(a ) is not affected as to its validity by the

annulment; and

(b ) has effect as if no bankruptcy order hadbeen made in respect of the bankrupt.

Division 24— Composition during bankruptcy



274. In this Division—

confirming resolution means a special resolutionpassed by a bankrupt's creditors in accordance with section275 confirming a preliminary resolution;

preliminary resolution meads a special resolutionpassed by a bankrupt's creditors in accordance with section275.

275.- (1) The creditors of a bankrupt m ay'accept acomp osition in satisfaction of the debts due to them from thebankrupt by p assing a special resolution that contains theterms of the com position.

(2) If there is more than o ne class of creditors, thedelay of one class in accep ting, or the failure of one class toaccept, does not prevent any other of the classes fromaccepting the com position.

Creditors mayacceptcomposition bypassingpreliminaryresolution.

Composition notff ti l

276. (1) A com position is ineffective only when the



effective unlessapproved byconfirmingresolution.

( ) p ycreditors have passed a sp ecial resolution confirming thepreliminary resolution.

(2) In the con firming resolution, the creditors m ayvary the terms of the com position set out in the preliminaryresolution, if the terms as varied are at least as favourable tothe creditors as those set out in the preliminary resolution.

(3) The notice of the meeting convened to p assthe confirming resolution is ineffective unless it—

(a ) states generally the terms of theproposal for comp osition; and

(b ) is accompa nied by a report by the

Official Receiver on that proposal.(4) If the proposal for com position provides for




qualifying, or suspending the bankrupt'sdischarge; or

(d) for any other reason it should notapprove the composition.

(4 ) The Court may not approve a composition ifthe composition does not provide for the payment, beforeany other debts are paid, of those debts that have priorityunder the Second Schedule.

(5 ) The Court's approval is conclusive as to thevalidity of the composition.

279. (1) The bank rupt or the Official Receiver mayapply to the Court to approve the composition.

(2) The Court may hear the ap plication only ifsatisfied that each creditor who has subm itted a claim in thebankruptcy has been given notice of it.

(3) Before approving the composition, the Courtshall—

(a ) receive and consider a report by the

Procedure forcourt approval ofcomposition.



(a ) receive and consider a report by theOfficial Receiver regarding the terms ofthe composition and the bankrupt'sconduct; and

(b ) hear any objection by or on behalf of a

creditor.(4) When it approves the composition, the Court

may correct any form al or accidental error or omission, butmay not alter the substance of the composition.

280. (1) As soon as practicable after the Court ha sapproved a composition—

(a) the-bank rupt and the Of ficial Receivermust execute a deed of compo sition for

Deed of

composition to beexecuted.


Effect of deed ofcomposition.

putting the proposal into effect; and

(b) the Official Receiver shall apply to theCourt for confirmation of the deed.

(2) If it is satisfied that the deed con forms w iththe comp osition that it has earlier app roved, the Courtshall—

(a ) direct that the deed be lodged in theCourt; and

(b ) on lodgement of the deed—quash therelevant bankruptcy order.

(3) The deed may not be entered and lodged in theCourt unless the prescribed commission has been paid to theOfficial Receiver.

(4) The quashing under subsection (2) does notrevest the bankrupt's property in the bankrupt in accordancewith section 273(1) (effect of annulment).

281. When the Court has confirmed the deed andquashed the bankruptcy order—



No. 3 of 2012

(a ) the deed b inds all the creditors in allrespects as if they had each executed thedeed; and

(b ) subject to the provisions of the Land

Registration Act, 2012— the bankrupt'sproperty to wh ich the deed relates vests,and must be dealt with, as provided bythe deed.

Bankrupt remainsliable for unpaid

balances ofcertain debts.

282. (1) A bankrupt who m akes a composition with the

bankrupt's creditors remains liable for theunpaid balance ofa debt if-

T h e I n s o l v e n c y B i l l 2 0 1 2 8 9 3

(a) the bankrupt, by means of fraud—

(i) incurred or increased the debt; or

(ii) on or before the date of thecomposition, obtained forbearanceon the debt; and

(b) the creditor who has been defrauded hasnot agreed to , the composition.

(2) For the pur poses of subsection (1)(b), acreditor does not agree to the composition merely byproving the debt and accepting payment of a distribution ofthe assets in the estate.

281. (1) The deadlines for steps to approve thecomposition and execute the deed are as follows:

(a ) the confirming resolution must bepassed within one month after the

.preliminary resolution is passed;(b ) the Court must approve the composition

within one month after the confirming

Deadlines forsteps to approvecomposition andexecute deed.



within one month after the confirmingresolution is passed;

(0) the bankrupt must execute the deed ofcomposition within seven days after theCourt approves the composition or, if

the Court allows the bankrupt additionaltime, within that time.

(2) If a deadline is not met—

(a ) immediately on the expiry of thedeadline—the bankruptcy proceedingsresume as if there had been noconfirming resolution; and

(b ) done or the,peiiods specified inSubsection (1) counts for the purpose ofcalculating a period of time for a


purpose of this Act.

Procedurefollowing

approval ofcomposition bythe Court.

284. (1) The Registrar of the Court shall, afterrecording the deed of composition—

(a ) endorse on the deed that it has beenrecorded in the Court registry; and

(b) i f requested to do so by the Off ic ia lReceiver—deliver the deed to theOfficial Receiver.

(2) As soon as practicable after the deed has beenrecorded in the Court registry, the Official Receiver shall—

(a ) take all steps necessary to have anyVesting provided for in the deedregistered or recorded in the appropriatepublic registry or office; and

(b ) then return the deed to the Registrar of

the Court.(3) The Official Receiver shall, subject to the

provisions of the deed, give possession to the bankrupt or



How compositionmay be enforced.

provisions of the deed, give possession to the bankrupt orthe trustee under the composition of—

(a ) the bankrupt's property; or

(b ) so much of the bankrupt's property as isunder the con trol of the OfficialReceiver and that under the compositionrevests in the bankrupt or thebankruptcy trustee.

285. (1) On the application of any peison aggrieved bya failure to pay an amount payable in accordance with acomposition approved by the Court, the Court may orderthat the failure to pay be remedied.

(2) On the application of a person who claims to


have an interest in a composition approved by the Court, theCourt may make an order enforcing the provisions of acomposition.

286. (1) After the preliminary resolution has beenpassed, the Court continues to have ex clusive jurisdiction inrelation to the com position and the deed of composition, andtheir administration.

(2) On an application in relation to thecomposition, the deed of com position, or their

administration, the Court—(a ) for the purpose of summoning and

examining the bankrupt andwitnesses—may direct the proceedingas if it were a proceeding underDivision 17; and

(b ) may make such order or ordeis as itconsiders appropriate, including anorder as to the costs of the application.

Jurisdiction of theCourt in relationto com positionand deed ofcomposition.



287. The Court shall decide a question arising under adeed of composition according to the law and practice ofbankruptcy, in so far as that law and practice is relevant.

Law and practicein bankruptcy toapply to deed ofcomposition.

Division 25— Bankruptcy offences

288 . (1) A bankrupt commits an offence if the bankruptdid not, when contracting a debt, have the capacity to pay

the debt w hen it fell due for payment, as w ell as to pay allthe bankrupt's other debts.

(2) A bankrupt commits an offence if the bankrupt

Offences inrelation to debts.


Offences inrelation toproperty.

has materially contributed to, or increased the extent of, thebankrupt's insolvency—

(a) by gambling;(b) by engaging in rash and hazardous

speculation;(c) by unjustifiable spending; or(d) by living extravagantly.

(3) In proceedings for an offence under subsection(1) or (2), it is a defence to prove that, at the relevant time,the bankrupt had no intention to defraud:

289. (1) A bankrupt commits an offence if the •

bankrupt--(a) conceals, or removes from Kenya, any

part of the bankrupt's property—

(i) during the two monthsimmediately preceding the date onwhich an unsatisfied judgment or

d f t f



order for payment of money wasmade against the bankrupt; or

(ii) at any time after such a judgmentor order was made; or

(b) with intent to defraud any of thebankrupt's creditors-(i) makes or causes to be made a gift,

delivery or transfer of any part ofthe bankrupt's property; or

(ii) gives or causes to be given acharge over any part of thatproperty.

(2) A bankrupt commits an offence if, during thetwo years immediately preceding the making of the


application to the Court for a bankruptcy, order in respect ofthe bankrupt, or at any time after.the application w as made,the bankrupt—

(a ) conceals any part of the bankrupt's

property to the value of fifty thousandshillings or m ore;

(b ) conceals any debt due to the bank rupt ordue from the bankrupt; or

(c ) fraudulently moves any part of thebankrupt's property to the value of fiftythousand shillings or m ore.

(3 ) In proceedings for an offence under subsection(1)(a), it is a defence to prove that, at the relevant time, thebankrupt had no intention to defraud any of the bankrupt'screditors.

(4 ) in proceedings for an offence under subsection(2)(a) or (b), it is'a defence to p rove that, at the relevanttime, the bankrupt had no intention to defraud.

290 (1) A bankr upt comm its an offence if during the Offence in



290. (1) A bankr upt comm its an offence if, during thethree years immediately preceding the time when thebankruptcy order was made in respect of the bankrupt, thebankrupt makes or produces to a material person a writtenstatement of the bankrup t's affairs that contains informationthat is false or misleading.

(2) The follow ing persons axe m aterial persons forthe purposes of subsection (1):

(a ) a person who is at the relevant time thebankrupt's creditor;

(b ) a person.who becom es the bankrupt's

creditor as a result of the statementbeing made or produced to the person.

(3) In proceedings for an offence un der subsection

Offence inrelation to writtenstatement tocreditor, etc.


(1), it is a defence to prove that at the relevant time thebankrupt had no intention to deceive.

Offence inrelation todocuments, etc.

291. (1) A bankrup t commits an offence if, during thetwo years imm ediately preceding the making of theapplication to the Court for a bankruptcy order in respect ofthe bankrupt, or at any time after the application was made,the bankrupt—

(a ) conceals, destroys, mu tilates or falsifies,or is a party to the concealment,destruction, mutilation or falsificationof, any document affecting, or relatingto, the bankrupt's conduct, affairs orproperty;

(b ) makes, or is a party to the making of,any false entry in any documentaffecting, or relating to, the bankrupt'sconduct, affairs or property;

(c ) fraudulently parts with, alters, or makesany omission in, or is a party tofraudulently parting with altering or



fraudulently parting with, altering, ormaking an om ission in, any documentaffecting, or relating to, the bankrupt'sconduct, affairs or property; o r •

(d ) prevents the production of anydoCument relating to the bankrupt'sconduct, affairs or property to anyperson to whom the bankrupt has anobligation under this Part to produce thedocument.

(2) In proceedings for an offence und er subsection(1)(a), (b) or (d), it is a defence to prove that, at the relevanttime, the bankrupt had no intention to conceal the state oft h e b a n k r u p t 's a f f a ir s o r to d e f e a t th e l a w ,

T h e I n s o l v e n c y B i l l 2 0 1 2 899

292. A bankrupt commits an offence if, during thetwelve months imm ediately preceding the m aking of theapplication to the Court for a bankruptcy order in respect ofthe bankrupt, or at any time after the application w as made,the bankrupt attempts to account for any part of the

bankrupt's property by means of fictitious losses orexpenses.

Offence inrelation tofictitious losses orexpenses.

293. (1) A bankru pt comm its an offence if, during thethree years preceding the mak ing of the application to theCourt for a bankruptcy order in respect of the bankrupt, or atany time after the application w as

(a ) thehe bankrupt obtains property on creditand has not paid for the property; and

(b ) the bankrupt obtains the property-

(i) by making a false representationor doing some other fraudulentact;

(ii) by falsely stating the position ofthe bankrupt's financial affairs; or

(iii) d h f l f

Offences inrelation to credit,etc.



(iii) under the false pretence ofcarrying on business and dealingin the ordinary course of trade.

(2) A bankrupt commits an offence if, during the

three years immediately preceding the mak ing of theapplication to the Court for a bankruptcy order in respect ofthe bankrupt, or at any time after the application was made,the bankrupt (otherwise than in the ordinary course ofbusiness) pawns, mortgages, pledges or disposes *ironyproperty that the bankrupt has obtained but for which thebankrupt has not made paytnent.

(3) In proceedings for an offence under subsection


(1) or (2), it is a defence to prove that, at the relevant time,the bankrupt had no intention to defraud.

Offences inrelation toobtaining consentof creditors.

294. A bankrupt commits an offence if the bankrupt—(a) makes a false representation; or(b) does any other fraudulent act,

for the purpose of obtaining the consent of any one or moreof the bankrupt's creditors to any agreement with referenceto the bankrupt's affairs or the bankrupt's bankruptcy.

Offence forbankrupt to leaveKenya withoutconsent.

295. (1) A bankrupt commits an offence if, during thetwelve months immediately preceding the making of theapplication to the Court for a bankruptcy order in respect ofthe bankrupt, or at any time after the application was made,the bankrupt—

(a) leav'es Kenya (either temporarily orpermanently) and takes with thebankrupt any part of any property to thevalue of one hundred thousand shillingsor more that by law ought to be



or more that, by law, ought to bedistributed among the bankrupt'screditors;

(b) attempts to leave and to take any part of

that property; or(c) prepares to leave Kenya (either

temporarily or permanently) whilebeing in possession of any part of thatproperty.

(2) In proceedings for an offence under subsection(1), it is a defence to prove that, at the relevant time, thebankrupt had no intention to defraud.


296. A bankrupt w ho is found guilty of an offence undera provision of sections 288 to 295 is liable on conviction toa fine not exceeding two million shillings or toimprisonment for a term not exceeding five years, or toboth.

General penaltiesfor bankruptcyoffences.

297. (1) A bankrup t comm its an offence if, at any timeduring the three years immediately preceding the date onwhich the bankrupt w as adjudged bankrupt—

(a ) the bankrupt had failed to keep andpreserve a record of the bankrupt'stransactions for the period; and

(b ) because of the nature of the bankrupt'sbusiness or occupation, the bankruptmight reasonably be expected to havekept such a record.

(2) A bankrupt w ho is found guilty of an offenceunder subsection (1) is liable on conviction to a fine n ot

exceeding one m illion shillings.or to imprisonm ent for aterm not exceeding tw elve months, or to both.

Failure to keepand preserveproper record of .transactions.



298. (1) A bankrupt com mits an offence if, w ith intentto conceal the true state of the bankrup t's affairs, thebankrupt has fa iled to keep and preserve a proper record ofthe bankrupt's transactions.

(2) A bankrupt who is found pilty of an offenceunder subsection (1) is liable on conviction to a fine notexceeding one m illion shillings or to im prisonment for aterm not exceeding tw o years, or to both.

Failure to keep-proper recordswith intent toconceal.

299. (1) For the purposes of sections 297 and 298, a hen bankruptbankrupt is, in the absence of evidence to the contrary, resumed not to ,


have kept orpreserved properrecords.

presumed not to have kept a prop er record of the bankrupt'stransactions if, being engaged in a trade or business, thebankrupt has not kep t the required records.

(2) For the p urpose o f subsection (1), the requiredrecords are those needed to e xplain the bankrupt's

transactions and financial position in the b ankrupt's trade orbusiness, and includes—

(a) a record containing entries from day today in sufficient detail of all cashreceived and cash p aid;

(b) if the bankrupt's trade or business hasinvolved dealing in goods—

(i) a record of all goods sold andpurchased; and

(ii) detailed stock sheets of annual andother stock takings showing thequantity and the valuation m ade ofeach item of stock on hand; and

(c) if the bankrupt's trade or business hasinvolved supplying services—details ofthose services.

(3) For the purposes of sections 297 and 298 a



(3) For the purposes of sections 297 and 298, abankrupt is, in the absence of evidence to the contrary,presunied not to have preserved a prop er record of thebankrupt's transactions if the bankrupt has not preserved—

(a ) the records listed in sub section (2) (ifapplicable);

(b ) a record of all goods purchased in thecourse of the bankrupt's business (withthe original invoices); and

(c ) a daily record of all goods sold oilcredit.


300. (1) A bankrupt who—

(a ) acts or purports to act as a director of acompany; or

(b ) fails without reasonable excuse tocomply w ith section 151 (prohibition ofbankrupt entering business),

comm its an offence:

(2) A person w ho is found guilty of an offenceunder subsection (1) is liable on conviction to a fine notexceeding one m illion shillings or to im prisonment for A

term not exceeding tw elve months, or to both.

301. (1) A bankrupt com mits an offence if thebankrupt—

(a ) makes a statement (whether orally or inwriting) to the bankruptcy trustee or theOfficial Receiver (if not the bankruptcy

trustee) in the course of theadministration of the bank rupt's affairs,that the bankrupt knew or had reason toknow w as false or misleading in a

Offence bybankrupt inrelation tomanagement ofcompanies.

Other bankruptcyoffences.



material respect;

(b ) after becoming aw are that any personhas lodged a false proof in the

bankruptcy, failed to disclose that factimmediately to the bankruptcy trustee

bankruptcy trustee);or to the O fficial Receiver (if not the

(c ) • has, during the two years immediatelypreceding the date on w hich thebankrupt was adjudged bankrupt andwhile the bankrupt was insolvent, givenany undue preference to any of the


bankrup t's creditors with intent todefraud any of the other of thebankrupt's creditors;

(d) before the bankrupt obtains a final orderor discharge from bankruptcy (eitheralone or jointly with one or more otherpersons)—

(i) obtains credit of one hundredthousand shillings or more; or

(ii) incurs a liability to any person o fone hundred thousand shillings ormore for the purpose o f obtaining

credit for another person.(2 ) In proceedings for an offence under subsection

(1)(d)(i), it is a defence to p rove that, before ob taining therelevant credit, the bankrupt informed the etedit providerthat the bankrupt was an undischarged bankrupt.

(3 ) In proceedings for an offence under subsection(1)(d)(ii), it is a defenc e to pro ve that, before inc urring therelevant liability, the credit provider was informed that theperson incurring the liability was an undischarged bankrupt.

(4) A person w ho is found guilty of an offenced b i (1) i li bl i i fi



under subsection (1) is liable on conviction a fine notexceeding one m illion shillings or to imprisonment for aterm not exceeding twelve m onths, or to both.

PART IV—ALTERNATIVES TO BANKRUPTCY: NATURALPERSONS

Division 1— Voluntary arrangements


Subdivision 1—Ordinary procedure

302. (1) In this Division—

"debtor" means a debtor who is a natural person;

"interim order" means an order made under section305;

"proposal" means a proposal made by a debtor tothe debtor's creditors for a composition in satisfaction ofthe debtor's debts or a scheme of arrangem ent of thedebtor's affairs;

"p rovisional supervisor", in relation to a proposal,means the person designated as referred to in section305(1)(d);

"supervisor", in relation to a voluntaryarrangement, means the person who is for the time beingperforming the functions imposed as a result of theapproval of the arrangement by the creditors of the debtor

under the arrangement;"voluntary arrangement" , in relation to a debtor,

means a proposal that has taken effect in accordance withsection 311(1).




(2) For the purposes of this Division, a voluntaryarrangement approved by a creditors' meeting convenedunder section 308 ends prem aturely if, when it ceases to

have effect, it has not been fully implemented in respect ofall persons bound by the arrangement because of section311(2)(b).

303. (1) An application to the Court for an interimorder may be made if the debtor intends to make a proposal

to the debtor's creditors under this Division for acomposition in satisfaction of the debtor's debts or a

When app licationfor interim ordercan be made.


scheme of arrangement of the debtor's affairs.

(2) The proposal must provide for a person to actas supervisor of the voluntary arrangement to which theproposal relates.

(3) Only an authorised insolvency practitioner iseligible to act as supervisor of a voluntary arrangement.

(4) Subject to subsection (2), such an theapplication may be made—

(a ) if the debtor is an undischargedbankrupt—by the debtor, thebankruptcy trustee.of the debtor'sestate or the Official Receiver; and

(b ) in any other case—by the debtor.

(5) An application may be made by a debtor w hois an undischarged bankrupt only if the debtor has givennotice of the proposal to the O fficial Receiver and, if thereis one, the bankruptcy trustee of the debtor' s estate.

(6) An application may not be m ade while abankruptcy application made by the debtor is pending, ifthe Court has, under section 33, appointed an authorisedinsolvency practitioner to inquire into the debtor's affairsand to report on those affairs to the Court.



Effect ofapplication forinterim order.

p

304. (1) While an application under section 303 for an

interim order is pending, the following provisions apply:(a) a landlord or other person to whom

rent is payable by .the debtor mayexercise a right of for feiture in relationto premises let to the debtor for afailure of the debtor to comply with aterm of the tenancy-

(i) only w ith the leave of the Co tirt;and


(ii) if in giving leave the C ourt hasimposed conditions—only ifthose conditions are compliedwith;

(b) the Court—

(i) may prohibit distress from beinglevied on the debtor's property orits sUbsequent sale, or both; and

(ii) may halt any action, execution orother legal process against theproperty or person of the debtor.

(2) A court in which proceedings are pendingagainst the debtor may, on proof that an application hasbeen made under section 303 in respect of the debtor, eitherstay the proceedings or allow them to continue on suchterms as it considersappropriate.

305. (1) On the hearing of an application made under303 (application for interim order), the Court may make aninterim order if satisfied-

' (a) that the debtor intends to m ake a

Power of the Courtto make interimorder.



( )proposal under this Division;

(b ) that on the day of the making of theapplication the debtor was anundischarged bankrupt or was able tomake an application for the debtor'sown bankruptcy;

(c ) that no previous application has beenmade by the debtor for an interim orderduring the tw elve' months immediatelypreceding that day; and

(d) .that the supervisor designated underthe debtor's proposal is w illing to act


in relation to the prop osal.

(2 ) The Court shall make an interim order ifsatisfied that it would facilitate the consideration andimplem entation of the debtor's propo sal.

(3 ) If the debtor is an undischarged bankrup t, theinterim order may contain provisions as to the conduct ofthe bankruptcy, and the administration of the bankrupt'sestate, during the p eriod for which the order is to haveeffect.

(4) However, an interim order m ay, in relation toa debtor who is an undischarged bankrupt, include aprovision relaxing or removing a requiremen t of Part III orof this Division, or of the insolvenc y regulations only if theCourt is satisfied that the inclusion of the provision wouldbe unlikely to result in a significant dim inution in, or in thevalue of, the debtor's estate in relation to the co nduct of thebankruptcy.

(5) Except as otherwise p rovided by thisDivision, an interim order m ade on an app lication mad eunder section 303 ceases to have effect at the end offourteen days from the date on which the order was m ade.

(6) On the m aking of an interim order, thedesignated supervisor referred to in subsection (1)(c)



designated supervisor referred to in subsection (1)(c)becomes provisional supervisor.

(7 ) While an interim order has effect in respect of

a debtor—(a ) a bankruptcy ap plication relating to the

debtor may not be made or proceededwith;

(b ) a landlord or other person to whomrent is payable m ay exercise a right offorfeiture by peaceable re-entry in

relation to p remises let to the debtor inrespect of a failure by the debtor tocomp ly with a term or condition of the


debtor's tenancy of the premises onlywith the approval of the Court; and

(c) any other proceedings (includingexecution or other legal process) may

be begun or continued, and distressmay be levied; against the debtor or thedebtor's property only with theapproval of the Court.

306. (1) As soon as practicable after the mak ing of aninterim order, the provisional supervisor shall, before theorder ceases to have effect, submit a repo rt to the Courtstating—

(a ) whether, in that supervisor's opinion,the proposal has a reasonable prospectof being approved and implemented;

(b ) whether, in that supervisor's opinion, a

meeting o f the debtoes,creditorsshould be convened to consider theproposal; and

(c ) if in that supervisor's opinion is thatsuch a meeting should be convened

Provisionalsupervisor to report

on debtor'sProposal.



such a meeting should be convened—the date on which, and the time andplace at which, it is proposed to ho ldthe meeting.

(2) For the purpose of enabling the p rovisionalsupervisor to prepare that supervisor's report, the debtorshall submit to that supervisor--

(a ) a document setting out the terms of theproposal; and

(b ) a statement of the debtor's affairscontaining-

(i) such p articulars of the debtor s


creditors and of the debtor'sdebts and o ther liabilities and ofthe debtor's assets as may beprescribed by the insolvencyregulations for the purposes of

this section; and(ii) such other information as may be

so prescribed.

(3 ) If the provisional supervisor has failed tosubm it the report required by this section or has died, theCourt may, on an app lication ma de by the debtor, make anorder directing that supervisor to be replaced as such by

another authorised insolvency practitioner in relation to theproposal.

(4) If it is impracticable or inapp ropriate for theprovisional supe rvisor to continue to act as such, the Court •may, on an ap plication made by the debtor or thatsupervisor, make an order directing that supervisor to bereplaced as such by another authorised insolvency

practitioner in relation to the propo sal.(5) If the provisional supervisor has failed to

subm it the report as required by this section, the Court may,on an app lication m ade by application of the debtor, make

d di i h i i d i (if i h



an orde r directing the interim ord er to continue, or (if it hasceased to have effect) to be renewed, for such furtherperiod as the Court ma y specify in the order.

(6) On the hearing of an ap plication m ade by theprovisional supervisor, the Court may m ake an orderextending the period for which the interim order has effectso as to enable that supervisor to have m ore time to prepa rehis or her report.

(7 ) If, on receiving the provisional supervisor'sreport, the Court is satisfied that a meeting of the debtor'screditors should be convened to consider the debtor'sproposal, the Court shall make an order directing the periodfor which the interim order has effect to be extended (for

The Insolvency Bill, 2012 91 I

such further period as it may specify in the order) so as toenable the debtor's proposal to be considered by thedebtor's creditors in accordance with this Division.

(8) The Court may discharge the interim order if

it is satisfied, on the application of the provisionalsupervisor—

(a ) that the debtor has failed to complywith the debtor's obligations undersubsection (2); or

(b ) that for any other reason it would beinappropriate for a meeting of the

debtor's creditors to be convened toconsider the debtor's proposal.

307. (1) This section applies if—

(a) a debtorintends to make a proposalunder this Division;

(b ) no interim order has been made inrelation to the proposal and noapplication for such an order ispending; and

Debtor's proposaland provisionalsupervisor's report.



(c ) where the debtor is an undischargedbankrupt—the debtor has given noticeof the proposal to the Official Receiverand, if there is one, the bankruptcytrustee of the debtor's estate,

unless a bankruptcy application made by the debtor ispending and the Court has, under section 33, appointed anauthorised insolvency practitioner to inquire into thedebtor's affairs and rep -ort the findings to the Court.

(2) For the purpose of enabling the provisionalsupervisor to prepare a report to the Court, the debtor shallsubmit to that supervisor—


(a) a document set ting out the terms of thevoluntary arrangement that the debtoris proposing; and

(b ) a statement of the debtor's affairscontaining—

(i) such particulars of the debtor'screditors and of the debtor'sdebts and other liabilities and ofthe debtor's assets as may beprescribed by the insolvencyregulations for the purposes ofthis section; and

(ii) such other information as may beso prescribed.

(3) If the provisional supervisor is of the opinionthat the debtor is an undischarged bankrupt, or is able toapplication for the debtor's own bankruptcy, that supervisorshall, within fourteen days (or such extended period as theCourt may allow) after receiving the document andstatement mentioned in subsection (2), submit a report tothe Court stating—

(a ) whether, in that supervisor's opinion,the debtor's proposal has a reasonable



prospect of being approved andimplemented;

(b ) whether, in that supervisor's opinion, ameeting of the debtor's creditorsshould be convened to consider thedebtor's proposal; and

(c ) if in that supervisor's opinion such ameeting should be con vened, the dateon which, and time and p lace at which,

it is proposed to hold the m eeting.(4) If the provisional supervisor has failed to

submit the report required by this section or has died, the


Court may, on an application made by the debtor, make anorder directing that supervisor to be replaced as such byanother authorised insolvency practitioner.

(5 ) If it is impracticable or inappropriate for theprovisional supervisor to continue to act as such, the Courtmay, on an application made by the debtor or thatsupervisor, make an order directing that supervisor to bereplaced as such by another authorised insolvencypractitioner.

(6 ) The Court may, on an application made bythe provisional supervisor, extend the period within whichthat supervisor's report is required to be sumitted.

308. (1) If it has been reported to the Court undersection 306 or 307 that a meeting of the debtor's creditorsshould be convened, the provisional supervisor shall, unlessthe Court otherwise directs, convene that meeting for thetime, date and place proposed in that supervisor's report.

(2) The persons to be summoned to the meetingare every creditor of the debtor of whose claim and addressthe person convening the meeting is aware.

(3.) For the purpose of subsection (2), the

When provisionalsupervisor is toconvene creditors'meeting to considerdebtor's proposal.



creditors of a debtor who is an undischarged bankruptinclude—

(a ) each person who is a creditor of thebankrupt in respect of a bankruptcydebt; and

(b ) each person who would be such acreditor if the bankruptcy hadcommenced on the date on whichnotice of the meeting was given.

309. (1) The main purpose of a creditors' meeting onduct ofcreditors' meeting:


consideration of

debtor s proposal.convened under section 308 is to decide whether to approvethe debtor's proposal (with or without modifications).

(2 ) At the beginning of the meeting, thosecreditors present shall elect one of their number to bechairperson of the meeting.

(3 ) The chairperson shall then divide the meetinginto three groups for voting purposes, with the first groupcomprising secured creditors (if any), the second groupcomprising preferential creditors (if any) and the thirdgroup comprising unsecured creditors.

(4) A modification to the debtor's proposal may

be approved only if the debtor consents to it.(5) A modification to the debtor's proposal may

be be one that provides for the provisional supervisor to bereplaced by another authorised insolvency practitioner toperform the functions of supervisor of that proposal if it isapproved and takes effect as a voluntary arrangement.

(6) However, a modification to the debtor's

proposal may not be one as a result of which it is no longera proposal as defined by section 302.

(7) If the proposal or a modification to it affectsthe right of a secured creditor of the debtor to enforce thecreditor's security the proposal or modification may not be



creditor s security, the proposal or modification may not beapproved unless—

(a ) the creditor consents to it; or

(b ) if the creditor does not consent to it—the creditor-

(i) • would be in a position no worsethan if the debtor were adjudgedbankrupt;

(ii) would receive no less from the

assets to which the creditor'ssecurity relates, or from theirproceeds of sale, than any other


secured creditor having a securityinterest in those assets that hasthe same priority as thecreditor's; and

(iii) would be paid in full from those

assets, or their proceeds of sale,before any payment from them ortheir proceeds is made to anyother creditor whose securityinterest in them is ranked belowthat of the creditor, or who has nosecurity interest in them.

(8) Subject to this section, the meeting is to beconducted in accordance with the rules (if any) prescribedby the insolvency regulations.

(9) The meeting may at any time resolve that itbe adjourned, or further adjourned.

( I 0) As soon as practicable after the conclusion ofthe meeting, the chairperson—

(a ) shall report the result of of the meetingto the Court; and

(b ) iminediately after doing so, shall givenotice of the result of the meeting to all



persons to whom the notice conveningthe meeting was sent.

(I I) If the report is to the effect that the meetinghas decided not to approve the debtor's proposal (eitherwith or without modifications), the Court shall dischargean : interim order that has effect in relation to the debtor.

310. 1 h:s section applies to the decisions taken at

e m . ) ditors held in accordance with section2 09 (c;inciLIctof creditors' meeting: consideration of

debtor's proposal) to consider a debtor's proposal (with or

Approval ofdebtor s proposal.


without modifications).

(2) The debtor's proposal (including anymodifications) is approved if it is a approved by a majority(in number and value) of the creditors of each group ofcreditors present (either in person or by proxy) at the

meeting of creditors.

(3) For the purposes only of deciding whether therequisite majority by value has voted in favour of aresolution to approve the debtor's proposal, the followingprovisions apply:

(a) the chairperson of the meeting may-

(i) admit or reject proofs of debt;and

(ii) adjourn the meeting in order toadmit or reject proofs of debt;

(b) a person whose debt is admitted is acreditor.

(4) At any time before the deadline for makingan application under this subsection, the debtor or any ofthe debtor's creditors who attended or was entitled to attendthe meeting may make an application to the Court for anorder under subsection (7).

(5) Th d dli f ki li i d



(5) The deadline for making an application undersubsection (4) is—

(a ) the expiry of twenty-eight days afterthe date on which the meeting ofcreditors was held; or

(b ) if the Court extends that period, theexpiry of the extended period.

(6) The debtor and any creditor who attended orwas entitled to attend the meeting of creditors is entitled toappear and be heard at the hearing of the application even if •not the app licant. The right conferred by this subsection


may be exercised by such a creditor irrespective of whetherthe creditor supports or has an interest in theimplementation of the proposal.

(7) On the hearing of an application made undersubsection (4), the Court may—

(a ) make an order approving the proposal(with or without the modifications (ifany) put to the meeting of creditors inaccordance with section 309); or

(b ) make such other order as it considersappropriate,

but only if it considers that it would be in the best interestsof both the debtor and the debtor's creditors to so.

(8) The Court may make an order undersubsection (7)(a) even if the debtor's proposal (or amodification to it) was not approved at the creditors'meeting by a majority of the preferential creditors' group orthe unsecured creditors' group, but may do so only if the

proposal (or modification)—(a ) has been approved by a majority of the

secured creditors's group;

(b ) does not discriminate among themembers of the dissenting group or



g g pgroups of creditors and ensures thatthey will be no worse off than they

would have been if the debtor had beenadjudged bankrupt; and

(c ) respects the priorities of preferentialcreditors over unsecured creditors.

(9) Section 93(3) and (4) apply in relation to aresolution purporting to be passed in accordance with thissection.


Effect of approvalof debtor'sproposal bymeeting ofcreditors or by theCourt.

311. (1) A debtor's proposal (with or withoutmodifications) takes effect as a voluntary arrangement bythe debtor on the day after the date on which it is approvedby the Court by order made under section 310(7)(a) or onsuch later date as may be specified in the order.

(2) On taking effect as a voluntary arrangement,the approved proposal binds every person (including asecured creditor and a preferential creditor) who—

(a ) was entitled to vote at the meeting(whether present or represented at themeeting or not); or

(b ) would have been so entitled if the

person had received notice of themeeting,

as if the person were a party to the arrangement.

(3) On the'approved proposal taking effect as avoluntary arrangement, the provisional supervisor becomesthe supervisor of the arrangement unless that supervisor hasbeen replaced in accordance with section 309(5).

(4) If—

(a ) when the voluntary arrangement ends,any amount payable under thearrangement to a person bound becauseof subsection (2)(b)(ii) has not been



of subsection (2)(b)(ii) has not beenpaid: and

(b ) that arrangement did not come to anend prematurely,

the debtor at that time becomes liable to pa r,the amount payable under that arrangement.

(5) An interim order having effect in relation tothe debtor immediately before the expiry of twenty-eightdays from and including the date on which the report withrespect to the creditors' meeting was made to the Court in


accordance with section 309(10) ceases to have effect at theend of that period.

(6 ) Subsection (5) applies except to such extentas the Court may direct for the purposes of any applicationmade under section 313 (right to challenge decision taken

at creditors' meeting).(7 ) If proceedings on a bankruptcy application

have been halted by an interim order that has ceased tohave effect, the application is, unless the Court otherwiseorders, taken to have been dismissed.

312. (1) If the Court has approved a debtor's proposalin accordance with section 310(7)(a) and the debtor is anundischarged bankrupt—

(a ) the bankrupt; or

(b ) if the bankrupt has not made anapplication within the periodprescribed by the insolvencyregulations for the purposes of thissection—the Official Receiver,

may make an application to the Court for an order undersubsection (3).

(2) However such an application may not be

Additional effecton undischargedbankrupt.



(2) However, such an application may not bemade—

(a ) during the period within which thedecision of the creditors' meeting canbe challenged by an application madeunder section 313(1):

(b ) while an application under section313( 1 ) i spending; or

(c ) while an appeal in respect of an ordermade under section 313 is pending; or

(d ) during the period within which such an


appeal may be m ade.

(3 ) On the hearing of an application made undersubsection (1), the Court shall, subject to subsection (2),annul the bankruptcy order, unless it is of the opinion thatthere are compelling reasons not to do so.

(4 ) In m aking an order und er subsection (3), theCourt may give such directions about the conduct of thebankruptcy and the administration of the bankrupt's estateas it considers appropriate for facilitating theimplem entation of the approved propo sal.

Right to challengedecision taken atcreditors' meeting.

313. (1) Subject to subsection (3), any of the personsspecified in subsection (2) may make an application to theCourt on either or both o f the following grounds:

(a ) that a debtor's proposal approved by acreditors' meeting held in accordanceWith section 30 9 unfairly affects theinterests of a creditor of the debtor;

(b ) that a material irregularity occurred ator in relation to the m eeting.

(2) The persons who may make an applicationfor the purposes of subsection (1) are—

(a) the debtor;



(a) the debtor;

(b) a person who—

(i) was entitled to vote at thecreditors' meeting, or

(ii) would have been so entitled if theperson had had notice of it;

(c) the provisional supervisor or, if theproposal has taken effect as a

voluntary arrangement, the supervisorof the arrangement; and




(5) If, at any time after giving a direction undersubsection (4)(b) for convening a meeting to consider arevised proposal, the Court is satisfied that the debtor doesnot intend to submit such a proposal, the Court shall revokethe direction and revoke or suspend any approval given atthe previous meeting.

(6) If the Court gives a direction undersubsection (4)(b), it may also give a direction continuingor, as the case requires, renewing, for such period as maybe specified in the direction, the effect in relation to thedebtor of any applicable interim order.

(7) If, on the hearing of an application madeunder subsection (1) with respect to a creditors' meeting,the Court gives a direction under subsection (4)(b) orrevokes or suspends an approval under subsection (4)(a) or(5), it may give such ancillary directions as it considersappropriate and, in particular. directions with respect to--

(a) action taken since the meeting underany voluntary arrangement approvedby the meeting; and

(b) such action taken since the meeting ascould not have been taken if an interimorder had had effect in relation to thedebtor when they were taken.

(8) Except as otherwise provided by this section,



r is responsibj ,c1 , 1 • .•

( ) p p y ,an approval given at a creditors' meeting held inaccordance with section 309 is not invalidated by anyirregularity occurring at or in relation to the meeting.

carried out.


(2) If a voluntary apangemenaas effect undersection 311 or 318, a debtor or a creditor of the debtor orany other person who is dissatisfied by any act, omission ordecision of the supervisor may apply to the Court for anorder under subsection (3).

(3) On the hearing of an application made undersubsection (2), the Court—

(a) shall—

(i) if it finds the action or decisionof the superyisor to have beenunfair or unjustified—make an

order quashing or modifying theact or decision; or

(ii) if it does not so find—make anorder confirming the act ordecision;, and

(b) if it makes an order under paragraph(a)(i), may-

(i) give such directions to thesupervisor as it considersappropriate; and

(ii) make such ancillary order as itconsiders app ropriate.



(4) On the application of the supervisor to the

Court for directions in relation to any p articUlar m atterarising under the voluntary arrangement, the Court maygive such directions in relation to the matter as it considersappropriate.

(5) Whenever—

(a ) it is desirable to appoint a person toperform the functions of the

supervisor; and(b ) it is difficult or impracticable for an


appointment to be made without theassistance of the Court,

make an order appointing an authorised insolvencypractitioner to act as supervisor in relation to the voluntaryarrangement, either in substitution for the existing

supervisor or to fill a vacancy.(6) The power conferred by subsection (5) is

exercisable so as to increase the number of personsperforming the functions of supervisor or, if there is morethan one person performing those functions, so as toreplace one or m ore of those persons.

Subdivision 2—Expedited procedure

Expeditedvoluntaryarrangementprocedure:availability.

315. (1) This section applies if a debtor intends tomake a proposal to the debtor's crediton for a voluntaryarrangement and—

(a) the debtor is an undischarged bankrupt;(b ) the Official Receiver is specified in the

proposal as the provisional supervisorin relation to the proposal; and

(c)- no application for an interim order hasbeen m ade under section 303



been m ade under section 303.

(2) If this section applies, the debtor may submitto the Official Receiver—

(a ) a docum ent setting out the terms of thedebtor's proposal; and

(b ) a statement of the debtor's affairscontaining-

(i) such particulars as may beprescribed by the insolvencyregulations for the purposes of


this section,of the debtor'screditors, debts, other liabilitiesand assets; and

(ii) such other information as may beso p rescribed.

(3) If satisfied that the proposal has a reasonableprospect of being approved and implemented, the OfficialReceiver may make arrangements for the purpose ofinviting creditors to decide whether to approve it.

(4) For the purposes of subsection (3), a person isa creditor only if—

(a ) the person is a creditor of the debtor inrespect of a bankruptcy debt; and

(b ) the Official Receiver is aware of theperson's claim and the person'saddress.

( In making arrangements under subsection (3),

the Official Receiver shall ensure that—

(a ) each creditor is provided with a copyof the debtor's proposal;

(b ) each creditor is provided withinformation about the criteria byreference to which the OfficialReceiver will determine whether the



Receiver will determine whether thecreditors approve or reject thatproposal; and

(c ) no opportunity is allowed formodifications to that proposal to besuggested or made.

(6) If a debtor submits documents to the OfficialReceiver in accordance with subsection (2), an application

under section 303 for an interim order may not be made inrespect of the debtor unless the Official Receiver-


!

Receiver to makeapplicatic.n forannulment ofbankruptcy orderwhere debtor is an

no dischargedbankrupt.

(a ) has made the arrangements referred toin subsection (3); or

(b ) has informed the debtor that theOfficial Receiver does not intend tomake such arrangements (either

because the Official Receiver is notsatisfied that the proposal has areasonable prospect of being approvedand implemented or for any otherreason).

(7) If a meeting of creditors is convened for thepurpose of subsection (3), the provisions of section 309

apply to the holding and conduct of the meeting.

317. (1) In addition to making the arrangements undersection 316(3), the Official Receiver may, if the debtor isan undischarged bankrupt, make an application to the Courtto make an order under subsection (3).


(a) while an application for an order undersection 3 10(7) is pending;

(b ) during the period within which avoluntary arrangement can be



voluntary arrangement can bechallenged by an application madeunder section 313;

(c ) while an application made under thatsection is pending; or

(d ) while an appeal in respect of an ordermade under that section is pending; or

(e ) during the period within which such an

appeal may be m ade.(3) On considering an application made under


subsection (1), the Court shill a l ul the bWcruptcy orderin respect of the debtor unless it is of the opinion that thereare compelling reasons not to do so:

(4) The Court may g ive such directions about theconduct of the bankruptcy and the adm inistration of the

bankrupt's estate as it considers w ill facilitate theimplementation,of the voluntary arrangement.

3 1 8 . (1) On the O fficial Receiver subm itting to theCourt a report in accordance with section 316 stating thatthe debtor's proposal has been approved, that proposaltakes effect as a voluntary arrangement.

(2) On taking effect as a voluntary arrangement,the debtor's proposal binds—

(a ) the debtor; and

(b ) binds every person (including asecured creditor and a preferentialcreditor) w ho w as entitled toparticipate in the arrangements made inaccordance w ith section 315(3),

as if each of them were a party to the arrangement.

(2) In addition to submitting the report, theOfficial Receiver may make an app lication to the Court to

k d d b i (4)

Approval ofexpeditedvoluntaryarreigement.



make an order under subsection (4).


(a ) during the period within which thevoluntary arrangement can bechallenged by an application undersection 313;

(b )while an application made under thatsection is pending; or

(c ) w hile an appeal in respect of an


Revocation ofexpeditedvoluntaryarrangement.

application m ade under tha t section ispending

(d) during the period w ithin w hich such anappeal may be made.

(4 ) On considering an application made under

subsection (2), the Court shall annul the bankruptcy orderin respect of the debtor unless it is of the opinion that thereare compelling reasons not to do so.

(5 ) The Court may g ive such directions about theconduct of the bankruptcy and the administration of thebankrupt's estate as it considers w ill facilitate theimplementation of the approved voluntary arrangement.

319. (1) The Court may m ake an order revoking avoluntary arrangement that has effect because of section318(1) on the ground—

(a ) that it unfairly affects the interests•of acreditor of the debtor; or

(b ) that a material irregularity occurred inrelation to the arrangements madeunder section 315(3).

(2) An order under subsection (1) may be madeonly on the application of—

( ) h d b



(a ) the debtor;

(b ) a person who w as entitled toparticipate in the arrangements m adeunder section 315(3);

(c ) the bankruptcy trustee (if any); or

(d ) the Official Receiver.

(3) An application under subsection (2) may n ot

be made after the expiry of twenty-eight days from andincluding the date on w hich the O fficial Receiver has


submitted to the Court the report referred to in section 316.

(4) However, a creditor who was not made awareof the arrangements under section 315(3) at the time whenthey were made may make an application under subsection(2) during the twenty-eight days from and including thedate on which the creditor first became aware of thevoluntary arrangement.

Subdivision 3 riminal conduct under the D ivision

Offence for debtorto make falserepresentation forpurpose ofobtaining creditors'approval.

320. (1) A debtor commits an offence, if for thepurpose of obtaining approval to a proposal for a voluntaryarrangement, the debtor—

(a ) makes a representation knowing it tobe false or misleading; or

(b ) fraudulently does, or omits to do, any

act.(2) In subsection (1), the reference to obtaining

approval to a proposal for a voluntary arrangement is toobtaining—

(a ) the approval of a proposal for avoluntary arrangement presented to a

i f h d b ' di h ld



meeting, of the debtor's creditors held

in accordance with section 309; or(b ) the'approval of a pioposal for a

voluntary arrangement submitted to theOfficial Receiver in accordance withsection 315.

(3) Subsection (1) applies even if the proposal isnot approved.

(4) A person found guilty of an offence undersubsection (1) is liable on conviction to a fine not


exceeding two m illion shillings or to imprisonment for aterm not exceeding five year, or to both.

Prosecution ofdelinquent debtors.

3 2 1 . (1) This section app lies to a voluntary

arrangement that has taken effect in accordance w ithsection 311(1) or section 3 18(1).

(2) As soon as p racticable after forming areasonable suspicion that a debtor has comm itted anoffence in connection with a voluntary arrangement towhich this section ap plies, the supervisor of thearrangement shall—

(a ) report the matter to the AttorneyGeneral and to the Director of PublicProsecutions; and

(b ) provide the Attorney General and theDirector of Public Prosecutions with-

(i) such information; and

(ii) such access to and facilities forinspecting and taking copies ofdocume nts (being information ordocumen ts under the debtor'scontrol and relating to the m atterconcerned),

as either of them sp ecifies



as either of them sp ecifies.

(3) . If the Director of Public Prosecution s takescriminal proceedings following a report madeund ersubsection (2), the supervisor shall provide that Directorwith all assistance in connection w ith the prosecution thatthe supervisor is reasonably able to p rovide.

(4) If the supervisor fails to com ply withsubsection (3), the Attorney General or Director of PublicProsecutions may ap ply to the Court for an order undersubsection (5).


(5) On the hearing of an application made by theprosecuting authority under subsection (4), the Court maymake an order directing the supervisor to comply withsubsection (3).

Division 2— Summ ary instalment orders

322. A summary instalment drder is an order made bythe Official Receiver directing the debtor pay the debto r'sdebts—

(a ) in instalments or in some other way;and

(b ) in full or to the extent that the O fficialReceiver considers practicable in theparticular circumstances of the case.

323. The Official Receiver may make a sum maryinstalment order on the application of—

(a ) a debtor; or

(b ) a creditor with the debtor's consent.

What is a summaryinstalment order?

Who can app ly fosummaryinstalment r11 pr

324 (1) Th O ffi i l R i f f



324. (1) The O fficial Receiver may refuse anapplication for a summary instalment order if theapplication does ndt comply w ith subsection (2).

(2) An application does n ot comply w ith thissubsection unless it—

(a ) is in the form prescribed by theinsolvency regulations for the purposesof this, section;

(b ) states—

Requirements for

applications madeby debtors.

4932 he Insolvency Bill, 20/2

(i) that the debtor proposes to paythe creditors in full; or

(ii) the amount in the shilling that thedebtor proposes to pay;

(c) states the total amount of the weekly orother instalments that the debtorproposes to pay;

d) states-

(i) the name and address of thedebtor's proposed supervisor andannex the written consent of thatperson to be supervisor; or

(ii) if the debtor claims that asupervisor is not necessary— thedebtor's reasons for making thatclaim; and

(e) includes the following information:

(i) the debtor's full name and

address;(ii) details of the debtor's property;

(iii) the names and addresses of eachcreditor;

(iv) the amount and nature of each ofthe creditors' debts;



(v ) whether any of the debts aresecured and the value of thecharge;

(vi) whether any of the debts areguaranteed by any person;

(vii) the amount of the debtor'searnings;

(viii) the name and address of the

TheInsovency Bill 2012 933

debtor's employer (if any);

(ix) any other matter that may beprescribed by' the insolvencyregulations for the purposes ofthis subsection.

325. (1) The Official Receiver may m ake a summ aryinstalment order if satisfied that—

(a ) the debtor's total unsecured debts thatwould be provable in the debtor'sbankruptcy do not exceed the amountpreicribed by the insolvencyregulations for the purpose of thissection; and

(b ) the debtor is unab le immediately topay those debts.

(2) The Official Receiver not make such an orderwithout having given the debtor and the creditors anopportunity to make representations with respect to thematter.

(3) A summary instalment order is not invalidmerely because the total amount of the deb ts provedexceeds the amount specified in subsection (1)(a), but if itdoes, the supervisor appointed under section 327

f f

Offical Receivermay makesummaryinstalment order.



(appointment of supervisors) may refer the matter to theOfficial Receiver, in which case the Of ficial Receiver maycancel the order.

326. In addition to an order for the payment of thedebts in instalments, the Of ficial Receiver may makeorders—

(a) regarding the debtor's future earningsor income:

Power of O fficialReceiver to makeadditional orders.


(b ) regarding the disposal of goods that thedebtor owns or possesses:

(c ) giving the supervisor appointed undersection 327 power to-

(i) direct the debtor's employer topay all or part of the debtor'searnings to the supervisor; and

(ii) supervise payment, out of thedebtor's earnings or incom e, ofthe reasonable living expenses ofthe debtor and the debtor'srelatives and dependants.

Appointment ofsupervisors.

327. (1) Except as provided by subsection (2), asumm ary instalment order is ineffective if it does notprovide for the app ointment of a suitable and w illingperson to supervise comp liance by the debtor with theterms of the order.

(2) The Official Receiver may dispen se with theappo intment of a sup ervisor if the Official Receiverconsiders it appropriate to do so.

(3) In such a case—

(a ) the provisions of this Division ap ply asif the debtor was the supervisor, except



for section 328 (role of supervisor);and

(b ) that section app lies as if the OfficialReceiver was the supervisor.

(4) The Official Receiver may require asupervisor to provide a b ond to secure the supervisor'sperformance of the supervisor's obligations under the A ct.

(5) In imposing such a requirement, the OfficialReceiver shall specify the amount of the bond and the


person to whom it is to be given.

328. (1) The supervisor is responsible for supervisingthe debtor's compliance with the terms of the summary

instalment order and any other orders made under section326.

(2 ) The supervisor may charge the debtorremuneration for carrying out the supervisor'sresponsibilities as supervipor at the amoun t or rates fixed orprescribed under subsection (3).

(3 ) The insolvency regulations may fix orprescribe the amount or rates of remuneration chargeableunder subsection (2).

329. (1) The Official Receiver m ay, by notice, requiresupervisor or a past supervisor to provide the Official

Receiver, w ithin a reasonable period (being not less than

seven days), with any specified documents, or anydocum ents of a specified class, that relate to the debtor'sproperty; conduct or dealings that are under the control ofthe supervisor or pa st supervisor

(2) A supervisor or past supervisor w ho fails tocomply with a notice given to the supervisor or pastsupervisor under subsection (1) commits an offence and on

Role ofsupervisors.

Power of OfficialReceiver to requiresupervisor or pastsupervisor to

provide documents.



conviction is liable to a fine not exceedirig two hundred andfifty thousand shillings.

330. The Official Receiver may terminate thesupervisor's appointment if of the opinion that thesupervisor has failed to supervise the debtor's complianceadequately, and may appoint a replacement supervisor.

Termination ofsupervisor'sappointment forfailure to superviseadequately.




order; or

(c) notified to the supervisor.

(2) While a summ ary instalmen t order has effect,a person m ay not begin or continue proceedings against thedebtor unless—

(a ) the Official Receiver gives perm issionfor a creditor to begin or co ntinue theproceedings; or

(b ) the debtor is in default under the order.

(3) In giving any such perm ission, the O fficialReceiver may imp ose such conditions as appear to the

Official Receiver to be fair and reasonable.(4) In the case o f proceedings that are pen ding

before a court at the time w hen the summ ary instalmen torder is m ade, the Court, unless the conditions specified insubsection (2)(a) or (b) apply—

(a) shall halt the proceedings on receivingnotice of the order; and

(b) may award all or part of the creditor'scosts incurred up to the time of theCourt's notification, and may certifyaccordingly for the purpose of thecreditor proving the debt under thisDivision.



335. (1) The supervisor shall send a notice of thesumm ary instalment order to every creditor—

(a ) who is know n to the supervisor;

(b ) whose nam e is shown on the debtor'sapplication for the order; or

(c ) who has p roved a debt under section339 (claims o f creditors).

Supervisor to givenotice of summaryinstalment order tocreditors.

4938he Insolvency Bill 2012

(2) A supervisor w ho, w ithout reasonable excuse,fails to comply w ith subsection (1) commits an offence andon conviction is liable to a fine not exceeding tw o hundredthousand shillings.

Public register ofdebtors subject tocurrent summaryinstalment order.

When summaryinstalment orderceases to becurrent.

336. (1) The O fficial Receiver shall establish andmaintain a public register of persons who are subject tocurrent summary instalment orders.

(2) The Official Receiver shall maintain theregister in accordance with Division 2 of Part XII.

337. A summary instalment order is not current if it hasbeen discharged or all the instalments required to be paidunder the order have been paid in accordance w ith theorder.

Claims of creditors

when summaryinstalment haseffect.

338. (1) A creditor w ho has proved the creditor's debtto the satisfaction of the supervisor is entitled to beincluded as a creditor in the adm inistration of the debtor'sestate under the summary instalment order for the amountof the debt.

(2 ) A creditor may ob ject to the supervisor'sacceptance or rejection of any creditor's claim by applyingto the Official Receiver.



(3 ) If a creditor objects under subsection (2), theOff icial Receiver m ay give any directions the OfficialReceiver considers appropriate as to the acceptance orrejection of the claim.

(4 ) A person who becomes a creditor of thedebtor after the order has been made, and w ho proves adebt before the supervisor m ay elect to be included in theadministration of the debtor's estate.


(5) If such a person so elects, the person may bepaid a dividend under the order only after the creditors whobecame creditors of the debtor before theca& was madeand who have been included as a creditor in theadministration have been paid under the order.

339. (1) This section applies if the supervisor, under apower conferred by a summary instalment order made bythe Official Receiver, directs the debtor's em ployer to paythe debtor's earnings, or part of them, to the supervisor.

(2) The amounts that the employer shall pay tothe supervisor are recoverable as a debt from the employer,and the supervisor's receipt is a complete discharge to theemployer for the debt.

(3) Payment by the em ployer in contravention ofthe supervisor's direction to pay the supervisor dischargesthe liability of the employer to the supervisor for theamount of the payment,only if it is made—

(a ) with the consent of the supervisor orthe Official Receiver; or

(b ) to a person who is not the debtor andwho has a better legal claim to it thanthe debtor.

Payment ofdebtor's earningsto supervisor.



340. (1) A debtor who fails to pay an amount dueunder a summary instalment order is presumed, unless thecontrary is proved—

(a ) to have been able to pay the amountfrom the date of the order; and

(b ) to have refused or neglected to pay it.

(2) If the debtor fails to make a paym ent inaccordance w ith the order—

Consequences ofdefault by debtor topay amount dueunder summaryinstalment order.


(a ) proceedings that have been haltedunder section 334 (proceedings a gainstdebtors) may begin or continue;

(b ) any period during which a proceedingwas halted under that section are to be-

added to any period of limitation thatapplies to the proceeding.

(3 ) Subsection (2) is subject to any order of theCourt to the contrary.

(4) As soon a s practicable after a debtor fails tomake a pa yment in accordance with a summ ary instalmentorder, the sup ervisor shall give notice of the failure to the

Official Receiver.

Offence for debtorto obtain creditwhile summaryinstalment orderhas effect.

341. (1) A debtor in respect of whom a sum maryinstalmen t order is in effect comm its an offence if, before-all creditors have been paid the am ounts to which they areentitled under the order, the debtor—

(a ) alone or jointly with another person ,obtains credit of one hundred thousandshillings or more;

(b ) incurs a liability to another person forone hundred thou§and shillings ormore for the purpose o f obtainingcredit for another person; or



(c ) enters into a credit purchasetransaction under w hich the debtor isliable to pay on e hundred thousandshillings or more.

(2) In proceedings for an offence undersubsection (1) it is a defence to p rove—

(a) in a case to which subsection (1)(a)applies—that, before obtaining the


relevant credit, informed the creditprovider that the debtor was subject to,a summary instalment. order;

(b ) in a case to which subsection (1)(b)applies—that, before the defendantincurred the relevant liability, thecredit provider was informed that thedefendant was subject to a summaryinstalment order; or

(c ) in'a case to w hich subsection (1)(c) -applies—that, before the defendantentered into the relevant agreement,the other parties to the agreement w ereinformed that the defendant wassubject to a summary instalment order.

(3) A person who is found g uilty of an offenceunder this sedidn is liable on'conviction to' a fine ,notexceeding one m illion shillings or to imprisonment for aterm not exceeding tw elve' months, or to both.

Division 3— No-asset procedure

342. This Division prescribes a procedure for dealingwith a debtor who has no realisable assets.

Division 3:introduction.



343. (1) A debtor w ho meets the criteria set out insection 344 (criteria for entry to no-asset procedure) m ayapply to the Official Receiver for entry to the no-assetprocedure.

(2) A debtor can apply for entry to the no-assetprocedure by completing the 'following documents andlodging them w ith the Official Receiver:

Application forentry to no-assetprocedure.


(a ) an app lication in the form p rescribedby the insolvency regulations for thepurpose of this section; and

(b ) a statement in the form so p rescribedsetting out the debtor's financialposition.

(3) The Official Receiver ma y reject the debtor'sapplication if the ap plication or statement of the debtor'sfinancial position is, in the Official Receiver's opinion,incorrect or incomplete.

Criteria for entry to 44. (1) The Official Receiver may adm it a debtor tono-asset procedure. the no-asset procedure if satisfied on reasonable grounds

that—

(a ) the debtor has n o realisable assets;

(b ) the debtor has not p reviously been• admitted to the no-asset procedure;

(c ) the debtor has not p reviously beenadjudged bankrupt;

(d ) the debtor has total debts that are notless than one hundred thousandshillings and not m ore than fourmillion shillings; and

(e ) the debtor does not have the me ans torepay any am ount towards those debts.



(2) In this section, realisable assets does notinclude the assets that a ban krupt is allowed to retain undersection 160 (bankrup t entitled to retain Certain assets), butdoes include assets (for examp le, gifted assets) that mightbe recoverable by the O fficial Receiver—

(a) if the debtor were to be adjudged

bankrupt on the da te of app lication forentry to the no-asset procedure; and


(b) if Division 19 of Part III (Irregulartransactions) applied.

345. The_O fficial Receiver may not admit a debtor to

the no-asset procedure if satisfied, on reasonable grounds,that—

Debtor disqualifiedfrom entry to no-

asset procedure incertain cases.

(a ) the debtor has concealed assets withthe intention of defrauding the debtor'screditors (for exam ple, by transferringproperty to a trust);

(b ) the debtor has engaged in conduct that

would, if the debtor were adjudgedbankrupt, constitute an offence underthis Act;

(c) the debtor has incurred a debt or debtsknow ing that the debtor does not havethe means to repay them; or

(d ) a creditor intends to apply for thedebtor to be adjudged bankrupt and itis likely that, if the debtor were to beadjudged bank rupt, the outcome for thecreditor would be materially betterthan if the debtor were adm itted to theno-asset procedure.



346. As soon as practicable after receiving anapplication from a debtor for entry to the no-assetprocedure, the Off icial Receiver shall send a summary ofthe debtor's assets and liabilities to each know n creditor ofthe debtor.

Official Receiverto notify creditors.

347. A debtor w ho has applied for entry to the no-asset Restrictions on

procedure may not obtain credit (including hire purchase ebtor obtaining


credit afterapplication made.

When d ebtoradmitted to no-asset procedure.

credit), either alone or jointly with another person, of m orethan ten thousand shillings without first informing thecredit provider that the debtor has applied for entry to theno-asset procedure.

348. (1) A debtor is adm itted to the no -assetprocedure when the Official Receiver sends the debtor- anotice in the form prescribed by the insolvency regulationsfor the purpose s of this section.

(2) As soon as p racticable after a debtor isadmitted to the no-asset procedure, the Official Receivershall—

(a ) notify that fact to each cred itor of thedebtor of whom the Official Receiver •is aware; and

(b ) publish notice of it in a publication andin a manner prescribed by theinsolvency regulations.

Public register ofpersons admitted tono-asset procedure.

349. (1) The Official Receiver shall establish andmaintain a p ublic register of persons adm itted to the no-asset procedure and persons discharged from that procedureunder section 358.

(2) The O fficial Receiver shall maintain the

register in accordance w ith Division 2 of Pgt XI



register in accordance w ith Division 2 of Pgt XI.

Creditors may notenforce debts ofdebtor admitted tono-asset procedure.

350. (1) A creditor of a debtor may n ot, after thedebtor has been ad mitted to the no-asset procedure, beginor continue any step to recover or enforce a debt—

(a) that the debtor owes to the creditor at

the time when the debtor applies forentry tothe no-asset procedure; and


(b) that would be provab le in the debtor'sbankruptcy if the debtor were to beadjudged bankrupt.

(2) Subsection (1) does n ot apply to thefollowing debts (which despite that subsection remain

enforceable):(a ) amoun ts payable under a court order

made under the M atrimonial CausesAct;

(b ) amoun ts payable under the ChildrenAct;-

(c ) amounts owed in respect of a loan tosecure the education of a dependentchild or step-child of the debtor.

. Cap 152

Cap. 8

351 (1) On being required by the O fficial Receiver todo so, the debtor shall p rovide the Official Receiver withsuch assistance, documents and information as arereasonably necessary in order to apply the no-assetprocedure to the debtor.

(2 ) As soon as practicable after any changeoccurs in the debtor's circumstances that would allow thedebtor to repay an am ount towards the debts referred to insection 350(1), the debtor shall give written notification ofthe change to the Official Receiver.

(3 ) Th d b b i di (i l di

Deb tor s du tiesafter e ntry to no-asset procedure.



(3 ) The debtor m ay not obtain credit (includingcredit under a cond itional purchase transaction), eitheralone or jointly with another pe rson, of more than onehundred thousand shillings without first informing thecredit provider that the debtor is subject to the no-assetprocedure.

353. (1) A person who, wh ile admitted tothe no asset Offence for personadmitted to no-


asset procedure to procedure—obtain credit.

(a ) alone or jointly with another person,obtains credit of one hundred thousandshillings or m ore;

(b ) incurs liability to a credit provider for

one hundred thousand shillings ormore for the purpose of obtainingcredit for another person; or

(c ) enters into a credit purchasetransaction under which the person isliable to pay one hundred thousandshillings or m ore,

com mits an offence.(2) In proceedings for an offence under

subsection (1), it is a defence to prove—

(a ) in a case to which subsection (1)(a)applies—that, before obtaining therelevant credit the defendant informedthe credit provider that the defendantwas admitted to the no-assetprocedure;

(b) in a case-to which subsection (1)(b)applies—that, before the defendantincurred the relevant liability, thecredit provider was informed that thedefendant was admitted to the no-assetprocedure; or



procedure; or

(c ) in a case to which subsection (1)(c)applies—that, before the defendantentered into the relevant agreement,the other parties to the agreement wereinformed that the defendant wasadm itted to the no-asset procedure.

(3) A person who is found guilty of an offence


under this section is on con viction liable to a fine notexceeding one m illion shillings or to imp risonment for aterm not exceeding twelve m onths, or to both.

353. A debtor's participation in the no-asset procedureterminates when—

(a ) the Official Receiver terminates thedebtor's participation under section354 (when Official Receiver mayterminate no-asset p rocedure);

(b ) the debtor is discharged under section358 (discharge of d ebtor'sparticipation in no-asset Procedure);

(c ) the debtor app lies for the debtor's ownbankruptcy; or

(d ) a creditor who is en titled to do so (forexample, because the creditor's debt isenforceable as a debt sp ecified in

section 350(2)) app lies for the debtor'sbankruptcy and the debtor is adjudgedbankrupt.

How debtor's

participation in theno-asset procedureis terminated.

. 354. (1) The Official Receiver may terminate adebtor's participation in the no-asset procedure if—

(a ) the debtor was wrongly adm itted to thef

When OfficialReceiver mayterminate no-assetprocedure.



( ) g yno-asset procedure (for example,because the debtor concealed a ssets) ormisled the Official Receiver; or

(b ) the Official Receiver is satisfied thatthe debtor's financial circumstanceshave changed, enabling the debtor to

repay an am ount towards the debtor'sdebts.

4948 he Insolvency Bill 20/2

Official Receivermay apply forpreservation orderon ground ofdebtor'smisconduct.

(2 ) The O fficial Receiver terminates a debtor'sparticipation in the no-asset procedure by sending thedebtor to the debtor's last known add ress a notice in theform p rescribed by the insolvency regulations for thepurpo se of this subsection.

(3 ) The termination is effective when the notice

is sent, whether or no t the debtor receives it.(4) As soon as practicable after the termination

of a debtor's participation in the no-asset procedure, theOfficial Receiver shall send a notice of the termination toeach creditor of the debtor kno wn to the Official Receiver.

355. (1) If the Official Receiver terminates a d ebtor'sparticipation in the no-asset procedure on the ground thatthe debtor has concealed assets or m isled the OfficialReceiver, the Court may, on the ap plication of the OfficialReceiver, make a n order for the p reservation of the debtor'sassets pending an app lication for the d ebtor's bankruptcy.

(2) The.Court may make an ord er undersubsection (1) on such terms as it considers approp riate.

Effect oftermination ofdebtor'sparticipation in no-asset procedure.

356. (1) On termination of the d ebtor's participationin the no-asset procedure-

. (a) the debtor's debts that becameunenforceable on the debtor's entry tothe no-asset procedure become again



enforceable; and

(b) the debtor becomes liable to pay anypenalties and interest that may haveaccrued.

(2) Subsection (1) does no t apply if the debtor's

entry to the no-asset procedure is term inated by dischargeunder section 358 (discharge of debtor's participation in


no-asset procedure).

357. (1) A creditor may apply to the Official Receiverfor termination of the debtor's participation in the no-assetprocedure on any of the g rounds specified in subsection (2).

(2) The grou nds are as follows:(a ) the debtor did not m eet the criteria for

admission to the no-asset procedure;

(b ) there are reasonable grounds for theOfficial Receiver to conclude that thedebtor was disqualified under section345 (debtor disqualified from entry tono-asset procedure in certain cases).

358. (1) A debtor w ho is participating in the n o-assetprocedure is automatically discharged from that assetprocedure at the end of twelve months after the date whenthe debtor was adm itted to it.

(2 ) Subsection (1) does not apply if the OfficialReceiver—

(a). is satisfied that the tw elve-mo nthperiod should be extended for thepurpose of properly consideringwhether the debtor's participation inthe no-asset procedure should beterminated; and

Creditor may applyto OfficialReceiver fortermination ofdebtor'sparticipation in no-asset procedure.

Discharge ofdebtor'sparticipation in no-asset procedure.



(b) sends a w ritten deferral notice to thedebtor's last known address before theend of that period.

(3 ) The O fficial Receiver shall specify in thedeferral notice an alternative date for au tomatic discharge,

Which m ay be no later than thirty-five days after the end of


the twelve-month period.(4 ) A deferral notice has effect whether or not the

debtor receives it.

(5 ) As soon as practicable after the sending adeferral notice to a debtor, the Official Receiver shall senda copy of the notice to each creditor of the debtor known tothe Official Receiver.

(6). The debtor is automatically discharged fromthe no-asset procedure on the d ate-specified in the d eferralnotice.

(7) The Official Receiver may revoke a deferralnotice in the same w ay in which it was sent, in wh ich case,

the debtor is automatically discharged from the no-assetprocedure—

(a ) if the notice is revoked on or before theend of the twelve-month periodspecified in subsection (1)—at the endof that period; or

(b ) if it is revoked after the end of that

period— on the date of revocation.

Effect of dischargeof debtor'sparticipation in no-asset procedure.

359. (1) On discharge under section 358 (discharge ofdebtor's participation in no-asset procedure)—

(a ) the debtor's debts that becameunenforceable on the debtor's entry to

the no-asset procedure are can cellgd;and



and

(b ) the debtor is no longer liable to payany part of the d ebts, including anypenalties and interest that may haveaccrued.

(2) Subsection (1) does not apply—

(a) to any debt or liability incurred by


trallä or fraudulent breach of trust towhich the debtor was a party; or

(b) any debt or liability for which thedebtor has obtained forbearancethrough fraud to which the debtor wasa party.

(3) The debts and liabilities referred to insubsection (2) again become enforceable on dischargeunder section 358, and the debtor is liable to pay anypenalty or interest that may have accrued.

360. A discharge under section 358 (discharge ofdebtor's participation in no-asset procedure) does notrelease a person who, at the date of discharge, was—

(a) a business partner of the dischargeddebtor;

(b) a co-trustee with the dischdlied debtor;(c) jointly bound or had made any contract

with the discharged debtor; or(d) a guarantor or in the nature of a

guarantor of the discharged debtor.

Discharge does notrelease debtor'sbusiness partnersand others.

PART V— ADMINISTRATION O1 INSOLVENT DECEASED SESTATES



ESTATES

Division 1— Introductory provision

361 (1) In this Part—nterpretation:

administrator has the same meaning as in the Law Part V.


Cap. 160 of Succession Act;

"beneficiary", in relation to a deceased debtor'sestate, means a person w ho is beneficially interested in theestate;

"estate" has the same meaning as in the Law ofSuccession Act and, in relation to a deceased debtor, m eansthat part of the debtor's estate that is available fordistribution under section 375;

"executor" has the same meaning as in the Law ofSuccession Act;

" trustee" means a trustee appointed under section369(2);

(2) This Part does not affect—(a ) any property of a deceased that does not

form part of the deceased debtor'sestate; or

(b ) the administration of that property.

Division 2— Functions of the Cou rt in respect of adm inistration ofinsolvent estates

Court may orderthat estate beadministeredunder this Part.

362. (1) The Court may order that the estate of adeceased debtor be administered under this Part on theapplication—

(a ) under section 363 of the executor or



administrator or a person who isapplying to the Court for a grant ofprobate or letters of administration: or

(b ) u n de r s ec tio n 3 64 o f-

(i) a creditor who has producedevidence establishing a debt due


to the creditor; or

(ii) a beneficiary.

(2) The Court may refuse to make such an order ifit is satisfied that—

(a ) there is a reasonable p robability that

the estate w ill be sufficient to pay all ofthe deceased's debts; and

(b ) the creditors will not be prejudiced bythe estate being administered in thenormal way.

363. (1) The executor or adm inistrator, or a personwho is applying to the Court fora grant of probate or lettersof administration, may apply to the Court for an order thatthe estate be administered under this Part ifthe executor o radministrator or person applying is of the view that themoney in the estate (together with the proceeds of assetsin the estate that can conveniently be converted into money)w ill not be, or is not likely to be, sufficient to satisfy theseveral claims made or likely to be made on the estate.

(2) An application may—

(a ) be joined with an app lication for a grantof probate or letters of adm inistration inrespect of the deceased's will or of thedeceased's property that does not form

part of the deceased's estate; or(b ) be made at any time after that grant

Application byexecutor oradministrator, etc.



(b ) be made at any time after that grant.

(3) In addition to the application, an applicantshall lodge w ith the Court an account that—

(a) shows the assets, debts and liabilities ofthe deceased to the extent that the

applicant knows what they are; and


(b) complies with subsection (4).

(4) An accoun t com plies with this subsection ifit—

(a ) is verified by statutory declaration; and

(b ) is lodged-

(i) when the application is lodged;(ii) within the prescribed time after

the app lication is lodged; or

(iii) within such additional period (ifany) as the Court may allow.

(5) The applicant may amen d the account with the

app roval of the Court. •

Application bycreditor orbeneficiary fororder under thisPart.

364. (1) The following persons m ay also apply to theCourt for an orderunderthis Part:

(a ) a creditor of the deceased's estate, if thecreditor's debt has reached thethreshold for a creditor's application forbankruptcy;

(b ) a beneficiary.

(2) A creditor or beneficiary may ap ply for anorder if—

(a ) the executor or adm inistrator has not

applied unde r this Part, and after beingrequested in writing to apply, fails to



apply within twenty-one days afterreceiving the request; or

(b ) no executor or adm inistrator has beenappo inted, and no application has beenlodged in the Court under section 363 ,

within four months after the date of the


debtor's death.

(3) In the case of an ap plication und er subsection(2)(a) for an order that the estate be;administered under thisPart, the Court m ay not m ake the order before the expiry oftwo m onths after the date when probate or letters ofadministration were granted, but this restriction doe s notapply if—

(a) the executor or administrator hasconsented;

(b) the applicant proves that—

(i) the deceased.was n ot insolvent atany time within three monthsbefore the death; or

(ii) the executor or adm inistrator hasfavoured or is about to favour anyparticular creditor or creditors; or

(c) in the Court's opinion, the executor oradministrator is not properly

adm inistering the estate.(4) The Court may allow an ap plication und er

subsection (2)(b) to be lodged before the exp iry of fourmo nths after the date of the debtor's death if the Court issatisfied that—

(a ) the deceased was insolvent at any timewithin the three months preceding the

deathi or(b ) the estate that shouldhave been



(b ) the estate that shouldhave beenavailable for the decea sed's creditors israpidly diminishing.

365. If an application has been lodged by a c reditor orbeneficiary under section 364, the app licant shall give noticeof the application-

Notice ofapplication bycreditororbeneficiary,

4956he Insolvency Bill, 2012

(a ) to the executor o r adm inistrator; or

(b ) if there is no executor oradministrator—to the person sp ecifiedby the Court.

Court may orderadministration byOfficial Receiveror the PublicTrustee instead ofexecutor oradministrator.


(a ) an app lication has been m ade to theCourt for an order to administer anestate under this Part; and

(b ) the Court believes that the estate islikely to be better administered by the

Official Receiver or the Public Trusteerather than by the person who is or ma ybecome the executor or administrator.

(2) The Co urt may, as part of its original order onthe application or by any subsequent order, make an orderdirecting—

(a ) the executor or administrator (if there isone) to stop adm inistering the estate;and

(b ) the Official Receiver or the PublicTrustee to assum e responsibility for itsadministration.

Certificate lod gedby the PublicTrustee has effect

374. (1) If the Public Trustee is the executor oradm inistrator of, or would be entitled to o btain a grant of



Trustee has effectas application andorder.

, gadm inistration for, an ap parently insolvent estate, the PublicTrustee may lodge a certificate under this section.

(2 ) The lodging of a certificate in the prescribedform has the effect both of an app lication and an order thatthe estate be adm inistered under this Part.

(3 ) The certificate is to be lodged in the Court


registry from which the grant of probate or letters ofadministration was issued.

3 7 5 . (1) The who le of the estate at the date when theapplication for the order under this Part w as lodged vests inthe person appointed by the Court to administer it as trustee.

(2) In its order that the estate be administeredunder this Part or in a subsequent order; the Court mayappoint as trustee—

(a ) the executor or administrator;

(b ) the Off icial Receiver;

(c ) Public Trustee; or

(d ) any other person.

3 7 6 . The trustee Shall, as soon as practicable after theestate vests in the trustee, realise, administer, and distribute

the assets in accordance with the law and practice ofbankruptcy, subject to any modifications in this Part.

E s t a t e v e s t s i nt rus tee .

Tr u s t e e t o r e a l i s e ,a d m i n is t e r a n dd i s t r ib u t e e s t a t e .

3 7 7 . (1) This section applies if the estate that vests inthe trustee inpludes any of the deceased's necessaryhousehold furniture and effects that would have passed to

the deceased's surviving spouse if the estate had not beeninsolvent.

(2) h i i l d i

E n t i t le m e n t o fs u r v i v in g s p o u s et o h o u s e h o l df u r n i t u r e a n d

effec t s .



(2) The surviving spouse may select and retain asthe spouse's own property so much of the furniture andeffects referred to in subsection (1) that the trusteedetermines.

(3) The surviving spouse shall m ake the selection

within the time that the trustee allows.(4 ) The surviving 4pouse s selection does not


Trustee may makeallowance tosurviving spouse.

affect any rights under a valid charge or a credit purchasetransaction in respect of the goods selected.

(5) The fact that the goods available for selectionare subject to a charge or credit purchase transaction doesnot give the surviving spouse any rights to any other part ofthe deceased's prop erty.

378. (1) The trustee m ay make an allowance out of theestate to the surviving spouse or to any of the relatives ordependants of the d eceased or the surviving spouse for thesupport of any of them.

(2) However, the trustee shall first obtain theconsent of the creditors, which must be exp ressed in theform of an ordina ry resolution.

Division 3—Trustee s responsibilities with respect to administration of

insolvent deceased s estate


379. This Division app lies if the Court has made anorder that the estate of a deceased pe rson be adm inisteredunder this Part.

Trustee'sfunctions andpowers in respect

f i l

380. The trustee has, in relation to the estate, the sam efunctions and powers as a bankruptcy trustee has in relationt th t f b k t



of insolventdeceased's estate.

to the property of a bankrupt.

Distribution ofinsolvent

deceased's estate.

374. (1) The trustee sh all distribute the estate in the

following order:(a) firstly, payment of all proper costs,


charges, debts and expenses.of the dueadministration of the estate, whetherincurred before or after the order ismade;

(b) secondly, payment of the deceased'sreasonable funeral expenses;

(c) thirdly, payment of the follow ingexpenses of the deceased incurredduring the three months immediatelybefore the deceased's death-

(i) medical expenses; and

(ii) reasonable expenses for hospitalcare provided for the deceased, sofar as those expenses are lawfullyrecoverable;

(d) fourthly, payment of other claims andinterest in accordance w ith the SecondSchedule.

(2) For the purposes of subsection (1)(d), areference in the Second Schedule to the commencement ofthe bankruptcy is to be read as a reference to the date of thedeceased's death.

375. (1) In this section, "surplus" means the surplus of

assets that remains with the trustee after the trustee has paidin full—

( ) h d b d b h d d d b

H o w a n y s u r p lu si s t o b e p a i d .



(a ) the debts due by the deceased debtor;

(b ) the costs of the administration underthis Part; and

(c ) any other money that would be payable

in a case of bankruptcy.(2) The t rus tee sh al l—


(a ) if there is an executor or administratorof the deceased's property that does notform part of the deceased's estate underthis Part—pay the surplus to thatexecutor or administrator; or

(b ) if there is no such executor oradministrator—distribute the surplus inaccordance with the directions of theCourt (which shall in giving thosedirections have regard to the personswho are entitled to the surplus).

(3 ) The Court may m ake an order approving thedistribution of the surplus as part of t he order that the estate

be adm inistered under this Part, or at any time afterwards.(4) If the Court has made such an order, it may

from time to time vary it in relation to any part of thesurplus that remains under the control of the trustee at thedate of the variation.

Creditor's noticeto executor oradministrator.

376. If an order that a deceased's estate be administeredunder this Part is notified to the deceased's executor oradministrator, the executor or administrator may only obtaina proper discharge for any payment of money or dispositionof property by the executor or administrator if the paymentor disposition is consistent with the terms of the order.

Power of trusteeto act in relationt d d'

377. (1) A trustee may take a step that a bankruptcytrustee could have taken under Division 19 of Part III (for



to deceased'sirregulartransactions.

trustee could have taken under Division 19 of Part III (forexample, by cancelling an irregular transaction) as if thedeceased had been bankrupt at the time of death.

(2 ) However, the following two further additionalrestrictions apply w hen a trustee takes such a step.

(3 ) The first additiona l restriction is that the


trustee may not issue a notice cancelling a gift or voluntarysettlement without first obtaining the approval of the Court.The Court may give permission only if it is satisfied thatrecovery of the gift or settlement is necessary to pay thedebts of the estate in full (including interest).

(4) The second additional restriction is that the

Court may make an order under section 211 (Court mayorder recipient of bankrupt's contribution to property ofanother to pay value to bankruptcy trustee) only if it issatisfied that recovery of the deceased's contribution to theproperty of another is necessary to pay the debts of theestate in full (including interest).

378. The trustee may cancel an execution against thedeceased debtor's estate unless it was completed more thanthree months before the date of the order that the estate beadm inistered und er this Part.

Trustee maycancel executionagainst insolventdeceased debtor'sestate.

Certain acts of

executor oradministratorvalid if done ingood faith.

379. A payment made, or an act done or omitted to bedone, in good faith by an executor or administrator inrespect of a deceased's estate before the executor oradministrator had notice of an intention to apply for an orderthat the estate be administered under this Part is notinvalidated by any other provision of this Act.

PART VI—LIQUIDATION OF COMPANIES



Q

Division 1—Introductory provisions

380. (1) This Part applies to the liquidation of a cheme of Part VI.

4962

Distinctionbetweenmembers ' andcreditors '

voluntary

liquidation.

Interpretation: PartVI.


com pany registered under the Comp anies Act, 2012.

(2) A liquidation may be either—

(a ) • voluntary (see Divisions 2 to 5); or

(b ) by the Court (see D ivision 6).

(3) This Division an d Divisions 7 to 1 0 relate toliquidation generally, except when otherwise stated.

3 8 1 . In this Part—

(a ) a liquidation in the case of which adirectors' statutory declaration under

section 397 (declaration of solvency)has been made is a mem bers'voluntary liquidation ; and

(b ) a liquidation in the case of which sucha declaration has not been ma de is acreditors' voluntary liquidation .

38 2. (1 ) In this Part,

contributories —

(a ) mea ns all persons liable to contributeto the .assets of a comp any if it isliquidated; and

(b ) for the purposes of all proceedings fordetermining, and all proceedingsbefore the final determina tion of, the



persons who are to be treated ascontributories for the purposes of thisPart—includes all persons alleged tobe contributories;

inability to pay its debts , in relation to a

The Insolvency Bill, 20/2 963

comp any, has the meaning given by section 383;

liquidation comm ittee meeting , in relation to acomp any,i means a committee appointed by the creditorsof the comp any in accordance with section 408(appointment of liquidation committee).

resolution for voluntary liquidation means aresolution p assed under section 393(1)(a) or (b).

(2) The reference in subsection (1) to personsliable to contribute to the assets of a company does notinclude a person so liable because of a declaration by theCourt under—

(a ) section 505 (fraudulent trading bycompany in liquidation); or

(b ) section 506 (wrongful trading).

383. (1) For the purposes of this Part, a comp any isunable to pay its debts—

(a ) if a creditor (by assignment orotherwise) to whom the com pany isindebted for hundred thousandshillings or more has served on thecompany, by leaving it at thecompany's registered office, a writtendemand requiring the company to paythe debt and the comp any has fortwenty-one days afterwards failed topay the debt or to secure or com poundfor it to the reasonab le satisfaction of

The circumstancesin which acompany is unable

to pay its debts.



for it to the reasonab le satisfaction ofthe creditor;

(b ) if, execution or other p rocess issued ona judgment, decree or order of anycourt in favour of a creditor of thecompany is returned unsatisfied in

4964he Insolvency Bill 2012

Liability ascontributories ofpresent and formermembers.

whole or in part; or

(c) if it is proved to the satisfaction of theCourt that the company is unable topay its debts as they fall due.

(2 ) A company is also unable to pay its debts for

the purposes of this Part if it is proved to the satisfaction ofthe Court that the value of the company's assets is less thanthe amount of its liabilities (including its contingent andprospective liabilities).

(3 ) The insolvency regulations may increase orreduce the am ount specified in subsection (1)(a).

384. (1) When a company is being liquidated, everypresent and former member is liable to contribute to itsassets to any amount sufficient for payment of its debts andliabilities, and the expenses o f the liquidation, and for theadjustment of the rights of the contributories amongthemselves.

(2) Subsection (1) is subject to the followingprovisions:

(a ) a person who was formerly a memberof the com pany is not liable tocontribute if the person h as ceased tobe .a member for twelve months ormore before the commencem ent of the

liquidation;(b ) a person who was formerly a member

of the company is not liable to



contribute in respect of any debt orliability of the comp any contractedafter the person ceased to be amember;

(c) a former m emb er is not liable tocontribute, unless it appears to the


Court that the existing members areunable to satisfy the contributionsrequired to be made by them;

(d ) in the case of a company limited byshares—a contribution is not requiredfrom a member exceeding the amount

(if any) unpaid on the shares in respectof which the member is liable as apresent or former member;

(e ) nothing in the Companies Act, 2012 orthis Act invalidates any provisioncontained in a policy of insurance orother contract whereby the liability of

individual members on the policy orcontract is restricted, or because ofwhich the funds of the company arealone made liable in respect of thepolicy or contract;

(f) an amount due to a member of thecomp any (as 3uch), as dividends,

profits or otherwise is taken not to be adebt of the company, that is payable tothe member in a case of competitionbetween the member and any othercreditor who is not a member of thecompany, but any such amount can betaken into account for the purpose ofthe final adjustment of the rights of thecontributories among themselves.

(3) In the case of a company limited byguarantee a member is not liable to contibute more than



guarantee, a member is not liable to contibute more thanthe amount that that the member has undertaken tocontribute under the company's guarantee.

385. (1) In this section, "relevant payment" means a , Liability of pastdirectors and


shareholders. paym en t m ade out of capital in respec t of the redem ption orpurchase by a com pany of any o f i ts own shares.

(2) This se ction applies if a com pany is inl iquidat ion and —

(a) it h as un de r Division 4 of Part XVI ofthe Com panies Act, 2012 (Acquisitionby limited com pany of its own shares:redem ption or purchase by privatecom pany out of capital) m ade apaym en t out of capital in respe ct of theredem ption or purchase of any of itsow n sh ares; and

(b ) the aggregate amoun t of the com pany sassets and the am oun ts paid as acon tribution to its assets (apart fromth is sectio n ) are n ot sufficien t forpayme nt of i ts debts and l iabil i ties andthe ex pense s of the l iquidation.

(3) If the l iquidat ion com m en ced w ithin tw elvem onth s after the date on w hich th e relevant paym ent w asm a d e —

(a) the person from w hom the shares wereredeem ed or purchased, and

(b ) the directors wh o signed the statutorydeclaration m ade in accordance w ithsection 482(1) to (3) of the Com paniesAct, 201 2 (directors statem en t and

auditor s repo rt) for purposes o f theredem ption or purchase, except adirector w ho sh ow s that the directorhad reason able , grounds for form ing the



had reason able , grounds for form ing theopinion set out in the d eclaration,

are, to the exten t n ecessary to satisfy th e in sufficiency,l iable to con tribute to th e com pany s assets as provided bysubse ction s (4) and (5).


(4 ) A person from whom any of the shares wereredeemed or purchased is liable to contribute an amount notexceeding so much of the relevant payment as was made bythe company in respect of the person's shares; and thedirectors are jointly and severally liable with that person tocontribute that amount.

(5 ) A person w ho has contributed an amount tothe assets in accordance w ith this section may apply to theCourt for an order-directing any other person jointly andseverally liable in respect oPthat amount to pay to theperson such amount as the COurt considers appropriate andequitable.

(6 ) Section 384 (liability as contributories of

present and former members) does not apply to a liabilityaccruing under this section.

386. (1) This section applies to a company that is inliquidation if it w as previously registered as unlimited buthas since become re-registered as a limited company.

(2) Despite section 384(2)(a), a former m emberwho was a member of the company at the time of its re-registration is, if the liquidation commences w ithin thethree years from and including the date on w hich thecompany w as re-registered, liable to contribute to the assetsof the company in respect of debts and liabilities contractedbefore that time.

(3 ) If no persons who were mem bers of thecompany at that time are existing mem bers of it, a personwho at that time w as a present or former member is liableto contribute as required by subsection (2) even though the

Position of limitedcompanies thatwere formerlyunlimited.



q y ( ) gexisting members have paid the contributions required to bemade by them.

(4 ) Subsection (3) applies subject to section

384(2Xa) and to subsection (2) of this section, but despite


section 384(2)(c).

(4) Despite section 384(2)(d) and (3), there is nolimit on the amount that a person who, at that time, was apast or present mem ber of the compan y is liable tocontribute.

Position ofunlimitedcompanies thatwere formerlylimited.

Nature ofcontributory'sliability.

387. (1) This section applies to a company inliquidation that has previously been registered as limitedbut has since b ecome re-registered as unlimited.

(2) A person who, at the time when theapplication for the com pany to b e re-registered was lodged,,vas a former m emb er of the company an d did not after that

Lime again becom e a m ember of it is not liable to contributeto the assets of the company any more than would havebeen the case had the com pany not been re-registered.

388. The liability of a contributory creates an ordinarycontract debt due from the contributory at the time when

the contributor's liability began, but payable at the timeswhen calls are made to enforce the liability.

Death ofcontributories notto affect theirliability.

389. (1) If a contributory dies either before or afterbeing placed on the list of contributories, the contributory'spersonal representatives are, in administering thecontributory's estate, liable to contribute to the assets of thecompany in discharge of the contributory's liability and aretherefore contributories.

(2) If the personal representatives fail to pay



(2) If the personal representatives fail to paymoney ordered to be paid by them, proceedings may betaken for administering the estate of the deceasedcontributory and for compelling payment from it of themon ey due.


390. If a contributory is adjudged bankrupt, eitherbefore or after being placed on the list of contributories, thefollowing provisions apply:

(a) the contributory's bankruptcy trusteerepresents the contributory for allpurposes of the liquidation and istherefore a contributory for thepurposes o f this Part;

(b) that trustee may be required—

(i) to admit to proof against thecontributory's estate; or

(ii) otherwise to permit the payment

from the contributory's assets indue course of law,

any money due from the contributoryin respect of the contributory's liabilityto contribute to the company's assets;

(c) there may be proved against the

contributory's estate the estimatedvalue of the contributory's liability tofuture calls as well as to calls alreadymade.

Liability ofcontributories whoare adjudgedbankrupt.

391. (1) This section applies to a company inliquidation that is registered but was not formed under the.Companies Act 2012.

(2) A person is, in respect of the company's'debts and liabilities contracted before registration, a

Liability ofcontributories tocontribute to debtsof company'registered but notformed underCompan ies Act,



gcontributory if the person is liable—

(a ) to pay, or contribute to the payment of,any debt or liability so contracted;

(b ) to pay, or contribute to the payment of,

p ,2012.


any amount for the adjustment of therights of the members amongthemselves in respect of any such debtor liability; or

(c) to pay, or con tribute to the am ount of,the expenses of liquidating thecompany, so far as relates to thosedebts o r liabilities.

(3 ) A contributory is liable to contribute to theassets of the company, in the course of the liquidation, allamounts due from the contributory in respect of any suchliability.

(4) If a contributory dies or becomes bankrupt,

the provisions of this Act relating to the personalrepresentatives of deceased contributories and to thebankruptcy trustees of bankrupt contributories respectivelyapply.

Division 2—V oluntary liquidation (introductory and general)

Circumstances inwhich companymay be liquidatedvoluntarily.

391. (1) A company may be liquidated voluntarily—

(a ) when the period (if any) fixed for theduration of the company by the articlesexpires, or the event (if any) occurs, onthe occurrence of which the articles

provide that the company is to bedissolved, and the company in generalmeeting has pa ssed a resolutionproviding for its voluntary liquidation;



or

(b ) if the company resolves by specialresolution that it be liquidated

voluntarily.


(2) Before passing a resolution for voluntaryliquidation, the company shall give notice of the resolutionto the holder of any qualifying floating charge in respect ofthe company's property.

(3) If notice is given prop osing a resolution forthe voluntary liquidation of a com pany, such a resolutionmay be passed only—

(a ) after the end of the expiry of sevendays from and including the date onwhich the notice was given; or

(b ) if the person to whom the notice wasgiven has consented in writing to the

passing of the resolution.(4) Division 3 of Part III of the Com panies Act

2012 (resolutions affecting a company's constitution)applies to a resolution under paragraph (a) of subsection (1)as well as a special resolution under p aragraph (b).

(5) For the purposes of this section, a person isthe holder of a qualifying floating charge in resp ect of a

comp any's property if the person holds one or moredebentures of the company secured—

(a ) by a qualifying floating charge thatrelates to the whole or substantially thewhole of the company's property;

(b ) by a number of qualifying floatingcharges that together relate to thewhole or substantially the whole of thecompany's property; or

(c ) by charges and other forms of securityh h l h h l



that together relate to the whole orsubstantially the whole of thecompany's property and at least one ofwhich is a qualifying floating charge.


Notice ofresolution toliquidate.

When liquidationcommences.

393 1) Within fourteen days after a compan y haspassed a resolution for its voluntary liquidation, it shall—

(a ) publish in theGazette a notice settingout the resolution; and

(b ) shall publish a copy of the resolutionon the company's website (if any) and

in such other p ublications (if any) asmay b e prescribed by the insolvencyregulations.

(2 ) If a comp any fails to com ply with subsection(1), the comp any, and each officer of the com pany who isin default, com mit an offence and o n conviction are eachliable to a fine not exceeding five hundred-thousand

shillings.(3 ) If, after a com pany o r any of its officers is

convicted of an offence, the com pany con tinues to fail totake any of the steps specified in subsection (1), thecompany, and each officer of the company who is indefault, com mit a further offence on each day on which thefailure continues and on conviction are each, iable to a fine

not exceeding fifty thousand shillings for each suchoffence.

(4) For purposes of subsections (2) and (3), theliquidator is an officer of the com pany.

394. The voluntary liquidation of a com pany

com men ces when the resolution for voluntary liquidation ispassed.



Consequences ofresolution toliquidate

395. (1) On and after the commencement of voluntaryliquidation of a com pany, the com pany shall cease to carryon its business, except in so far as may be necessary for its


beneficial liquidation.

(2) However, the corporate status and corporatepowers of the company continue to have effect until thecompany is dissolved, even if the company's articlesprovide o therwise.

396. The following are void if m ade after thecom men cement of a-voluntary liquidation of a com pany:

(a ) any transfer of the company's shares(other than a transfer made to or withthe sanction of the liquidator); and

(b ) an alteration in, or an attempt to alter,the status of the company's members.

397. (1) If it is proposed to liquidate a companyvoluntarily, the directors (or, in the case of a companyhaving more than two directors, the majority of them) mayat a directors' meeting make a statutory declaration to the

effect—(a ) that they have made a full inquiry into

the company's affairs; and

(b ) that, having done so, they have formedthe opinion that the company will beable to pay its debts in full,,togetherwith interest at the official rate, withinsuch period (not exceeding twelvemonths from the commencement of theliquidation) as may be specified in thedeclaration.

Share transfers andattempts to altermember's statusafter liquidationresolution to bevoid.

Making and effect ___of declaration ofsolvency bydirectors ofcompany.



declaration.

(2) Such a declaration by the directors has noeffect for purposes of this Act unless—

(a) it is made within the five weeksimmediately preceding the date of the


passing of the resolution forliquidation, or on that date but beforethe passing of the resolution; and

(b) it includes a statem ent of thecomp any's assets and liabilities as atthe latest practicable date before the

making of the declaration.(3) Within fourteen days after the date on w hich

the resolution for liquidation is passed, the company shalllodge a copy of the dec laration with the Registrar forregistration,

(4) A director who makes a declaration underthis section without having reasonable grounds for theopinion that the company will be able to pay its debts infull, together with interest at the official rate, within thespecified period comm its an offence and on conviction isliable to a fine not exceeding two m illion shillings or toimprisonment for a term not exceeding five years, or toboth.

(5) If—

(a ) the comp any is liquidated inaccordance with a resolution passedwithin five weeks after the making ofthe declaration; and

(b ) its debts (together with interest at theofficial rate) are not paid o r providedfor in full within the specified period ,

then, for the purpose of subsection (4), it is to be p resumed(unless the contrary is established) that the director did nothave reasonab le grounds for the director's opinion.



(6) If a company fails to comply with subsection(3), the comp any, and each officer of the comp any who isin default, comm it an offence and on conviction are each

liable to a fine not exceeding two hundred thousand


shillings.(7) If, after a compan y or any of its officers is

convicted of an offence under subsection (6), the companycontinues to fail to lodge the required declaration, thecompany, and each officer of the company w ho is indefault, commit a further offence on each day on w hich thefailure continues and on conv iction are each liable to a fine

not exceeding tw enty thousand shillings for each suchoffence.

Division 3—Mem bers' voluntary liquidation

398. (1) In a membe rs' voluntary liquidation, thecompany in g eneral meeting shall appoint one or m oreliquidators for the purpose of liquidating the company'saffairs and distributing its assets.

(2 ) On the appointment of a liquidator, all thepow ers of the directors cease, except in so far as thecompany in general meeting or the liquidator sanctionstheir continuance.

(3 ) Only an autho rised insolvent practitioner iseligible for appointment under subsection (1).

Appointment ofl i q u i d a t o r i nmembersv o l u n t a r yl i q u i d a t i o n .

399. (1) If a vacancy occurs (whether by death, ower to fill

resignation or otherw ise) in the office of liquidator acancy in office

appointed by the company, the com pany in general meetingo f li q u i d a t o r

may, subject to any arrangement w ith its creditors, appointanother authorised insolvency practitioner to fill thevacancy.

(2) F h f b i (1) l



(2) For the purposes of sub section (1), a generalmeeting may be convened—

(a) by a contributory; or


(b) if there was more than oneliquidators—b y the continuingliquidator or liquidators.

(3) The company shall hold the meeting—

(a ) in the manner p rovided by this Act orby its articles; or

(b ) in such manne r as the Courtdetermines on an application made bya contributory or by the continuingliquidator or liquidators.

General companymeeting at each— "s end.

400. (1) If the liquidation o f a com pany co ntinues fora period of twelve m onths or m ore, the liquidator shallconvene a general meeting of the comp any—

(a ) within three months after the end ofthat period of twelve months; and

(b ) within three months after the end ofeach subsequent period of twelvemonths.

(2 ) The liquidator shall lay before the me eting anaccount of the liquidator's acts and dealings, and of theconduct of the liquidation, during the preceding year.

(3 ) A liquidator who fails to comply w ith thissection comm its an offence and on conviction is liable to afine not exceeding five hundred thousand shillings.

(4) The Cabinet Secretary may extend the p eriodof three m onths referred to in subs ection (1)(a) or (b) ifsatisfied that there a re extenuating circumstances for do ingso, and if the Ca binet Secretary grants such an extension,that subsection is to be interpreted accordingly.



(5) This section is subject to section 410(conversion to creditors' voluntary liquidation) and section416 (creditors' meeting if liquidation converted),


401. (1) As soon practicable after the liquidation ofthe company's aff airs is complete, the liquidator—

(a ) shall prepare an account of theliquidation show ing hoiv it has beenconducted and the company's propertyhas been disposed of; and

(b ) shall then convene a g eneral meetingof the company for the purpose oflaying before it the account and givingan explanation of it.

(2) The liquidator—

(a ) shall convene the meeting bypublishing at least twenty-eight days

before the meeting an advertisement inthe Gazette on the company's.website(if any) and in such other publications(if any) as may be prescribed by theinsolvency regulations; and

(b ) shall specify the time, date, place andpurpose of the meeting.

(3) Within seven days after the meeting, theliquidator shall lodge w ith the Registrar a copy of theaccount, together with a return g iving details of the holdingof the meeting and of its date.

(4) If the copy and return are not lodged inaccordance with subsection (3), the liquidator commits anoffence and on conviction is liable to a fine not exceeding

five hundred thousand shillings.(5) If, after being convicted of an offence under

subsection (4), a liquidator continues to fail to lodge thecopy and the return, the liquidator commits a further

ff h d hi h h f il i d

Final meeting priorto dissolution:members'voluntaryliquidation.



offence on each day on w hich the failure continues and onconviction is liable to a fine not exceeding fifty thousand


Effect ofcompany's

insolvency.

shillings for each such offence.

(6 ) If a quorum is not present at the meeting, theliquidator shall, instead of the return referred to insubsection (3), make a return that the meeting w as dulyconvened and that no quorum was present; and on such areturn being made, subsection (3) as to the lodging of thereturn is taken to have been satisfied.

(7 ) If the liquidator fails to convene a generalmeeting of the com pany as required by subsection (1), theliquidator commits an offence and on conviction is liable toa fine not exceeding five hundred thousand shillings.

402. (1) This section applies if the liquidator is of the

opinion that the company will be unable to pay its debts infull (together with interest at the official rate) within theperiod stated in the directors' declaration under section 397(making and eff ect of declaration of solvency by directorsof company).

(2) On form ing the view that the company is orwill be unable to pay its debts, the liquidator—

(a ) shall convene a meeting of creditorsfor a date not later than the twenty-eighth day after the day on w hich thecontributory formed that opinion;

(b ) shall send notices of the creditors'meeting to the creditors by post at leastseven days before the day on w hich

that meeting is to be held;(c ) shall publish notice of the creditors'

meeting in the Gazette on thecompany's w ebsite and in any otherpublication prescribed by the



publication prescribed by theinsolvency regulations for the purposeof this Act;


(d ) may advertise the meeting in suchother manner and place as theliquidator considers desirable in theinterests of the creditors;

(e ) shall, during the period before the dayon w hich the creditors' meeting is tobe held, provide creditors, free ofcharge, with such informationconcerning the affairs of the companyas they may reasonably require; and

(f ) shall specify in the notice of thecreditors' meeting the duty imposed byparagraph (e).

(3) The liquidator shall also—

(a ) prepare a statement setting out theaffairs of the company that complieswith subsection (4);.

(b ) lay that statement before the creditors'

meeting; and(c ) attend and preside at that meeting.

(4) A statement com plies with this subsection ifit specifies—

(a ) the prescribed details of the company sassets, debts and liabilities;

(b ) the names and addresses of thecompany's creditors;

(c ) the securities (if any) respectively heldby them;



(d ) the dates when the securities wererespectively given; and

(e ) such further or other information (ifany) as may be prescribed by theinsolvency regulations,


and is verified by a statutory declaration signed by theliquidator.

(5 ) If the company's principal place of businesswas located in different places at different times during therelevant period, the duty imposed by subsection (2)(c)

applies separately in relation to each of those p laces.(6 ) If the company had no place of business in

Kenya du ring the relevant period, the references insubsections (2)(c) and (5) to the company's principal placeof business are taken to be reference§ to its registeredoffice.

(7 ) In this section, "the relevant period" meansthe period of six months immediately preceding the day onwhich w ere sent the notices convening the companymeeting at which it was resolved that the company beliquidated voluntarily.

(8 ) A liquidator who , without reasonable excuse,fails to comply with this section comm its an offence and onconviction is liable to a fine not exceeding five hundredthousand shillings.

Conversion tocreditors'voluntaryliquidation.

4 0 3 . As from and including the date on which thecreditors' meeting is held in accordance w ith section 402(effect of company's insolvency)—

(a) this Act has effect as if—

the directors' declaration undersection 397 (declaration ofsolvency) had not been made;and

(i)



(ii) the creditors' meeting and thecompany meeting at which it was

resolved that the company beliquidated voluntarily w ere themeetings referred to in section


405 (m eetings of creditors); and

(b) the liquidation becom es a creditors'voluntary liquidation.

Division 4— Creditors' v oluntary liquidation

404. (1) Except as pro vided by subsection (2), thisDivision applies in relation to a creditors' voluntaryliquidation.

(2) Section 405 (meeting of creditors) andsection 406 (directors to lay statement of affairs beforecreditors) do not apply if, under section 403 (conversion to

• reditors' voluntary liquidation), a members' vo luntaryliquidation has become a creditors' voluntary liquidation.


405. (1) A company that is in the course of liquidationshall—

(a ) convene a meeting of the company'screditors for a day not later than thefourteenth day after the day on whichthere is to be held the companymeeting at w hich the resolution forvoluntary liquidation is to be proposed;

(b ) send the notices of the creditors'meeting to the creditors not less thanseven days before the day on w hichthat meeting is to be held; and

(c ) ensure that notice of the creditors'i i bli h d i h

Meeting ofcreditors to beconvened bycompany.



meeting is published once in theGazette on the company's w ebsite andin any publication prescribed by theinsolvency regulations for the purposesof this section.


(2) The company shall ensure that the notice ofthe creditors' meeting states either—

(a ) the name and address of a personauthorised to act as an insolvencypractitioner in relation to the company

who, during the period before the dayon w hich that meeting is to be held,will provide creditors free of chargewith such information concerning thecompany's affairs as the creditors mayreasonably require; or

(b ) a place in the relevant locality where,

on the two business days falling nextbefore the day on which that meeting isto be held, a list of the names andaddresses of the company's creditorsw ill be available for inspection free ofcharge.

(3) If the company's principal place of businesswas located in different places at different times during therelevant period, the duties imposed by subsections (1)(c)and (2)(b) apply separately in relation to each of thoseplaces.

(4) If the company had no place of business inKenya du ring the relevant period, the references insubsections (1)(c) and (3) to the company's principal placeof business are taken to be references to its registeredoffice.

(5) In this section, "the relevant period" m eansthe period of six months imm ediately preceding the day onwhich w ere sent the notices convening the company

ti t hi h it l d th t th b



meeting at w hich it was resolved that the company beliquidated voluntarily.

(6) If the compan y w ithout reasonable excusefails to comply with a requ irement of subsection (1) or (2),the company, and each officer of the company w ho is in


default, commit an offence and on conviction are eachliable to a fine not exceeding five hundred thousandshillings.

(7) If, after a company or any of its officers isconvicted of an offence under subsection (6), the company

continues to fail to comply w ith the relevant requirement,the company, and each officer of the company w ho is indefault, commit a further offence on each day on w hich thefailure continues and on conviction are each liable to a finenot exceeding f ifty thousand shillings for each suchoffence.

406. (1) The directors of the company shall— i r e c t o r s t o l a ystatement o f a f f a i rs

(a ) prepare a statement as to the affairs of b e f o r e c r e d i t o r s .

the company that complies withsubsection (2);

(b ) lay that statement before the creditors'meeting under section 405 (meeting ofcreditors); and

(c ) appoint one of their number to presideat that meeting;

and it is the duty of the director so appointed to attend themeeting and preside over it.

(2) A statement complies w ith this subsection if

it is specifies—(a ) the details of the company's assets,

debts and liabilities prescribed by theinsolvency regulations for the purposesof this section;




(c ) the securities held by themrespectively;


Creditorsv o l u n t a r yl i q u i d a t i o n :a p p o i n t m e n t o fl i q u i d a t o r.


(e ) such further or other information asmay be so p rescribed,

and is verified by a statutory declaration signed by two ormore of the com pany's directors.

(3) If=

(a ) the directors without reasonable excusefail to comp ly with subsection (1) or(2); or

(b ) any of the directors fails, without

reasonable excuse, to comply withsubsection (1), so far as it requires thedirector to attend and preside at thecreditors' meeting,

the directors comm it, or the director comm its, an offenceand on conviction are each, or is, liable to a fine notexceeding five hundred thousan d shillings.

407. (1) The creditors and the comp any at theirrespective meetings may nom inate an authorisedinsolvency practitioner to be liquidator for the purpose ofliquidating the company's affairs and distributing its assets.

(2 ) The liquidator is the insolvency practitioner

nom inated by the creditors is to be liquidator unless theyfail to make a nom ination, in which case the liquidator. isthe insolvency practitioner (if any) nom inated by thecompany.

(3 ) If different insolvency practitioners are



nom inated, any director, mem ber or creditor of thecom pany m ay, within seven days after the date on which

t h e n o m i n a t io n w a s m a d e b y t h e c r ed i to r s , m a k e a napp lication to the Court for an order under subsection (4).

T h e I n s o l ve n c y B i l l 2 0 1 2 9/35

(4). On the hearing of an application made undersubsection (3), the Court may make an order either—

(a) directing the insolvency p ractitionernominated as liquidator by thecompany to be liquidator instead of, or

jointly with, the insolvency practitionernominated by the creditors; or

(b). appointing some other person to beliquidator instead of the insolvencypractitioner nominated by the creditors.

408. (1) The creditors at the meeting to be held inaccordance with section 405 (meeting of creditors) or atany subsequent meeting may, if they think appropriate,appoint a liquidation committee of not more than fivepersons to perform the functions imposed or conferred onsuch committees by or under this Act.

(2) If such a committee has been appointed, thecompany may, either at the meeting at which the resolutionfor voluntary liquidation is passed or at any timesubsequently in general meeting, appoint a number ofpersons, not exceeding five, to be mem bers of thecommittee.

(3) However, the creditors may resolve tha t all orany of the persons so appointed by the company are

disqualified ,from being members of the liquidationcommittee.

(4 ) If the creditors so resolve, the personsreferred to in the resolution cease to be members of thecommittee, unless the Court, on the application of any of

Creditors mayapimint liquidationcommittee.



those persons, quashes the resolution.

(5 ) On the hearing of an application to the Courtmade by any of the creditors, the Court may appoint otherpersons to act as members of the comm ittee in place of the .

4 9 8 6 h e I n s o l ve n c y B i l l 2 0 1 2

persons mentioned in the resolution.

Creditors' meetingif liquidationconverted undersection 403.

Cessation ofdirectors' powers.

409. If, in the case of a liquidation that w as undersection 403 (conversion to creditors' voluntary liquidation)converted to a creditors' voluntary liquidation, a creditors'meeting is held in accordance w ith section 402 (effect ofcompany's insolvency), any appointment made orcommittee established by that meeting is taken to havebeen made or established by a meeting held in accordancewith section 405 (meetings of creditors).

410. On the appointment of a liquidator, all the powersof the directors cease, except so far as the liquidationcommittee (or, if there is no such committee, the creditors)sanction their continuance.

Vacancy in officeof liquidator:creditors'voluntaryliquidation.

411. If a vacancy occurs in the office of liquidator

(other than a liquidator appointel by, or by the direction of,the Court), the creditors may f ill the vacancy.

Meetings ofcompany andcompany'screditors to be heldevery twelvemonths.

412. (1) If the liquidation continues for a period ofmore than tw elve months, the liquidator shall convene ageneral meeting of the company and a meeting of thecreditors to be held—

(a ) within three months after the end ofthat period of tw elve months; and

(b ) within three months after the end ofh b i d f l



each subsequent period of twelvemonths.

( 2 ) T h el iqu ida to r sha l l l ay before each of themeetings an account of the liquidator's acts and dealings

The Insolvenc Bill 2012 987

and of the conduct of the liquidation during the precedingyear.

(3) If—

(a ) under section 403, a members'voluntary liquidation has become acreditors' voluntary liquidation; and

(b ) the creditors' meeting under section402 (effect of company's insolvency)is held three months or less before theend of the twelve months after thecommencemen t of the liquidation,

the liquidator is not requ ired by this section to convene ameeting of creditors as provided by subsection (1)(a).

(4) The Cabinet.

Secretary may extend the periodof three m onths referred to in subsection (1)(a) or (b) ifsatisfied that there are extenuating circumstances for doingso, and such an extension is granted, that subsection is to beinterpreted accordingly.

(5) A liquidator w ho, without reasonable excuse,fails to comply with a req uirement of this section commitsan offence and on conviction is liable to a fine notexceeding one million shillings.

413. (1) As soon practicable after the compan y'saffairs are fully liquidated, the liquidator—

(a ) shall prepare an account of the

liquidation, showing how it has beenconducted and the company's propertyhas been disposed of; and

(b ) shall then convene a general meetingof the company and a meeting of thecreditors for the purpose of laying the

Final meeting priorto dissolution:creditors'voluntaryliquidation.



creditors for the purpose of laying theaccount before the meetings and giving


an explanation of it.

(2) The liquidator—

(a) shall convene each such m eeting bypublishing a notice of the meeting-

(i) in the Gazette,

(ii) on the company's website (ifany); and

(iii) in such other publication (if any)as may be prescribed by theinsolvency regulations for thepurposes of this section,

not later than twenty-eight days beforethe meeting; and

(b) shall specify in the no tice the time,date, place and purpose of the meeting.

(3) Within seven days—

(a ) after the date of the meetings; or

(b ) if they are not held on the same date—after the date of the later one,

the liquidator shall lodge with the Registrar a copy of theaccount, together with a return giving details of the holdingof the meetings and the dates on which they were held.

(4) A liquidator who fails to lodge the copy andreturn as required by subsection (3) commits an offenceand on conviction is liable to a fine not exceeding two

hundred thousand shillings.(5) If, after being conv icted of an offence under

subsection (4), a liquidator continues to fail to lode therequired copy and return, the liquidator commits a furtheroffence on each day on w hich the failure continues and onconviction is liable to a fine not exceeding tw enty thousand



conviction is liable to a fine not exceeding tw enty thousandshillings for each such offence.


(6 ) How ever, if a quorum is not present at eitherof the meeting, the liquidator shall, instead of the returnrequ ired by subgection (3):make a ranito the effect thatthe meeting was duly convened but no quorum w as present

(7 ) On such return being m ade, the provisions ofsubsection (3) relating to the making of the return are, inrespect of that meeting, taken to have been complied w ith.

(8 ) A liquidator who, without reasonable excuse,fails to convene a g eneral meeting of the company or ameeting of the creditors as required by this section commitsan offence and o n conviction is liable to a fine notexceeding one m illion shillings.

Division 5— provisions applying to both kinds of voluntary liquidation

414. (1) On the liquidation, the compan y's property inthe voluntary liquidation—

(a ) are to be applied in satisfaction of thecompany's liabilities equally and

without preference; and(b ) subject to that application, are, unless

the company's articles otherwiseprovide, to be distributed afnong themembers according to their rights andinterests in the company.

(2) Subsection (1) is subject to the pro visions of

this Act relating to preferential paymen ts.

415. (1) The Court may app oint a liquidator if for anyreason there is no liquidator or the liquidator is unable toact,

Property ofcompany to bedistributed amongmembers aftersatisfaction ofliabilities.

Appointment orremoval ofliquidator by theCourt



,

(2) The Court may, on cause show n, remove aCourt.

4 9 9 0 he Insolvency B ill, 2012

liquidator and appoint another one.

(3 ) Only an authorised insolvent p ractitioner iseligible for app ointme nt under this section.

(4) The acts of a person ap pointed by the Courtas a liquidator of a comp any are valid despite any defect inthe pe rson's appointmen t or qualifications.

Notice ofappointment to bepublished byliquidator.

416. (1) Within seven days after being appo inted asliquidator of a com pany, the liquidator shall publish anotice of the liquidator's appointment—

(a ) in the Gazette;

(b ) on the comp any's website (if any); and

(c ) in such other publication (if any) asmay b e prescribed by the insolvencyregulations for the p urposes of thissection.

(2 ) Within fourteen days after publishing (or firstpublishing) the notice of the liquidator's ap pointment, theliquidator shall lodge a cop y of the n otice with theRegistrar for registration.

(3 ) A liquidator who fails to comp ly withsubsection (1) comm its an offence and on conviction isliable to a fine not exceeding five hundred thousandshillings.

(4) If, after being convicted of an offence undersubsection (3), a liquidator continu es to fail to lodge the

required notice, the liquidator comm its a further offence oneach day o n which the failure continues and on co nvictionis liable'to a fine not exceedin g fifty thousan d shillings foreach such offence.

(5) A liquidator who fails to comply w ithsubsection (1) commits an o ffence and on c onviction is



liable to a fine not exceeding two hundred thousand


shillings.

(6) If, after being convicted of an offence undersubsection (5), a liquidator continues to fail to lodge therequired notice, the liquidator commits a further offence oneach day on which the failure continues and on convictionis liable to a fine not exceeding twenty thousand shillingsfor each such offence.

417. (1) In this section—

(a ) the transferor company is a companyto which this section applies; and

(b ) a transferee company, or a transfereelimited liability partnership, is thecompany or partnership to which theproperty of the transferor company isproposed to be, or is to be, transferredor sold.

(2) This section applies to a company that is

proposed to be, or is being, liquidated voluntarily if thewhole or part of the company's business or property isproposed to be transferred or sold—

(a ) to a transferee company; or

(b ) to a transferee limited liabilitypartnership.

(3) With the required approval, the liquidator ofthe transferor company may receive, in compensation orpart compensation for the transfer or sale—

(a ) in the case of the transfereecompany—shares, policies or othersimilar interests in the transferee

Power of liquidatorto accept shares ormembership rightsas consideration forsale of company's

property.



company for distribution among the

members of the transferor company; or(b ) in the case of the transferee limited


liability partnership—membershiprights in the transferee limited liabilitypartnership for distribution among themem bers of the transferor com pany.

(4) The approval required under subsection (3)is

(a ) in the case of a members' voluntaryliquidation— a special resolution of thecom pany, conferring either a generalauthority on the liquidator or anauthority in respect of any particulararrangement; and

(b ) in the case of a creditors' voluntary

liquidation— the approval of either theCourt or the liquidation committee (ifany).

(5) As an alternative to subsection (3), theliquidator may, with the required approval, enter into anyother arrangement under which the members of thetransferor company may—

(a) in the case of the t ransfereecompany—instead of receiving cash,shares, policies or similar interests (orin addition to them), participate in theprofits of, or receive any other benefitfrom, the transferee company; or

(b ) in the case of the transferee limited

liability partnership—instead ofreceiving cash or membership rights(or in addition to them), participate insom e other way in the profits, of, orreceive any other benefit from, thatpartnership.



(6) A sale or arrangement in accordance with this

s e c t io n i s b in d i n g o n m e m b e r s o f t h e tr a n s f e ro r c o m p a n y,




Questions relatingto liquidation maybe referred to theCourt fordetermination.

be determined by special resolution.

(4 ) If the member requires the liquidator topurchase the member's interest and no agreement isreached as to the price to be paid for the interest, therequirement to purchase the interest is, for the purposes ofthe Arbitration Act, 1995, taken to be an arbitrationagreement to determ ine that price.

419. (1) The liquidator, or a contributory or creditor,may apply to the Court to determine any question arising inthe liquidation of a company, or to exercise, with respect tothe enforcing of calls or any other matter, all or any of thepowers that the Court might exercise if the company werebeing liquidated by the Court.

(2 ) If satisfied that the determination of thequestion or the required exercise of power will be fair andbeneficial, the Court may make an order acceding whollyor partially to the application on such terms as it considersappropriate, or may make such other order on theapplication as it considers ap propriate.

(3 ) On the m aking of an order under subsection(2), the Registrar of the Court shall without delay forward acopy of an order made under this section halting theproceedings in the liquidation, to the Registrar ofCom panies for registration.

Restrictions ondirectors' powersto appoint ornominate liquidatorof company involuntaryliquidation.

420. (1) If, in the case of a company that is involuntary liquidation, a liquidator has not been appointedor nominated by the company, the directors may exercisetheir powers only—

(a ) with the approval of the Court; or

(b ) in the case of a creditors' voluntary



(b ) in the case of a creditors voluntary

liquidation— so far as may be




superviseliquidation ofcompanies.

supervise the liquidation of com panies registered in Kenya.

(2) Subsection (1) does not apply to a companythat is in voluntary liquidation in accordance with Divisions2 to 5.

Circumstances inwhich companymay be liquidatedby the Court.

423. (1) A company may be liquidated by the Courtif-

(a) the company has by special resolutionresolved that the company beliquidated by the Court;

(b) being a public company that Wasregistered as such on its originalincorporation—

(i) the company has not been issuedwith a trading certificate undersection 761 of the CompaniesAct, 2012 (requirement as tominimum share capital); and

(ii) more than twelve months haselapsed since it w as so registered;

(c) the company does not commence itsbusiness within twelve months from itsincorporation or suspends its businessfor a whole year; '

(d) except in the case of a private company

limited by shares or by guarantee, thenumber of members is reduced belowtwo;

(e) the company is unable to pay its debts;

(0 at the time at which a moratorium forthe company ends under section 644



(arrangements coming to an endprematurely)—a voluntary


arrangement made under Part IX(Company voluntary arrangements)does not have effect in relation to thecompany; or

(g) the Court is of the opinion that it is justand equitable that the company shouldbe liquidated.

(2) A company may also be liquidated by theCourt on an application made by the Attorney Generalunder section 43 2(6).

424. (1) An application to the Court for the liquidation

of a company may be made any or all of the following:(a ) the company or its directors;

(b ) a creditor or creditors (including anycontingent or prospective creditor orcreditors); -

(c ) a contributory or contributories of the

company;(d ) a provisional liquidator or an

administrator of the company;

(e ) if the company is in voluntaryliquidation—the liquidator.

(2) However, except as otherwise provided bythis section, a contributory is not entitled to make aliquidation application unless either—

(a ) the number of members is reducedbelow two; or

(b ) the relevant shares (or some of them)either-

Applications to theCourt forliquidation ofcompanies.



(i) were originally allotted to thecontributory, or have been held


by the contributory, andregistered in the contributory's'name, for at least six monthsduring the eighteen monthspreceding the commencement ofthe liquidation; or

(ii) have devolved on the

contributory through the death ofa former holder.

(3) A person who is liable under section 385(liability of past directors and shareholders) to contribute toa company's assets on its in liquidation may make anapplication on either of the grounds specified in section423(f) and (g), in which case subsection (2) does not apply,

but, unless the person is a contributory otherwise thanunder section 385, the contributory may not as such make aliquidation application on any other ground.

(4) A liquidation application on the groundspecified in section 431(f) may only be made by one ormo re creditors.

(5) The Attorney General may make a liquidation

application if—(a ) the ground of the application is that

specified in section 423(b) or (c); or

(b ) it is a case to which section 425applies.

(6) The Attorney General may also make an

application for the liquidation of a company if, afterreceiving from an inspector appointed to conduct aninvestigation into the affairs of a company under Part XXXof the Companies Act, 2012 a copy of a report of theinvestigation. the Attorney General considers that, as aresult of the contents of the report, the company should beliquidated because of a circumstance referred to in section



801(2 )(a) or (b) of that Act.

The Insolvency Bill, 2012, 999

(7) If a company is in voluntary liquidation, aliquidation application may be made by the OfficialReceiver (as well as by any other person authorised underthe other provisions of this section), but the Court maymake a liquidation order on such an application only if it issatisfied that the voluntary liquidation cannot be continuedwith due regard to the interests of the creditors or

contributories.

425. (1) If, in relation to a company, it appears to theAttorney General

(a ) from a report made or informationobtained under Part XXX of theCompanies Act, 2012 (Companyinvestigations) or section 1014 of thatAct (production and inspection ofdocuments if offence suspected);

(b ) from a report made, or informationobtained, by the Capital MarketsAuthority under the Capital Markets

Act;(c ) from information provided by the

Registrar; or

(d ) as a result of the company or itsdirectors having been convicted of anoffence involving fraudulent conduct,

that it would be in the public interest for the company to beliquidated, the Attorney General may make an applicationto the Court to make a liquidation order in respect of thecompany for its liquidation on the ground that it would bejust and equ itable 'for it to be so.

(2) Subsection (1) does not apply if the companyis already in the process of liquidation by the Court.

Application forliquidation ofcompany ongrounds of publicinterest.

Cap. 485A



y p q y


Powers of Court onhearing ofliquidationapplication.

426. (1) On the hearing of a liquidation application,the Court may make such of the following orders as itconsiders appropriate:

(a ) an order dismissing the app lication;

(b ) an order adjourning the h earing,conditionally or unconditionally;

(c ) an interim liquidation order; or(d ) any other o rder that, in its opinion, the

circumstances of the case require.

(2) However, the Court may not refuse to make aliquidation order on the ground only that the company'sassets have been mortgaged to an amount equal to or inexcess of those assets, or that the com pany h as no assets.

(3) If the application is made by members of thecompany as contributories on the ground that it is just andequitable that the company should be liquidated, the Courtshall make a liquidation order, but only if of the opinionthat—

(a ) that the applicants are entitled to relief

either by liquidating the company orby some other means; and

(b ) that, in the absence of any otherremedy, it would b e just and equitablethat the comp any should be liquidated,

(4) Subsection (3) does not apply if the Court isalso of the opinion that—

(a) some other remedy is available to theapplicants; and

(b ) they are acting unreasonably in seekingto have the company liquidated insteadof pursuing that other remed y.




427. (1) At any time. after the making of a liquidationapplication, and before a liquidation order has been made,the company, or any creditor or contributory, may—

(a) if legal proceedings against thecompany are pending in the Court—apply to the Court for the proceedingsto be halted; and

(b ) if proceedings relating to a matter arepending against the company inanother court—apply to the Court torestrain further proceedings in respectof that matter in the other court.

(2 ) On the hearing of an application under

subsection (1)(a) or (b) , the Court may make an orderhalting or restraining the proceedings on such terms as itconsiders app ropriate.

(3 ) If, in relation to a company registered (butnot formed) under the Companies Act, 2012, theapplication is made by a creditor, this section extends toany contributory of the com pany.

Power to halt orrestrainproceedingsagainst companywhen liquidationapplication hasbeen made.

428. (1) In a liquidation ordered by the Court—

(a) any disposition of the company'sproperty; and

(b ) any transfef of shares, or alteration inthe status of the company's members,

made after the commencement of the liquidation is void,unless the Court o therwise orders.

(2) Subsection (1) does not apply to action takenby an administrator of a company while a liquidationapplication is suspended under section 558 (dismissal ofpending liquidation application).

Dispositions ofproperty bycompany aftercommencement of-liquidation to bevoid unless theCourt otherwise

orders.




Attachments andother forms ofexecution againstcompany inliquidation to bevoid.

429. If a company is being liquidated by the Cuurt, anyattachment, sequestration, distress or execution instigatedagainst the assets of the company after the commencementof the liquidation is void.

When liquidationof company by theCourt commences.

430. (1) If, before the making of an application for theliquidation of a company by the Court, a resolution hasbeen passed by the company for liquidating the companyvoluntarily—

(a) the liquidation commences at the timeof the passing of the resolution; and

(b ) unless the Court, on proof of fraud or

mistake, directs otherwise, allproceedings taken in the voluntaryliquidation are to be regarded ashaving have been validly taken.

(2 ) If the Court makes a liquidation Order undersection 533 (powers of Court on hearing application foradministration), the liquidation commences on the making

of the order.(3 ) In any other case, the liquidation of a

company by the Court commences when the application forliquidation order is m ade.

Consequences ofliquidation order. 431. (1) Within seven days after a liquidation order ismade in respect of a company, the company shall lodge acopy of the order with the Registrar for registration in theCom panies Register.

(2) When a liquidation order has been made or aprovisional liquidator has been appointed, legal




proceedings against the company may be begun orcontinued only With the leave of the Court and subject tosuch conditions as the Court considers appropriate.

(3) An order for liquidating a company operatesin favour of all the creditors and of all contributories of thecompany as if made on the joint application of all of them.

432. 1) If the COurt has m ade a liquidation order orappointed a provisional liquidathr, the Official Receivermay require some or all of the prescribed persons to makeout and submit to the Official Receiver a statementconcerning the affairs of the company.

(2) Those prescribed persons who are required tosubmit such a statement shall verify it by statutorydeclaration and shall include in it—

(a ) such particulars of the company'sassets, debts and liabilities as areprescribed by the insolvencyregulations for the purposes of thissection;


(c ) , the securities (if any) held by themrespectively;


(e ) such further or other information as theOfficial Receiver may reasonablyrequire.

(3) The prescribed persons are—

(a) those who are or have been officers ofthe company;

Official Receivermay requirecompany'sstatement of affairsto be subm itted.



(b). those who have taken part in the


formation of the company at any timeduring the twelve months before therelevant date;

(c) those who-

(i) are in the company'semployment, or have been in itsemp loyment during that period;and

(ii) are in the Official Receiver'sopinion capable of giving theinformation required;

(d) those who are or have been within thatperiod officers of, or in the

employment of, a company that is, orwithin that year was, an officer of thecompany.

(4) A prescribed person who is required underthis section to submit a statement of affairs to the OfficialReceiver shall, subject to subsection (5), do so withintwenty-one days from and including the date on which

notice of the requirement was given to the person by theOfficial Receiver.

(5) The Official Receiver may—

(a ) at any time release a person from anobligation imposed on the personunder subsection (1) or by subsection(2); or

(b ) either when giving the notice referredto in subsection (4) or subsequently—extend the period referred to in thatsubsection.

(6) If the Official Receiver has declined toexercise a power conferred by subsection (5), the Courtmay, on the application of the Attorney General or a person



y, pp y p


who is dissatisfied with the Official Receiver's decision,exercise the power if it considers it appropriate to do so.

(7) In this section—

"employment" includes employment under acontract for services; and

"the relevant date" means—

(a) if a provisional liquidator isappointed—the date of theappointment; and

(b ) if no such appointment is made—the_date of the liquidation order.

(8 ) A person who, without reasonable excuse,fails to comply with an obligation imposed by or under thissection commits an offence and on conviction is liable to afine not exceeding five hundred thousand shillings.

(9 ) If, after being convicted of an offence undersubsection (8), a person, without reasonable excuse,continues to fail to comply with the relevant obligation, theperson commits a further offence on each day on which thefailure continues and on conviction is liable to a fine notexceeding fifty thousand shillings for each such offence.

431. (1) On the making of a liquidation order, theOfficial Receiver shall conduct an investigation—

(a ) if the company has failed—to discoverwhy the com pany' failed; and

(b ) generally, to investigate the promotion,formation, business, dealings andaffairs of the company,

and to make such report (if any) to the Court as the OfficialReceiver considers appropriate,

Duty of O fficialReceiver toconductinvestigation into

failure of com pany.



(2) In any legal proceedings, the Official


Receiver's report is evidence of the matters stated in it untilthe contrary is proved.

Public examinationof officers andformer officers ofcompany.

434. (1) If a company is being liquidated by the Court,the Official Receiver may, at any time before thedissolution of the company, apply to the Court for the

public examination of any person who—(a ) is or has been an officer of the

company;

(b ) has acted as provisional liquidator,liquidator or administrator of thecompany; or

(c ) not being a person referred to inparagraph (a) or (b)—is or has beenconcerned, or has taken part, in thepromotion, formation or managementof the company.

(2) Unless the Court otherwise orders, theOfficial Receiver shall make an application undersubsection (1) on receiving a written request to do sofrom—

(a ) creditors of the company holding notless than one-half in value of the totalamount of the company's debts; or

(b ) contributories of the company holdingnot less than three-quarters of the

voting rights at general meetings of thecompany.

(3) If , on the hearing of an application madeunder subsection (1), the Court is satisfied that a publicexamination of the person to whom the application relatesis warranted, it shall make an order directing such anexamination to be held on a date and at a time and place




specified in the order.

(4) On being served w ith a copy of an ordermade under subsection, the person concerned shall attendon the date and at the time and p lace specified in the orderand be publicly examined—

(a ) about the promotion, formation ormanagement of the company; or

(b ) about the conduct o f its affairs, orconduct or dealings in relation to thecompany.

(5) The persons specified in subsection (6)may—

(a ) participate in the p ublic examination ofa person under this section; and

(b ) may question the person concerningthe matters referred to in subsection(4).

(6) The following p ersons may p articipate in theexamination:

(a ) the Official Receiver;

(b ) the liquidator of the company;

(c ) any person who has been appointed asspecial manager of the company'sproperty or business;

(d ) any creditor of the company who has

submitted a proof;(e ) any contributory of the company.

435. (1) A person who, without reasonable excuse,fails at any time to attend the person's public examinationunder section 434 is guilty of a contempt of Court and is

Consequences offailure to attendpublicexamination.



liable to be punished accordingly (in addition to any other

5 8 he Insolvency Bill, 2012

punishment to which the person may be subject).(2) If a person fails without reasonable excuse to

attend the person's examination under section 434, or thereare reasonable grounds for believing that a person hasabsconded, or is about to abscond, with a view to avoidingor delaying the examination, the Court may issue a warrantto be issued to a police officer or a prescribed officer of the

Court—(a ) for the arrest of that person; and

(b ) for the seizure of any documents orproperty in that person's possession.

(3) In such a case, the Court may authorise theperson arrested under the w arrant to be detained in custody,

and anything seized under it to be kept, in accordance withthe directions of the Court, until such time as the Courtorders.

Appointment andpowers ofprovisionalliquidator.

436. (1) The Court may appoint a provisionalliquidator either after on or after, or at any time before, themaking of a liquidation order.

(2 ) Only the Official Receiver or an authorisedinsolvent practitioner is eligible for appointment as aprovisional liquidator.

(3 ) A provisional liquidator shall perform suchfunctions and may exercise such pow ers as the Colirt mayspecify in the order ap pointing the provisional liquidator.

(4) The acts of a person appointed as provisionalliquidator of a com pany are valid despite any d efect in theperson's appointment or qualifications.

Functions andpowers of OfficialReceiver in relation

ffi f

437. (1) Subsections (2) to (7) have effect, subject tosection 440 (appointment by the Court following

d i i i l )h h C



to office ofliquidator. adm inistration or voluntary arrangemen t)when the Court




not required to perform the latter duty.(7) The O fficial Receiver shall include in a

notice given under subsection (5)(b) an exp lanation of thecreditors' power under subsection (5)(c) to require theOfficial Receiver to convene m eetings of the com pany'screditors and con tributories.

Appointment ofliquidator byCabinet S ecretary.

438. (1) In a liquidation o rdered by the Court, theOfficial Receiver may, at any time w hen the liquidator ofthe comp any, apply to the Cabinet Secretary for theapp ointment of a p erson as liquidator in the OfficialReceiver's place.

(2) If meetings are held in accordance with adecision under section 437(5)(a), but no person is chosen tobe liquictator as a result of those m eetings, the OfficialReceiver shall decide whether to refer to the CabinetSecretary the question of whether an ap pointm ent should be •made.

(3) On an app lication ma de under subsection (1),or a reference made in accordance with a decision undersubsection (2), the Cabinet Secretary shall either make anappointment or decline to make one.

(4) If a liquidator has been appo inted by theCabinet Secretary under subsection (3), the liquidatorshall—

(a ) send a n otice of the liquidator'sappointmen t to the com pany'screditors; or

(b ) if the Courtso allows—publish anotice or n otices advertising theliquidator's appointment in accordancewith the directions of the Court. .

(5) The liquidator shall, in such a notice-




(a ) state whether the liquidator proposes toconvene a general m eeting of thecomp any's creditors under section 441(creditors' meeting may app Ointliquidation com mittee) for the purposeof determining (together with anymeeting o f contributories) whether a

liquidation comm ittee should beestablished und er that section; and

(b ) if the liquidator does not propose toconvene such a meeting— specify thepower of the comp any's creditorsunder that section to require theliquidator to con vene one.

439. 1) If a comp any is being liquidated by the Courtand separate m eetings of the com pany's creditors and thecomp any's contributories are convened for the purpose ofchoosing a person to be liquidator of the com pany, thecreditors and the contributories at their respective meetings

may nom inate a person to be the liquidator of the company.(2) The liquidator is—

(a ) the person nom inated by the creditors;r

(b ) if no person is so nominated— theperson (if any) nominated by thecontributories.

(3) If different persons are nom inated, acontributory or creditor may, w ithin seven days after thedate on which the nom ination was made b y the creditors,app ly to the Court for an order either—

(a) appointing the person nominated asliquidator by the contributories to be a

liquidator instead of or jointly with

If meeting ofcreditors andmeeting ofcontributorsnominate differentliquidators.creditor's choice to

prevail.



liquidator instead of, or jointly with,


the person nom inated by the creditors;or

(b) appointing some other perSon to beliquidator instead of the p ersonnom inated by the creditors.

Appointment ofliquidator by theCourt followingadministration orvoluntaryarrangement.

440. (1) If a liquidation order is made immediately onthe appointm ent of an adm inistrator ceasing to have effect,the Court may ap point as liquidator of the comp any theperson whose ap pointment as adm inistrator has ceased tohave effect.

(2 ) If a liquidation order is made at a time whenthere is a supervisor of a voluntary arrangement approvedin relation to the comp any under Part IX, the Court mayappoint as liquidator of the com pany the person who is thesupervisor at the time when the liquidation order is mad e.

(3 ) If the Court makes an appointment under this -section, the Official Receiver—

(a) does not become the l iquidator as

otherwise provided by section 437(2);and

(b ) has no d uty under section 437(5)(a) or(b) to convene m eetings of creditors orcontributories.

•

Creditors' meetingmay appointliquidationcommittee.

441. (1) If, after a liquidation order has been made,separate meetings of creditors and contributories have beenconvened for the purpose of choosing a person to beliquidator, those m eetings may establish a liquidationcom mittee to perform the functions imp osed and toexercise the powers conferred on it by or under this Act.

(2) The liquidator (not being the Official

Receiver) may.at anytime if of the opinion that it is



Receiver) may.at anytime, if of the opinion that it is


appropriate to do so, convene separate general meetings ofthe com pany's creditors and contributories for the purposeof—

(a ) determining whether a liquidationcom mittee should be established; and

(b ) if it is so determined— of establishing

it.(3) The liquidator (not be ing the O fficial

Receiver) shall convene such a m eeting if requested to doso by creditors of the com pany holding not less than one-tenth in value of the total amount of the company's debts.

(4) If meetings of creditors and co ntributories areconvened—

(a ) under this section; or

(b ) for the purpose of choosing a person tobe liquidator,

and either the m eeting of creditors or the m eeting ofcontributories decides that a liquidation comm ittee shouldbe established, but the other meeting does not so decide, or

decides that a comm ittee should not be established, such acom mittee is nevertheless required to be established, unlessthe Court o therwise orders.

(5) A liquidation com mittee may no t, and maynot be required to, perform its functions while the OfficialReceiver is liquidator, and during that time its functions arevested in the Cabinet Secretary except to the extent that the

insolvency regulations otherwise p rovide.(6) If, at the relevant time—

(a ) there is no liquidation com mittee; and

(b ) the liquidator is a p erson other than theOfficial Receiver,

the Cabinet Secretary shall perform the functions of such a

com mittee except in so far as the insolvency regulations



p y g


General functionsof liquidator whencompany isliquidated by theCourt.

otherwise provide.

442. (1) The functions of the liquidator of a comp anythat is being liquidated by the Court are—

(a ) to ensure that the assets of thecompany are realised and distributed tothe com pany's creditors; and,

(b ) if there is a surplus—to distribute thesurplus to the p ersons entitled to it.

(2) If the liquidator of a com pany that is beingliquidated is not the Official Receiver, the liquidatorshall—

(a ) provide the O fficial Receiver with suchinformation;

(b ) produce to the Official Receiver, andpermit inspection by the OfficialReceiver of, such records and otherdocuments; and

(c ) give to the Official Receiver such otherassistance,

as the Official Receiver may reasonably require for thepurposes of performing the Official Receiver's functions inrelation to the liquidation.

(3) A liquidator who, without reasonab le excuse,fails to com ply with a requirement m ade by the Official

Receiver under subsection (2) comm its an offence and onconviction is liable to a fine not exceeding five hundredthousand shillings.

Liquidator toassume control ofcompany's

property when

443. When—

(a) a liquidation order has been mad e; or




(b) a provisional liquidator has beenappointed,

in respect of a com pany, the liquidator or the provisionalliquidator shall assume control of all the prope rty

including things in action) to which the companyappears to be entitled.

444. (1) When a com pany is being liquidated by theCourt, the Court may, on the, ap plication of the liquidator,by order direct all or any part of the prop erty belonging tothe com pany or held by trustees on its behalf to vest in theliquidator in that capacity.

(2) On the m aking of such an order, the propertyto which the order relates vests in the liquidator.

(3)• After giving such indem nity (if any) as theCourt may direct, the liquidator may begin or defend, or

4 .continue, any legal proceedings that relate to that prop ertyor that it is necessary to begin or defe nd, or continue , forthe purpose of effectively liquidating the comp any and

recovering its property.

liquidation ordermade.

Company'sproperty to vest inliquidator.

445. (1) Subject to the subsection (2), if it appears tothe liquidator of a com pany that is being liquidated by theCourt that the liquidation of the co mp any is for all practicalpurposes com plete and the liquidator is not dig OfficialReceiver, the liquidator shall convene a final generalmeeting of the com pany's creditors.

(2) At the final meeting, those present shall—

(a ) consider the liquidator's report of theliquidation; and

(b ) determine w hether the liquidatorshould be released under section 470(release of liquidator of comp any

Duty of liquidatorto convene finalgeneral meeting ofcompany'screditors.




Power of the Courtto halt liquidation.

liquidated by the Court).(3 ) If approp riate, the liquidator may give the

notice convening the final general meeting at the sam e timeas giving notice of any final distribution of the company'sproperty, but if it is convened for an earlier date, thatmeeting is adjourned (and, if necessary, further adjourned)until a date on which the liquidator is able to report to the

meeting that the liquidation of the company is for allpractical purposes comp lete.

(4 ) In performing the liquidator's functions in theliquidation, the liquidator shall retain sufficient amountsfrom the company's property to cover the expenses ofconvening and holding the m eeting required by this section.

4 4 6 . (1) On the application of the liquidator, theOfficial Receiver or any creditor or contributory, and onproof to the satisfaction of the Court that all proceedings inthe liquidation ought to be halted, the Court may, at anytime after an order for liquidation is made, make an orderhalting the proceedings, either permanently or for a

specified period, on such terms as the Court considersappropriate.

(2) Before making an order under subsection (1),the Court may require the Official Receiver to provide itwith a report on any facts or matters that appear to theOfficial Receiver to be relevant to the app lication.

(3) The Official Receiver shall comply with such

a requirement w ithin such period as the Court specifies.(4 ) Within seven days after the Court has made

an order under this section, the com pany shall lodge a copyof the order with the Registrar for registration.

(5 ) If a comp any fails to com ply with subsection(4), the comp any, and each officer of the com pany wh o isi n d e fa u l t, c o m m i t a n o f fe n c e a n d o n c o n v i c t io n a r e e a c h




liable to a fine not exceeding two hundred thousandshillings.

(6) If, after a company or any of its officers isconvicted of an offence under subsection (5), the companycontinues to fail to lodge the required copy, the company,and each officer of the company who is in default, commita further offence on each day on which the failurecontinues and on conviction are each liable to a fine notexceeding twenty thousand shillings for each such offence.

447. (1) As soon as practicable after making aliquidation order, the Court shall—

(a ) settle a list of contributories, withpower to rectify the register ofmembers in all cases in which

.rectification is required; and

(b ) take all practicable steps to have thecompany's assets collected, andapplied in discharge of its liabilities.

(2 ) If it appears to the C ourt, that it will not benecessary to make calls on, or adjust the rights ofcontributories, the Court may dispense with the settlementof a list of contributories.

(3 ) In settling the list, the Court shall distinguishbetween persons who are contributories in their own rightand persons who are contributories as being representatives

of or liable for the debts of others.

Settlement of listof contributoriesand app lication ofassets.

448. (1) At any time after making a liquidation order,the Court may make an order in respect of any contributorywho is for the time being on the list of contributoriesrequiring the contributory to pay, in accordance with theorder, an amount due from the contributory (or from the

Recovery of debtsdue fromcontributory tocompany.




Power of the Courtto make calls fromcontributories.

estate of the person whom the contributor represents) to thecomp any, exclusive of any amount payable by thecontributor or the estate because of a call.

(2) In making such an order, the Court may—

(a ) in the case of an unlimited com pany—allow to the contributory as a set-offmo ney due to the con tributory or theestate that the contributory representsfrom the company on any independentdealing or contract with the com pany(but not money due to the contributoryas a mem ber of the comp any in respectof a dividend or profit); and

(b ) in the case of a limited comp any—make to a director or manager whoseliability is unlimited, or to the estate ofthe director or manager, the sameallowance.

(3) If, in the case of a com pany (wh ether limitedor unlimited), all the creditors have be en p aid in full(together with interest at the official rate), money due on anaccount to a contributory from the com pany m ay beallowed to the contributory as a set off against anysubsequent call.

449. (1) At any time after making a liquidation order,and either before or a fter the Court has ascertained thesufficiency of the comp any's assets, it may—

(a) make calls on all or any of thecontributories for the time being settledon the list of the contributories (to theextent of their liability) for paym ent ofany m oney that the Court considersnecessary-




(4) to satisfy the com pany's debtsand liabilities and the expenses ofliquidation; and

(ii) for the adjustmen t of the rights ofthe contributories amongthemselves; and

(b) make an order for p ayment of any callsso made.

(2) In ma kings call, the Court may tak e intoconsideration the probability that some of the contributoriesmay partly or w holly fail to pay it.

450. (1) The Court may order any contributory,purchaser or other person from whom money is due to thecompany to pay the am ount due into the Central Bank ofKenya (or any branch of it) to the account of the liquidatorinstead of to the liquidator,

(2 ) Such an order may be enforced in the samemanner as if it had directed payment to the liquidator.

(3 ) All money and securities paid or deliveredinto the Central Bank of Kenya (or branch) in relation to aliquidation by the Court are subject in all respects to theorders of the Court.

Power of the Courtto order money du(to company to bepaid into CentralBank.

/ 451 (1) An order m ade by the Court on a contributory

is conclusive evidence that the money (if any) appearing tobe due or ordered to be paid by the contributory is due.

(2 ) Subsection (1) is subject to the exercise ofany available right of appeal.

(3 ) All other pertinent matters stated in the orderare to be taken as truly stated as against all persons and inall legal proceedings.

Order made by theCourt againstcontributory to beconclusiveevidence thatmoney ordered tobe paid is due.




Power of the Courtto fix deadlines forproving claims.

Court to adjustrights of

contributories.

Power of the Courtto make ordersenabling creditorsand contributoriesto inspect

company's records.

452. The Court m ay fix deadlines by which creditorsare required to prove their debts or claims or are to b eexcluded from the ben efit of any distribution m ade beforethose debts are p roved.

453. The C ourt shall adjust the rights of thecontributories am ong them selves and distribute any surplusamo ng the persons en titled to it.

454. (1) At any time after making a liquidation order,the Court may make such order for inspection of thecompany's records by creditors and contributories as theCourt considers approp riate.

(2) The creditors and contributories of thecom pany are entitled to inspect all records in thecompany's possession or under its control, but except asprovided by or under the authority of any o ther written law,no o ther persons are en titled to inspect those records.

Payment ofexpenses ofliquidation.

455. (1) If the assets of a company are insufficient tosatisfy its liabilities, the Co urt—

(a) may m ake an order for the paymen t outof the assets of the expenses incurredin the liquidation; and

(b ) may direct that that payment be given

such of p riority as the Court considersappropriate.

(2) An order made under subsection (1) haseffect irrespective of the provisions of this relatingtopreferential debts.




456. (1) If, at any time either before or after making aliquidation order, the Court is satisfied on reasonablegrounds that a contributory is—

(a) about to quit Kenya or otherwise toabscond; or

(b) has concealed or removed, or is aboutto conceal or remove, any of thecontributory's property for the purposeof evading payment of calls,

it may issue a warrant authorising the contributory to bearrested and the contributory's documents and moveablepersonal property to be seized.

(2) In such a case, the Court may authorise the

person arrested under the warrant to be detained in custody,and anything seized under the warrant to be kept, inaccordance with the directions of the Court, until such timeas the Court orders.

Power to arrestabscondingcontributory.

457. Powers conferred on the Court by this Part are in

addition to any existing powers to bring legal proceedingsagainst a contributory or debtor of the company, or theassets of a contributory or debtor, for the recovery of callsor other amounts.

Powers of theCourt to becumulative.

458. (1) The insolvency regulations may enable orrequire all or any of the functions imposed or powersconferred on the Court with respect to the matters specifiedin subsection (2) to be performed or exercised by the

liquidator as an officer of the Court and in accordance withits directions.

(2) The following are the matters referred to in

Power of the Courtto delegate its

powers toliquidator.




subsection (1):

(3)liquidator—

(a ) the convening and co nducting ofmeetings to ascertain the wishes ofcreditors and contributories;

(b ) the settling of lists of contributories

and the rec tifying of the register ofmembers if required;

(c ) the collection and app lication of theassets;

(d ) the pa yment, delivery, transfer ofmon ey, property or documents to theliquidator;

(e ) the making of calls;

(f ) the fixing of a period within whichdebts and claims have to be proved.

This section does no t authorise the.

(a ) to rectify the com pany's register ofmem bers without the special leave ofthe Court; or

(b ) to ma ke a call without either thatspecial leave or the app roval of theliquidation comm ittee (if any).

Division 7— Liquidators

Style and title ofliquidators.

459. (1) The liquidator of a com pany is in alldocum ents and com munications relating to the liquidationof the company to be referred to—

(a) if a person other than the OfficialReceiver is liquidator—a s the




liquidator of the com pany; or

(b) if the Official Receiver is liquidator—as the Official Receiver andliquidator of the comp any.

(2 ) In neither case is the liquidator to be referredto by the liquidator's persona l name.

(3 ) A liquidator who fails to take all reasonablypracticable steps to ensure that that subsections (1) and (2)are comp lied with commits an offence and on conviction isliable to a fine not exceeding one hundred thousandshillings.

460. A p erson who gives, or agrees or offers to give, toany mem ber or creditor of a compa ny any valuableconsideration with a view to obtaining the person's ownappointm ent or nomination, or to obtaining or preventingthe appointm ent or nomination of some other person, as thecomp any's liquidator comm its an offence and onconviction is liable to a fine not exceed ing two m illionshillings.

Offence to makecorrupt inducementaffectingappointment ofliquidator.

461. (1) This section has effect if a comp any is involuntary liquidation, but subject to section 462(liquidator's functions— creditors' voluntary liquidation) inthe case of a c reditor's voluntary liquidation.

(2) The liquidator may

(a ) in the case of a m embers' voluntaryliquidation— with the approval of aspecial resolution of the comp any; and

(b ) in the case of a creditor's voluntaryliquidation— with the sanction of the

Court or the liquidation com mittee (or,

Liquidator'sfunctions:voluntaryliquidation.




if there is no such comm ittee, amee ting of the company's creditors),

exercise any of the powers specified in Part l of the ThirdSchedule (payment of debts, comprom ise of claims; etc.).

(3) The liquidator may, without app roval,exercise either of the powers specified in Part 2 of theThird Schedule (institution and defence of p roceedings;carrying on the business of the company) and any of thegeneral powers sp ecified in Part 3 of that Schedule.

(4) The liquidator may—

(a ) exercise the Court's power of settling alist of contributories;

(b ) exercise the Court's power of makingcalls;

(c ) convene general meetings of thecompany for the purpose of obtainingits approval by sp ecial resolution or forsuch other purpose as the liquidator

.considers app ropriate.

(5) The liquidator shall pay the com pany's debtsand adjust the rights of the contributories amongthemselves.

(6) If, in exercise of the powers co nferred by thisAct, the liquidator disposes of property of the comp any to aperson who is connected with the company, the liquidatorshall, if there is a liquidation com mittee, give notice to thecommittee of that exercise of the liquidator's powers.

(7) A liquidator who , without reasonable excuse,fails to comp ly with subsection (6) commits an offence andon conviction is liable to a fine not exceeding two hundredthousand shillings.

(8) A list of contributories settled by a liquidatorin accordance with the power conferred by subsection

(4)(a) is evidenceof the liability of thepersonsn a m e d i n i t



T he Insolve ncy Bill . 2012 025

as contributories, until the contrary is proved.

462. (1) If, in the case of a creditors' voluntaryliquidation, a liquidator has been nominated by thecompany, the powers conferred on the liquidator by section461 (liquidator's functions—voluntary liquidation).may not

be exercised, except w ith the sanction of the Court, duringthe period before the holding of the creditors' meetingunder section 405 (meeting of creditors).

(2) Subsection (1) does not apply to the pow er ofthe liquidator—

(a ) to assume control of all the property towhich the company is or appears to be

entitled;(b ) to dispose of perishable goods and

other goods the value of w hich is likelyto diminish if they are not immediatelydisposed of; or

(c ) to take all such other action as may benecessary for the protection of thecompany's assets.

(3) The liquidator shall—

(a ) attend the creditors' meeting; and

(b ) shall report to the meeting on anyexercise by the liquidator of theliquidator's powers (whether or notunder this section or under section 419(reference of questions to the Court) orsection 470.

(4) If—

(a ) the company fails to comply withsection 405(1) or (2); or

(b) the directors fail to comply with

Liquidator'sfunctions:creditors'voluntaryliquidation.




section 406(1) or (2),the liquidator shall, within seven days,after the relevantday, apply to the Court for directions as to the m anner inwhich that default is to be rem edied.

(5) In subsection (4), the relevant day is the d ayon which the liquidator was nominated by the com pany orthe day on w hich the liquidator first became aware o f thedefault, whichever is the later.

(6) A liquidator who, without reasonable excuse,fails to com ply with a requirement of this section com mitsan offence and o n conviction is liable to a fine notexceeding five hundred thousand 'shillings.

Liquidator'sfunctions:liquidation by theCourt.

463 1) If a comp any is being liquidated by the Court,the liquidator may—

(a ) with the appro val of the CoUrt or theliquidation comm ittee (if any), exerciseany of the powers sp ecified in Parts 1

.and 2 of the Third Schedule (paym entof debts; comp romise of claims, etc.,institution and defence of proceedings;carrying on of the business of thecomp any); and

(b ) with or without that app roval, exerciseany of the general pow ers specified inPart 3 of that Schedule.

(2) If, in exercising the powers co nferred on theliquidator by this A ct, the liquidator—

(a ) disposes of property of the comp any toa person who is connected with thecomp any; or

(b ) emp loys an advocate to assist theliquidator in perform ing the




(3) The liquidator m ay at any time ap ply to theCourt for directions in relation to any particular matterarising in the liquidation.

(4) In accordance with this Part, the liquidator isrequired to use the liquidator's own discretion in themanagem ent of the assets and their distribution among thecreditors.

(5) A person w ho is dissatisfied with an act ordecision of the liquidator may apply to the Court for anorder under subsec tion (6).

(6) On the hearing of an app lication mad e undersubsection (5), the Court may—

(a ) • make an order_cdnfirtning, reversing or

modifying the act or decisioncomp lained of; and

(b ) make such other order in the case as itconsiders appropriate.

(7) If, at any time after a liquidation applicationhas been m ade to the Court against a person (including, theattention of the Court is drawn to the fact that the person isa m ember of an insolvent partnership, the Court may m akean order as to the future conduct of the insolvencyproceedings.

(8) The reference in subsection (7) to a personincludes an insolvent partnership or other body that may. beliquidated under Part VII as an unregistered comp any.

(9) An order made und er subsection (7)—(a ) may be m ade or given on the

app lication of the Official Receiver,any authorised insolvency prac titioner,the bankruptcy trustee of thepartnership or any other interestedperson; and

(b ) may include provisions as to the




adm inistration of the joint estate of thepartnership, and in p articular how itand the separate estate of any mem berare to be administered.

465. (1) If a liquidator who has—

(a ) in lodging, delivering or m aking areturn, account or other docum ent; or

(b ) in giving a notice that the liquidator isby law requiredto lodge., deliver. makeor give.

failed to rectify the failure within fourteen da ys after the

service on the liquidator of a notice requiring the liquidatorto do so; any creditor or contributory ()Nile comp any. orthe Registrar may m akean applation to the Court tier anorder under subsection2).

(2) On the hear ing, of an ai►ticationmade undersubsection ( the Court may M ake an orderdirecting theliquidator to rectify the failure within such period as m aybe spec ified in the order.

(3 ) The Court`S order may provide forall costs ofand incidental to the app lication to be b orne by theliquidator.

(4 ) This section does not the operation ofany enactment that provides for the imposition of fines or

o t h e r penalties on a liquidator in respect of a default

referred to in this section.

Enforcement ofliquidator's dutiesto lodge. deliverand m ake returns.accounts and otherdocuments.

466. ( 1) This section applies to the rem oval fromoffice and vacation of office of the liquidator of a companythat is involuntary liquidation.

(2) Subject to subseetim (2). a liquidator m ay be

Circumstances inwhich liquidatormay be removedfrom office in thecase of a voluntaryliquidation.




removed from office only by an order of the Court or—

(a ) in the case of a m embers' voluntaryliquidation— by a general meeting ofthe comp any convened specially forthat purpose; or

(b ) in the case of a cred itors' voluntaryliquidation— by a general meeting of

the com pany's creditors convenedspecially for that purpose inaccordance with the insolvencyregulations.

(3) If the liquidator was app ointed by the Courtunder section 415 (appointment or reit-loyal of liquidator bythe Court), a meeting such as is referred to in subsection (2)

may be convened for the purpose of replacing the liquidatoronly if the liquidator considers it app ropriate to do so or theCourt so directs or the meeting is requested—

(a ) in the case of a m embers' voluntaryliquidation— by m embers representingnot less than one -half of the totalvoting rights of all the mem bers having

at the date of the request a right to voteat the mee ting; or

(b ) in the case of a c reditors' voluntaryliquidation—by creditors holding notless than one-half in value o f the totalamount of the com pany's debts.

(4) A liquidator (other than the Official Receiver)automatically vacates office if the liquidator ceases to h oldan authorisation to act as an insolvency p ractitioner.

(5) A liquidator m ay, in the circumstancesprescribed by the insolvency regulations, resign office bylodging with the Re gistrar a notice of resignation.

6) If-




(a ) in the case of a m embers' voluntaryliquidation— a final meeting of theecomp any has been held in accordancewith section 401 (final meeting p rior todissolution); or

(b ) in the case of a creditors' voluntaryliquidation— final meetings of the

comp any and of the creditors havebeen held in accordance w ith section462(liquidator's functions—creditors'voluntary liquidation),

the liquidator whose report was considered at the m eetingor me etings vacates office as soon as the liquidator haslodged with the Registrar a notice that the meeting has, or

the mee tings have, been held and of the decisions (if any)made at the meeting or m eetings.

468. (1) This section app lies with respect to theremoval from office and vacation of office of—

(a ) the liquidator of a com pany that being

liquidated by the Court; or(b ) a provisional liquidator.

(2) A liquidator may be removed from officeonly—

(a ) by an order of the Co urt; or

(b ) by &general meeting of the comp any'screditors convened specially for thatpurpose as p rovided by the insolvencyregulations.

(3) A provisional liquidator ma y be remo vedfrom office only by an orde r of the Court.

(4) If—

(a) the Official Receiver is liquidator

Liquidator may beremoved only bythe Court or bygeneral meeting ofcreditors in thecase of companybeing liquidated bythe Court.




otherwise than as successor inaccordance with section 437(3) to aperson who held office as a result of anomination by a m eeting of thecompany's creditors or contributories;or

(b) the liquidator —

(i) was appointed by the Courtotherwise than under section439(3) or 440(1); or

(ii) was appointed by the CabinetSecretary,

a general mee ting of the company's creditors is to be

convened for the p urpose of rep lacing the liquidator in thecircumstances specified in subsection (5).

(5) The circumstances referred to in subsection(4) are that—

(a ) the liquidator considers it appropriateto convene a meeting of creditors;

(b ) the Court directs such a meeting to beheld; or

(c ) the meeting is requested by creditorsholding not less than one-quarter invalue of the total amount of thecompany's debts.

(6) If appo inted by the Cab inet Secretary, the

liquidator may be removed from office only by or inaccordance with the decision of the Cabinet Secretary.

(7) A liquidator or p rovisional liquidator (otherthan the Official Receiver) automatically vacates office onceasing to be the holder of an authorisation to act as aninsolvency practitioner.

(8) A liquidator may resign office by giving




notice of the resignation to the Court.

(9) If a final m eeting has been held in acco rdancewith section 445 (duty of liquidator to convene finalmeeting), the liquidator whose report was co nsidered at themeeting vacates office as soon as the liquidator has givennotice to the Court that the meeting-has been held and ofthe decisions (if any) of the m eeting.

(10)Within seven d ays after giving notice to theCourt in accordance with subsection (8), the formerliquidator shall lodge a cop y of the notice with theRegistrar for registration.

(11)A form er liquidator who, w ithout reasonableexcuse, fails to com ply with subsection (10) comm its an

offence and on conviction is liable to a fine not exceedingtwo hundred thousand shillings.

469. (1) This section app lies with respect to therelease of the liquidator of a com pany that is in voluntaryliquidation.

(2) A person w ho has ceased to be a liquidator isentitled to be released from the liquidator's obligations withrespect to the comp any with effect from the following time:

(a ) in the case of a person who has beenremoved from office by a generalmeeting of the comp any or by ageneral meeting of the comp any's

creditors that has not resolved againstthe liquidator's release or who hasdied—the timeat which notice islodged with the Registrar that theperson has ceased to hold office asliquidator;

(b ) in the case of a person who-

(i) has been removed from office by

Release ofliquidator in thecase of companyliquidatedvoluntarily.



50 3 he Insolvency Bill, 2012

a general mee ting of thecomp any's creditors that hasresolved again st the liquidator'srelease, or by the Cou rt; or

(ii) has vacated office under section467(4),

such time as the Cabinet Secretarymay, on the ap plication of the person,determine;

(c ) in the case of a person who hasresigned—such time as may beprescribed by the insolvencyregulations;

(d ) in the case of a p erson who has vacatedoffice under section 467(7)(a)—thetime at which the person vacatedoffice;

(e ) in the case of a p erson who has vacatedoffice under section 467(7)(b)—

(i) if the final meeting of thecreditors referred to in thatsubsection has resolved againstthat person's release— such timeas the Cabinet Secretary may, onan application by that person,determine; and

(ii) if that meeting has not resolvedagainst that person's release—thetime at which the p erson vacatedoffice.

(3) If a liquidator is released in accordance withsubsection (2), the liquidator is, with effect from wh ichevertime sp ecified in that subsection is relevant, dischargedfrom all liability both in respect of acts or omissions of the




liquidator's in the liquidation and o therwise in relation toconduct as liquidator.

(4) However, nothing in this section p revents theexercise, in relation to a person w ho has bee n releasedunder subsection (2), of the Court's powers under section504 (power of Court to m ake orders against delinquentdirectors, liquidators, etc).

4 7 0 . (1) This section applies with respect to therelease of the liquidator of a com pany that is in liquidationby the Court, or of a provision al liquidator.

(2) On ceasing to be liquidator and beingsucceeded by another person as liquidator, the Official

Receiver is released from the responsibilities a liquidatorwith effect from—

(a ) if the successor was nominated by ageneral meeting of c reditors orcontributories, or was app ointed by theCabinet Secretary—the time at whichthe Official Receiver gives notice to

the Court that the Official Receiver hasbeen succeeded by an other person; or

(b ) if the successor is appointed by theCourt—such time as the Court maydetermine.

(3) If the O fficial Receiver w hile a liquidatorgives notice to the Cabinet Secretary that the liquidation isfor all practical purposes com plete, the Official Receiver isreleased with effect from such time as the CabinetSecretary m ay determine.

(4) A person other than the Official Receiverwho has ceased to be a liquidator is released with effectfrom—

(a) if the person has been removed from

Release ofliquidator in thecase of companyliquidated by theCourt.




office by a general m eeting of creditorsthat has not resolved against theperson's release, or the person hasdied—the time at which notice is givento the Court in accordance w ith theinsolvency regulations that that personhas been rem oved from office or hasdied;

(b) if the person has been removed fromoffice—

(i) by a general m eeting of creditorsthat has resolved against theperson's release; or

(ii) by the Court or the CabinetSecretary,

such time as the Cabinet Se.p retarymay, on an app lication 53/ that person,determine;

(c) if the person has vacated office undersection 468(7)—such time as theCabinet Secretary may, on anapplication by that person, determine;

(d) in the case of a person who hasresigned—such time as may beprescribed by the insolvencyregulations for the p urposes of thisparagraph; or

(e) in the case of a person who has vacatedoffice under section 468(9)—

(i) if the final meeting referred to inthat subsection has resolvedagainst that person's release—such time as the CabinetSecretary may, on an application



The insolvency Bill 2012 0 3 7

by that person, determine; and

(ii) if hat meeting has not soresolved—the time at which thatperson vacated office.

(5 ) On the hearing of application to the Court ofa person w ho has ceased to hold office as a provisionalliquidator, the person is released w ith effect from such time

as the Court may determine.(6 ) On being released under this section, the

Off icial Receiver or a liquidator or provisional liquidator is,with effect from the time specified in subsection (2), (3),(4) or (5), discharged from all liability both in respect ofacts or omissions in the liquidation and otherw ise inrelation to conduct as liquidator or provisional liquidator.

(7 ) However, nothing in this section prevents theexercise, in relation to a person w ho has been releasedunder this section, of the Court's powers under section 504(power of Court to make orders against delinquentdirectors, liquidators, etc.).

Division 8—Provisions applying to all kinds of liquidation

471. (1) The liquidator of a company that is inliquidation shall distribute the assets of the companyavailable for the payment of creditors in accordance withthe Second SchediLle.

(2) Subsection (1) is subject to the provisions ofthis Part.

472. (1) This section applies to a company that isbeing liquidated by the Court.

(2) If a person (whether or not a landlord or

P r e f e r e n t i a l d e b t s(general provision).

P r e f e r e n t ia l c h a r g eon property ofc o m p a n y d is t ra i n e dw i t h i n t h r e e

m o n t h s b e f o re




making ofliquidation order.

person entitled to rent) has distrained on the property of thecom pany during the three months imm ediately precedingthe date of the liquidation order, that property or effects, orthe proceeds of its sale, is charged for the benefit of thecomp any with the preferential debts of the company to theextent that the comp any's assets are for the time beinginsufficient to satisfy them.

(3 ) If, because of a charge under subsection (2), aperson surrenders property to a company or p ays money toa com pany, the person ranks, in respect of the amount ofthe procee ds of sale of the prop erty by the liquidator, or theamount money paid, as a preferential creditor of thecom pany, except as against so much of the compa ny'sproperty as is available for the paym ent of preferentialcreditors because of the surrender or paym ent.

(4) This section does not limit the effect ofsection 429 (avoidance of attachm ents, etc.).

Expenses ofliquidation to havepriority over claimsunder floating

charge.

473. (1) The expenses of liquidating a comp any, so faras the assets of the compa ny available for paym ent ofgeneral creditors are insufficient to meet those exp enses,have priority over any claims to p roperty comp rised in orsubject to any floating charge created by the compan y andare to be paid out of any such property accordingly.

(2) In subsection (1)-

(a ) the reference to assets of the comp anyavailable for payment of generalcreditorsdoes notinclude an amountmade available under section474(2)(a);

(b ) the reference to claims to prop ertycomp rised in or subject to a floatingcharge is to the claims of-

(i) the holders of debentures secured




by, or holders of, the floatingcharge; and

(ii) any preferential creditors entitledto be pa id out of that property inpriority to them.

(3) Provision m ay be m ade restricting theapplication of subsection (1), in such circumstances as may

be p rescribed by the insolvency regulations, to exp ensesauthorised or approved—

(a) by the holders of debentures securedby, or holders of, the floating chargeand by any p referential creditorsentitled to be paid in p riority to them;or

(b) by the Court.

(4) References in this section to the expenses ofthe liquidation are to all exp enses prop erly incurred in theliquidation, including the remuneration of the liquidator.

474. (1) This section app lies to a com pany in respectof which a floating charge relates to its property—

(a ) if the comp any is in liquidation orunder ad ministration; or

(b ) a provisional liquidator is app ointed inrespect of it.

(2) If this section applies to a com pany, theliquidator, adm inistrator or provisional liquidator—

(a ) shall make available for thesatisfaction of unsecured debts suchpart of the com pany's net property asis prescribed by the insolvencyregulations; and

(b ) may not distribute that part to the

Share of assets tobe made availablefor unsecuredcreditors wherefloating chargerelates tocompany'sproperty.




proprietor of a floating charge exceptto the extent that it exceeds tl1ie am ountrequired for the satisfaction ofunsecured debts.

(3) Subsection (2) does not apply to a companyi f—

(a) the company's net property is less thanthe minimum prescribed by theinsolvency regulations for the purposesof this section; and

(b ) the liquidator, administrator orprovisional liquidator believes that thecost of making a distribution tounsecured creditors would bedisproportionate to the benefits.

(4) Subsection (2) also does not apply to acompany if, or in so far as, it is disapplied by—

(a) a voluntary arrangement in respect ofthe company in accordance with PartIX; or

(b) a compromise or ar rangement agreedunder Part XXX IV of the CompaniesAct, 2012 (Arrangements andreconstructions).

(5) Subsection (2) also does not apply to acompany if—

(a ) the liquidator, administrator orprovisional liquidator applies to theCourt for an order und er thissubsection on the ground that the costof making a distribution to unsecuredcreditors would be disproportionate tothe benefits; and

(b) as a result of such an application, the




Court orders that subsection (2) is notto app ly.

(6) In subsections (2) and (3) a company's netassets is the amount of its assets that would, but for thissection, be available for satisfaction of claims of holders ofdebentures secured by, or holders of, any floating chargecreated by the company.

(7) The regulations referred to in subsection (2)prescribing part of a company's net assets may, inparticular, provide for its calculation—

(a ) as a percentage of the company's netassets; or

(b ) as an aggregate of differentpercentages of different parts of thecompany's net assets.

(8) In this section, "floating charge" means acharge that is a floating charge on its creation and that iscreated after the regulations referred to in subsection (2)(a)take effect.

475. (1) If a company is in liquidation or a provisionalliquidat6i is appointed in respect of the company, the Courtmay, on an application made under subsection (2), appointa person to be the special manager of the business orproperty of the company.

(2 ) An application to the Court to appoint a

special manager may be made by the liquidator orprovisional liquidator if it appears to the applicant that thenature of the business or property of the company, or theinterests of the company's creditors or contributories ormembers generally, require the appointment of anotherperson to manage the company's business or property.

(3 ) A special manager has such powers as theCourt specifies in the special manager's appointment or in

Power of the Courtto appoint specialmanager ofcompany'sbusiness orproperty whencompany is inliquidation orprovisional

liquidatorappointed.




directions given as a result of an application by thatmanager.

(4) The Court's power to confer powers to thespecial manager includes power to direct that any provisionof this Act that has effect in relation to a provisionalliquidator or liquidator of a company has the same effect inrelation to the special manager for the purposes ofperforming any of the functions of the provisionalliquidator or liquidator.

(5) A special manager shall—

(a ) give such security as may beprescribed by the insolvencyregulations;

(b ) prepare and keep such accounting

records as may be so prescribed; and(c ) produce those records in accordance

with the insolvency regulations to theCourt or to such other persons as maybe so p rescribed.

(6) A special manager's appointment does nottake effect until the security referred to in subsection (5)(a)has been given.

(7) A special manager who fails to comply withsubsection (5)(b) or (c) is guilty of contempt of the Courtand is liable to be punished accordingly (in addition to anyother punishment to which the person may be subject).

Power of liquidatorto disclaim onerousproperty.

476. (1) The liquidator may, by the giving such noticeas may be prescribed by the insolvency regulations,disclaim any onerous property and may do so even if theliquidator has taken control of it, tries to sell it, orotherwise exercised rights of ownership in relation to it.

(2) The following is onerous property for the




purposes of this section:(a ) an unprofitable contract;

(b ) other property of the company that isunsalable or not readily saleable or issuch that it may give rise to a liabilityto pay money or perform any otheronerous act.

(3) A disclaimer under this section—

(a ) operates so as to determine, as fromthe date of the disclaimer, the rights,interests and liabilities of the companyin or in respect of the propertydisclaimed; but

(b ) does not, except so far as is necessaryfor the purpose of releasing thecompany from any liability, affect therights or liabilities of any other person.

(5) A notice of disclaimer may not be givenunder this section in respect of any property if—

(a ) a person interested in the property hasapplied in writing to the liquidator, or apredecessor of the liquidator, requiringthe liquidator or liquidator'spredecessor to decide whether theproperty will be disclaimed or not; and

(b ) twenty-eight days from and includingthe date on which that application wasmade (or such extended period as theCourt may allow) has expired withouta notice of disclaimer having beengiven under this section in respect ofthe property.

(6) A person who has sustained loss or damage inconsequence of the operation of a disclaimer under this




section is a creditor of the com pany to the extent of the lossor damage and accordingly may prove for the loss ordam age in the liquidation.

Special provisionsrelating todisclaimer ofleaseholds.

477. (1) The disclaimer under section 476 of anyproperty comprising a leasehold interest does not takeeffect unless a copy of the disclaimer has been served (sofar as the liquidator is aware of their addresses) on everyperson claiming under the company as under-lessee ormortgagee and either—

(a) an applica tion under sect ion 479(general powers of the Court in respectof disclaimed property) has not beenmade with respect to that propertywithin fourteen days from andincluding the date on which the lastnotice served under this subsection wasserved; or

(b) i f such an applica tion is made—theCourt makes an o rder directing thedisclaimer to take effect.

(2) If the Court makes an order under subsection(1)(b) it may also, instead of or in addition to any o rder itmakes un der section 479, make such orders with respect tofixtures, tenant's improvements and other matters arisingout of the lease as it considers appropriate.

Effect ofdisclaimer inrelation to landsubject torentcharge.

478. (1) If, as a result of the disclaimer under section476 of land subject to a rentcharge, the land vests byoperation of law in a person, the person is not subject toany liability in respect of am ounts becom ing due under therentcharge except amounts that become due after theproprietor (or some person claiming under or through thep r o p r i e to r ) h a s t a k e n p o s s e s s i o n o r c o n t ro l o f th e l a n d o r



The hisolvelley Bill 20/2 045

has occup ied it.(2) The reference in subsection (1) to a person

includes the State and to any a successor in title to theperson.

479. (1) This section and section 480 apply toproperty that the liquidator has disclaimed in accordancewith section 476.

(2) An application to the Court for an order undersubsection (3) may be made by—

(a ) any person who claims an interest in• he disclaimed property; or

(b ) any person who is under a liability inrespect of the disclaimed property,other than a liability discharged by thedisclaimer.

(3) On the hearing of an application made undersubsection (2), the Court may make an order, on such termsas it considers appropriate, for the vesting of the disclaimedproperty in, or for its delivery to—

(a ) a person entitled to it or a trustee forsuch a person; or

(b ) a person subject to such a liability as isreferred to in subsection (2)(b) or atrustee for such a person.

(4) The Court may make an order undersubsection (3)(b) only if it appears to the Court that itwould be just to do so for the purpose of compensating theperson subject to the liability in respect of the disclaimer.

(5) The effect of an order made under this sectionis to be taken into account in assessing for the purpose ofsection 476(6) the extent of any loss or damage sustained

by a person in consequence of the disclaimer.

General powers ofthe Court in respectof disclaimedproperty.




(6) It is not necessary for an order under thissection vesting property in a person to be completed bytransfer.

Powers of theCourt in respect ofleaseholds held bycompany inliquidation.

480. (1) The Court may not make an order undersection 488 vesting a leasehold interest in a personclaiming under the company as underlessee or mortgageeexcept on terms making the person—

(a ) subject to the sam e liabilities andobligations as the com pany was subjectto under the lease at thecommencement of the liquidation; or

(b ) if the Court considers appropriate—

subject to the sam e liabilities andobligations as the person wo uld besubject to if the lease had beenassigned to the person at thecomm encem ent of the liquidation.

(2) For the purposes of an order under section488 relating only to the part of the property comprising a

lease, the ,requirements of subsection (1) app ly as if thelease was the only prop erty to which the order relates.

(3) If subsection (1) applies and no personclaiming under the comp any as underlessee or mo rtgagee iswilling to accept an order under section 488 on the termsrequired under that subsection, the. Court may make anorder vesting the company's interest in the lease in anyperson who is liable (whether personally or in arepresentative capacity, and whether alone or jointly withthe company) to perform the lessee's covenants under thelease.

(4) The Court may vest that estate and interest insuch a person freed and discharged from all estates,encumb rances and interests created by the comp any.




(5) If subsection (1) applies and a p ersonclaiming under the company as underlessee or mortgageedeclines to accept an o rder under section 488, that person isexcluded from all interest in the property.

481. (1) If—

(a ) a creditor—

(0 has issued execution against thegoods or land of a company; or

(ii) has attached any debt due to it;and

(b ) the comp any is subsequently

liquidated,the creditor is not entitled to retain the ben efit of theexecution or attachment against the liquidator unless thecreditor has completed the execution or attachment beforethe comm encem ent of the liquidation.

(2) However—

(a ) if a creditor has had notice of ameeting having been convened atwhich a resolution for voluntaryliquidation is to be,proposed— the dateon which the creditor had notice is, forthe purposeo subsection (1),substituted for the d ate ofcomm encem ent of the liquidation;

(b ) a person wh o, under a sale conductedby the enforcem ent officer or otherofficer charged with the execution ofthe writ goods of a comp any on whichexecution has been levied, purchasesthe goods in good faith acquires a goodtitle to them as against the liquidator;

Creditor notentitled to retainbenefit ofexecution orattachment againstliquidator unlesscreditor completesexecution orattachment beforecommencementofliquidation.




and(c) the rights conferred by subsection (1)

on the liquidator may be set aside bythe Court in favour o f the creditor tosuch extent and subject to such termsas the Court considers just.

(3 ) For purposes of this Act—

(a ) an execution against goods iscomp leted by seizure and sale;

(b ) an attachment of a debt is com pletedby receipt of the debt; and

(c ) an execution against land is comp letedby its seizure or by any other event

prescribed by the insolvencyregulations for the purposes of thissection.

Duties of judicialenforcementofficers chargedwith execution ofwrits and otherprocessesinvolvingcompanies inliquidation.


(a ) a company's goods are taken in

execution; and(b ) before their sale or the completion of

the execution (whether by the receiptor recovery of the full amount of thelevy)—no tice is served on the judicialenforcemen t officer charged withexecution of the writ or other

process—(i) that a p rovisional liquidator has

been appo inted;

(ii) that a liquidation order has beenmade; or

(iii) t h a t a r e s o lu t i o n f o r v o l u n t a r y




liquidation has been passed.(2) If so required, the judicial enforcem ent

officer concerned shall deliver the goods and any m oneyseized or received in p art satisfaction of the execution tothe liquidator.

(3) However, the costs of execution are a firstcharge on the goods or m oney so delivered, and theliquidator may sell the goods, or a sufficient part of themfor the purpose o f satisfying the charge.

(4) If, under an exe cution in respect of ajudgement for an am ount exceeding fifty thousandshillings, a company's goods are sold or m oney is paid inorder to avoid sale, the judicial enforcement shall deductthe costs of the execution from the p roceeds of sale or themon ey paid and retain the balance for not less than fourteendays.

(5) If, within that period—

(a) notice is served on the judicialenforcement officer to the effect that-

(i) an ap plication for the liquidation

of the company has been m ade;or

(ii) a meeting has been convened atwhich there is to be proposed aresorution for voluntaryliquidation; and

(b) an order is made or a resolutionpassed,

that officer shall pay the balance to the liquidator, who isentitled to retain it as against the execution creditor.

(6) The rights conferred by this section on theliquidator may b e set aside by the Court in favour of thecreditor to such extent and subject to such term s as the




Power of the Courtto rescind contractsentered into bycompany inliquidation.

Court considers app ropriate.

(7) The amount specified in subsection (4) issubject to increase or reduction by the insolvencyregulations.

483. (1) A person who is, as against the liquidator,

entitled to the benefit or subject to the burden of a contractmade with the company, may make an application for anorder under subsection (2).

(2 ) On'the hearing of an application made undersubsection (1), the Court m ay m ake an order rescinding thecontract on such terms as to paym ent by or to either partyof damages for the non-performance of the contract, or

otherwise as the Court co nsiders appropriate.(3) Damages payable to a person under the order

are provable by the p erson as a debt in the liquidation.

Power of liquidatorto transfer assets ofcompan y to its

employees.

484. (1) On the liquidation of a company (whether bythe Court or voluntarily), the liquidator may, in accordance

with this section, make any payment that the company has,before the commencement of the liquidation, decided tomake under section 210 of the Companies Act, 2012(power to provide for employees or former employees oncessation or transfer of business).

(2) After the liquidation has commenced, theliquidator may make any such provision as is referred to in

section 210 of the Companies Act, 2012 only if—(a ) the company's liabilities have been

fully satisfied and provision has beenmad e for the expenses of theliquidation;

(b ) the exercise of the power has beenauthorised by a resolution of the




company, and

(c ) the requirements of the com pany'sarticles (if any) as to the exercise of thepower c onferred by that section arecomp lied with.

(3 ) A payment that can be made by a comp anyunder this section after the comm encem ent of its

liquidation m ay be m ade only out of the com pany's assetsthat are available for distribution to the com pany'smem bers at the conclusion of the liquidation.

(4) If the comp any is being liquidated by theCourt, the exercise by the liquidator of a pow er under thissection is subject to the Court's control, and an y creditor orcontributory m ay app ly to the Court for an order givingdirections with•respect to any exercise or proposed exerciseof the power.

(5) Subsections (1) and (2) have effectirrespective of wh at is stated in any rule of law or in section414 (property of comp any to be distributed amo ngmembers after satisfaction of liabilities).

485. (1) A com pany that is in liquidation shall ensurethat—

(a ) every invoice, order for goods orservices, business letter or order form(whether in hard cop y, electronic orany other form) issued by or on behalfof the com pany, or a liquidator of thecom pany or a receiver or manager ofthe comp any's property; and

(b ) each of the com pany's websites,

states that the com pany is in liquidation.

(2) If the comp any fails to com ply'with a

Company inliquidationrequired to statethat it is inliquidation in allinvoices, lettersand othercommunications.




requirement under subsection (1), the com pany, and each

officer who is in default, commit an offence and onconviction are each liable to a fine not exceeding fivehundred thousand shillings.

(3) If, after a company or any of its officers isconvicted of an offence under subsection (2), the com panycontinues to fail to com ply with the relevant requirement,the company, and each officer of the company who is in

default, com mits a further offence on each day on w hichthe failure continues and on conviction is liable to a finenot exceeding fifty thousand shillings for each suchoffence.

Interest on debts tobe paid if surplus

permits.

486. (1) In a company liquidation, interest is payablein accordance with this section on any d ebt proved in theliquidation, including so m uch of any such debt asrepresents interest on the remainder.

(2 ) The liquidator shall, before applying anysurplus remaining after the paym ent of the debts proved ina liquidation for any other purpose, app ly the surplus inpaying interest on those debts in respect of the periodsduring which they have been o utstanding since theliquidation com menced.

(3 ) All interest under this section ranks equally(whether or not the debts on which it is payable rankequally).

(4 ) The rate of interest payable und er this sectionin respect of any deb t is the rate for the time being

prescribed by the insolvency regulations for the purposes ofthis section.

Certain documentsrelating tocompany inliquidation to be

487. (1) If a company is in liquidation, the followingdocum ents are exempt from stamp duty:




(a ) every transfer relating solely to,

freehold or leasehold property, or toany interest in, any real or personalproperty, that forms part of thecompany's assets and that, after theexecution of the transfer, either at lawof in equity, is or remains part of thoseassets; and

(b ) every writ, order or other documentrelating solely to the property of acompany that is in liquidation asreferred to in subsection (1), or to anyproceeding under such a liquidation.

(2) Subsection (1) does not apply if theliquidation is a members' voluntary liquidation.

488. If a company is in liquidation, all records of thecompany and of the liquidator are (as.between thecontributories of the company) evidence of the truth of allMatterspurpOrtingto be recorded in them, until thecontrary is proved.

exempt from stamp,.

duty.

Records ofcompany inliquidation to beevidence.

489. (1) If the liquidation of a company is notcompleted within twelve months after its commencement,the liquidator shall, at such intervals as may be prescribedby the insolvency regulations and until the liquidation iscompleted, lodge with the Registrar a statement containingthe particulars so prescribed with respect to the proceedingsin, and position of, the liquidation.

(2 ) A liquidator who fails to lodge a statement asrequired by subsection (1) commits an offence and onconviction is liable to a fine not exceeding five hundredthousand shillings.

(3 ) If, after being convicted of an offence under

Liquidator to lodgeperiodic statementswith Registrar ofCompanies withrespect to currentposition ofliquidation.




subsection (2), a liquidator continues to fail to lodge a

statement as required by subsection (1), the liquidatorcom mits a further offence on each day on which the failurecontinues and on con viction is liable to a fine not exceedingfifty thousand shillings for each such o ffence.

Effect ofresolutions p assed

at adjournedmeetings ofcompany'screditors andcontributories.

490. If a resolution is passed at an adjourned m eetingof a com pany's creditors or contributories, the resolution isfor all purposes taken to have been passed on the da te onwhich it was in fact passed, and not as having been passedon any earlier date.

Court may ordermeetings to be held

to ascertain wishesof creditors orcontributories.

491. (1) The Court may—

(a ) as to all ma tters relating to theliquidation of a com pany, have regardto the wishes of the creditors orcontributories (as prowedto it by anysufficient evidence); and

(b ) if it considers approp riate, for thepurpose of ascertaining those wishes—

(i) direct meetings of the creditors orcontributories to be convened,held and conducted in suchmann er as the Court directs; and

(ii) appoint a person to act aschairperson of any such mee tingand rep ort the result of it to theCourt.

(2 ) In the case of creditors, the Co urt shall takeinto account the value of each creditor's debt.

(3 ) In the case of contributories, the Court shalltake into account the number of votes conferred on each




contributory.

492. In all procee din gs un der th is Part, all courts andtribunals, all judge s and person s acting jud icially, and allofficers of a court or tr ibunal, or em ployed in en forcing th eproces s of a court or tribunal, are requ ired to take judicialno t i ce o f—

(a) the signature of an officer of the HighCourt; and

(b ) th e o fficial seal or stam p of th at Courtaffixed to or im pressed on anydocum ent m ade„ issued or signedund er a provision of this Act or the

Com panies Act, or any o fficial copy o fsuch a docum ent

Judicial notice tobe taken ofdocuments of theCourt.

493. (1) An aff idavi t required to te sw orn un der o r forthe purposes of this Par t may be sw orn in Keny a—

(a) before any court, tribunal, judge or

person law fully autho rised to take andrece ive affidavits; or

(b ) before any of any diplom atrepresen t ing the Governm ent of Kenyain any place outside Kenya.

(2) All courts, tr ibunals, judges and oth er person sacting judicially are required to t ake judicial no tice of theseal or stam p or sign ature of any lim b co urt, tribunal,.jadge, person or i l ipktn at affixed to, impress ed o n, orsubscribed to any such affidavit , or to any oth er docum entto be u sed for the purpos es of this Part.

Affidavits requiredto be sworn forpurposes of thisPart.




Division 9—Dissolution of companies after liquidation

Dissolution(voluntaryliquidation).

494. (1) This section ap plies to a com pany liquidatedvoluntarily if the liquidator has sent to the Regisfrar theRegistrar's final account and return in accordance withsection 401 (final meeting prior to dissolution: mem bers'voluntary liquidation) or section 413 (final mee ting prior to

dissolution: creditors' voluntary liquidation).(2 ) As soon as prac ticable after receiving the

account and return, the Registrar shall register them.

(3 ) At the end of three m onths from theregistration of the account and return, the comp any isdissolved.

(4) However, the Court may, on the application .of the liquidator or any other person who ap pears to theCourt to have a legitima te interest in the matter, make a norder deferring the date at which the dissolution of thecom pany is to take effect for such period as the Courtconsiders appropriate.

(5) Within seven days after an order is madeunder subsection (4), the person on whose ap plication theorder was m ade shall lodge with the Registrar a copy of theorder for registration.

(6 ) A person who, without reasonable excuse,fails to comply with subsection (5) commits an offence andon conviction is liable to a fine not exceeding two hundredthousand shillings.

(7 ) If, after being convicted of an offence undersubsection (6), a person continues to fail to lodge therequired cop y with the Registrar, the person com mits afurther offence on each day on which the failure continuesand on co nviction is liable to a fine not exceeding twentythousand shillings for each offence.




495. (1) This section app lies when an order for theliquidation of a company has been made b y the Court andthe Official Receiver is the liquidator of the com pany.

(2) On being satisfied—

(a ) that the realisable assets of thecom pany are insufficient to cover theexpenses o f the liquidation; and

(b ) that the affairs Of the com pany do no trequire any further investigation,

the Official Receiver may ap ply to the Registrar for theearly dissolution of the comp any.

(3) The Official Receiver may m ake such anapp lication only if at least twenty-eight days' notice of the.

Official Receiver's intention to make the application hasbeen given to the company's creditors and contributories.

(4) On giving of that notice, the Official Receieris (subject to any directions given under the section 496) nolonger be required to perform any functions imp osed on theOfficial Receiver in relation to the com pany, its creditors orcontributories because of any provision of this Act, apart

from a duty to m ake an app lication under subsection (2).(5) As soon as practicable after receiving the

Official Receiver's app lication, the Registrar shall registerit.

(6) At the end of the three months from an dincluding the date of the registration of the application thecomp any is dissolved.

(7) However, the Cabinet Secretary may, on theapplication of the Official Receiver or any other personwho ap pears to the Cabinet Secretary to have a legitimateinterest in the m atter, give directions in accordance withsection 496, but only if the three m onths period referred to

Early dissolution ofcompany.




in subsection (6) has not expired.

Consequence ofnotice given undersection 495(3).

4 9 6 . (1) If a notice has been given in accordan ce withsection 495(3), the Official Receiver or any cred itor orcontributory of the company m ay apply to the CabinetSecretary for directions under this section.

(2) The grounds on which such an ap plicationmay be made are—

(a) that the realisable assets of thecompany are sufficient to cover theexpen ses of the liquidation;

(b) that the affairs of the company dorequire further investigation; or

• (c) that for any other reason the earlydissolution of the company isinappropriate.

(3) Directions under this section—

(a ) are directions making such provisionas the Cabinet Secretary considersapp ropriate for enabling the liquidationof the company to p roceed as if nonotice had been given under section495(3); and

(b ) may, in the case of an ap plicationunder section 495(7), include adirection deferring the date at w hichthe dissolution of the compa ny is totake effect for such period as theCabinet Secretary considersappropriate.

(4) Any person claim ing to be adversely affectedby a decision of the Cab inet Secretary under this section.ma y appe al to the Court against the decision.




(5) Such an application must be m ade w ithinsuch period, and comply with such other req uirements, asare prescribed by the insolvency regulations for thepurposes of this section.

(6) On the hearing of an application made undersubsection (4), the Court shall make one of the fo llowingorders:

(a ) an order ,confirming the directionsgiven by the Cabinet Secretary;

(b ) an order quashing those directions; or

(c ) an order substituting such otherdirections as the Cabinet Secretarycould have lawfully given under thissection.

(7) Within seven days after directions are givenunder this section, or an appeal with respect to anapplication for such directions is determined, the person onw hose application directions w ere given, or in w hosefavour the appeal was determined, shall lodge with theRegistrar for registration a copy of the directions ordetermination.

(8) A person w ho, w ithout reasonable excuse,fails to lodge a copy as requ ired by subsection (7) comm itsan offence and on conviction is liable to a fine no texceeding two hundred thousand shillings.

(9) If, after being convicted of an offence und ersubsection (7), the person continues to fail to lodge the

relevant copy w ith the Registrar for registration, the personcomm its a further offence on each day on wh ich the failurecontinues and on conv iction is liable to a fine not exceedingtwenty thousand shillings for each such offence.

497 . (1) This section applies to a notice that is— issolutionotherwise than

under sections 494-496.




(a ) served for the purpo ses of section468(9) (final m eeting of creditors andvacation of office by liquidator); or

(b) f rom the Off ic ia l Receiver tha t theliquidation of a com pany by the C ourtis complete.

(2) As soon as practicable after such a notice islodged for registration, the Registrar shall register it.

(3 ) At the end of the three months from andincluding date of registration of the notice, the comp any isdissolved.

(4) However, on the application of the OfficialReceiver or any other person who appears to the CabinetSecretary to have a legitimate interest in the m atter, the

Cabinet Secretary may give a direction deferring the date atwhich the dissolution of the com pany is to take effect forsuch period as the C abinet Secretary considers appropriate.

(5) Any person who claims to be adverselyaffected by a direction of the Cabinet Secretary on anapplication for a direction under subsection (4) may app ealto the Co urt against the direction.

(6) Such an application may be not be madeotherwise than within such period, and in accordance withsuch requirements, as are prescribed by the insolvencyregulations for the purposes o f this section.

(7) On the hearing of an application made undersubsection (5), the Court shall, if satisfied that the CabinetSecretary's direction was justified, make an order

confirming the d irection, but if not so satisfied, shall makean order quashing the direction.

(8) Within seven days after a direction is givenunder this section, or an ap peal with respect to anapplication for such a direction is determined, the person onwhose ap plication the direction was given, or in w hosefavour the appeal was determined,shall lodge with the




Registrar for registration a copy of the direction or theCourt's determination.

(9) A person w ho, without reasonable excuse,fails to lodge a co py as required by subsection (8) comm itsan offence and on conviction is liable to a fine notexceeding two hundred thousand shillings.

(10)If, after being convicted of an offence undersubsection (9), a p erson continues to fail to lodge therequired cop y with the Registrar, the person c omm its afurther offence on each day on w hich the failure continuesand on conviction is liable to a fine not exceeding twentythousand shillings for each offence.

Division 10—Qffences relating to conduct before and during liquidationand criminal proceedings relating to those offences

Offence involvingcomm ission offraudulent acts inanticipation ofliquidation.

498. (1) This section app lies in relation to acompany—

(a ) in respect of which the Court has madea liquidation order; or

(b ) that has passed a resolution for thevoluntary liquidation of the com pany.

(2) An officer or former officer of the comp anycomm its an offence if, within the twelve mo nthsimm ediately preceding the commen ceme nt of theliquidation of the com pany, the officer or former officer—

(a ) concealed any part of the com pany'sproperty to the value of fifty thousandshillings or more; or conc ealed anydebt due to or from the com pany,

(b ) fraudulently removed any part of thecom pany's property to the value of



5062 he ln.solveiwy Bill, 2012

fifty thousand shillings or more;(c) concealed, destroyed, mutilated or

falsified any document affe cting prrelating to the company's affairs orproperty;

(d) made any false entry in any documentaffecting (*relating to the Company'saffairs or property;

(e) fraudulently parted with, altered ormade any omission in any documentaffecting or relating to the company'saffairs or property; or

(f) pawned, pledged or disposed of anyproperty of the company that has been

obtained on credit and has not beenpaid for.(3) Subsection (3)(f) does not apply if the

pawning, pledging or disposal was done in the ordinarycourse of the company's business

(4) An officer or former officer of the companyalso commits offence—

(a) if, within the twelve months periodreferred to in subsection (2), the officeror former officer has been privy to thedoing by others of any of the actsreferred to in paragraphs (c), (d). and(e) of that subsection; or

(b) if, at any time after the commencementof the liquidation, the officer or formerofficer—

(i) does any of the acts referred to inparagraphs (a) to (f) of thatsubsection; or

is privy to the doing by others of




any of the acts referred to inparagraphs (c) to (e) of thatsubsection.

(5) In a prosecution for an offence under,—

(a ) subsection (2)(a) or (f); or

(b ) subsection (3) in respect of an act_ referred to in either of those

paragraphs),it is a defence to prove that the offieer o r (*miner officer hadno intention to defraud.

(6) In a prosecution for an offence under—

(a ) subsection (2)(c) or (d); or

(b ) subsection (3) in respect of an actreferred to in either of tw o paragraphs,

it is a defence to prove the officer or former officer hadno intention to conceal the state of affairs of the companyor to defeat the law.

(7) If property is paw ned, pledged or disposed ofin circumstances that constitute an offence under

subsection (2)(f), a person who takes in pawn o r pledge, orotherwise receives, the property knowing it to have beenpawned, pledged or disposed of in such circumstances,commits an offence.

(8) A person found guilty of an offence underthis section is liable on conviction to a fine not exceedingtwo million shillings or to imprisonment for a term notexceeding five years, or to both.

(8) The insolvency regulations may increase orreduce the am ounts specified in subsection (2)(a) and (b).

(9) Without limiting section 217 of theCompanies Act, 2012, that section applies to an officer orformer officer of a company w ho is convicted of an offenceunder this section.

•




Offences involvingtransactions todefraud creditors ofcompany inliquidation.

499. (1) This section applies in relation to a

company—(a) in respect of which the Court has made

a liquidation order; or(b) that has passed a resolution for the

voluntary liquidation of the company.(2) An officer or former officer of the company

commits an offence if the officer or former officer—(a) has made or caused to be made a giftor transfer of, or charge on, or hascaused or connived at the levying ofexecution against, the company'sproperty; or

(b) has concealed or removed any part of

the company's property since, orwithin the two months preceding, thedate of any unsatisfied judgment ororder for the payment of moneyobtained against the company.

(3) A person is not liable to be charged with anoffence under subsection (2) if the conduct alleged to

constitute the offence occurred more than five years beforethe commencement of the liquidation.(4) In a prosecution for an offence under

subsection (2)(a), it is a defence to prove that the officer orformer officer did not, at the time of the alleged offence,have any intent to defraud the company's creditors.

(5) An officer or former officer of company whois person found guilty of an offence under this section isliable on conviction to a fine not exceeding one millionshillings or to imprisonment or a fine not exceeding twoyears, or to both.




(6) Without limiting section 217 of theCompanies Act, 2012, that section applies to an officer orformer officer of a company who is person convicted of anoffence und er this section.

5 0 0 . (1) This section applies in relation to a companythat is in liquidation, whether voluntary or by the Court.

(2) An officer K former officer of the companycommits an offence if the officer or former officer—

(a ) does not to the best of the officer's orformer officer's knowledge and belieffully and truly disclose to theliquidator all of the company'sproperty, and how and to whom andfor what consideration and when thecompany disposed of any part of thatproperty (except such part as has beendisposed of in the ordinary course ofthe company's business);

(b ) does not deliver up to the liquidator, orin accordance with the directions of theliquidator, all such part of thecompany's property as is under thecontrol of the officer or form er officer,and that the liquidator is required bylaw to deliver up;

(c ) fails to deliver up to the liquidator (oras the liquidator directs) all documents

under the control of the officer orformer officer that belong to thecompany and that the officer or formerofficer is required by law to deliver up;

(d ) knowing or believing that a false debthas been proved by any person in theliquidation, fails to inform the

Offence involvingmisconductcommitted incourse ofliquidation ofcompany.




liquidator of that knowledge or belief

as soon as practicable; or(e) after the commencement of the

liquidation—prevents the productionof any docum ent affecting or relatingto the com pany's affairs or prop erty.

(3 ) An officer or former officer also comm its anoffence if, after the comm encem ent of the liquidation, theofficer or former officer attempts to account for any part ofthe com pany's property by m eans of fictitious losses orexpenses.

(4) An officer or former officer is presum ed, inthe absence of evidence to the contrary, to have committedan offence unde r subsection (3) if the officer or formerofficer has made an attem pt of the kind referred to in thatsubsection at a m eeting of the comp any's creditors heldwithin the twelve m onths imm ediately preceding thecomm encement of the liquidation.

(5) In a prosecution for an offence undersubsection (2)(a), (b) or (c), it is a defence to p rove that theofficer or former officer had no intention to defraud.

(6) In a prosecution for an offence undersubsection (2)(e), it is a defence to p rove that the officer orformer officer had no intention to conceal the state ofaffairs of the com pany or to defeat the law.

(7) An officer or former officer found guilty ofan offence und er this section is liable on conviction to afine not exceeding two million shillings or to imprisonmentfor a term not exce eding five years, to both.

(8) Without limiting section 217 of theComp anies Act, 2012, that section applies to an officer orformer officer of a com pany who is convicted of an offenceunder this section.




501. (1)- This section 4pplies in relation to a companythat is in liquidation, whether voluntary or by the Court.

(2) An officer or contributory of the companycommits an offence if, during the liquidation, the officer orcontributory, with intent to defraud or deceive the companyor any other person—

(a) destroys, damages, alters or falsifies asecurity or other document of the-company; or

(b) makes or is privy to the making of afalse or fraudulent entry in any recordor other document of the company.

(3) A person who is found guilty of an offenceunder subsection (1) is liable on conviction to a fine not

exceeding two million shillings or to imprisonment for aterm not exceeding five years, to both.(4) Without limiting section 217 of the

Companies Act, 2012, that section applies to an officer of acompany who is convicted of an offence under this section.

Offence to falsify

documents inrelation tocompany inliquidation.

502. (1) This section applies to a company that is inliquidation, whether voluntary or by the Court.(2) An officer or former qfficer of the company

commits an offence if, during the liquidation, the officer orformer officer makes a material omission from a statementrelating to the company's affairs.

(3) An officer or former officer of the companyis also taken to have committed an offence undersubsection (2) if, before the commencement of theliquidation, the officer or former officer has made anyMaterial omission from a statement relating to thecompany's affairs.

• 4) In a prosecution for an offence under this

Offence to makematerial.omissionfrom statementrelating to affairsof company inliquidation




Offence to makefalserepresentations tocreditors of

company inliquidation.

section, it is a defence to prove that the officer or form er

officer had no intention to defraud.(5) A person who is found guilty of an offence

under this section is liable to a fine not exceeding onemillion shillings or to imprisonm ent for twelve months, orto both.

(6) Without limit ing section 217 of theCom panies Act, 2012, that section app lies to an officer orformer officer who is convicted of an offence under thissection.

503. (1) This section applies to a company that is inliquidation, whether voluntary or by the Court.

(2) An officer or former officer of the companycomm its an offence if—

(a) the officer or former officer makes afalse representation; or

(b) does any other f raudulent act ,

for the purpose of obtaining the consent of the company'screditors or any of them to an agreem ent relating to the

company's affairs or to the liquidation.(3) An officer or former officer of the company

is also to be taken to have com mitted an offence undersubsection (2) if, before the comm encemen t of theliquidation, the officer or former officer —

(a) made any false representation; or

(b) did any other f raudulent act ,for the purpose of obtaining that consent.

(4) An officer or former officer person who isfound guilty of an offence under this section is liable onconviction to a fine not exceeding two million shillings andto imprisonm ent for a term not exceeding five years, or to




both.

(5) Without limiting section 217 of theCompanies Act, 2012, that section applies to an officer orformer officer of a company w ho is convicted of an offenceunder this section.

504. (1) This section applies to the follow ing person s:

(a)- an officer or former officer of acompatiy that is in liquidation (whetherby the Court or voluntarily);

a person who is or has acted as theliquidator of such a company;

not being a person referred to in

paragraph (a) or (b)—a person w ho hasbeen concerned in the promotion,formation or management of such acompany.

(2) If, during the course of the liquidation of acompany, it appears that a person to whom this sectionapplies has or may have—

(a ) misapplied or retained, or becomeaccountable for, money or property ofthe company; or

(b ) committed misfeasance or a breach ofany fiduciary or other duty in relationto the company,

the Official Receiver, the liquidator of the company or acreditor or contributory of the company m ay make anapplication to the Court to conduct an examination undersubsection (6).

(3) The referen ce in subsection (2) tomisfeasance or a breach of any fiduciary or other duty inrelation to the company includes, in the case of a person

(b )

(c)

Power of the Courtto make ordersagainst delinquentdirectors,liquidators, etc.




Power of theLourtto make ordArsagainst offers ofcompany/andothers found tohave participated infraudulent trading

who has acted as liquidator of the com pany, any

misfeasance or breach o f any fiduciary mother duty inconnection with the carrying out of the liquidator'sfutuFtions as liquidator of the co mpany.

(4) An ap plication under subsection (2) m ay bem 'de in relation to a p erson who h as acted as liquidator oftle comp any only with the leave of the Co urt given afterthe person has been released from the responsibilities ofliquidator.

(5) A contributory may make an app licationunder subsection (2) only with the leave of the Co urt.

(6 ) On the hearing ofa n application made undersubsection (2), the Court may undertake an examinationinto the conduct of the person in relation to whom theapplication was made.

(7 ) If, at the conclusion of the exa mination, theCourt finds that the person examined has engaged inconduct of a kind referred to in subsection (2), it may m akean order com pellirig the person—

(a ) to repay, restore or account for themo ney or prope rty or any part of it,with interest at such rate as the Courtconsiders appropriate; or

(b ) to contribute such amoun t to thecomp any's assets as comp ensation forthe misfeasan ce , breach of fiduciary orother duty as the Court considers fairand reasonable.

505. (1) A liquidator of a com pany m ay make anapp lication to the Court to make an orde r under subsection(2) if—

(a) in the course of the liquidation of thecom pany, the liquidator forms the View



The Insolvency B ill, 2012 071

by company inliquidation.

that a business of the company has

been carried on with intent to defraudcreditors of the company or creditorsof any other person, or for anyfraudulent purpose; and

(b) the liquidator b elieves that specifiedpersons participated (directly orindirectly) in the business with the

know ledge that the business was beingcarried on in that manner.

(2 ) If, on hearing an application made undersubsection (1), the Court finds that the persons specified inthe application did in fact participate (directly or indirectly)in a business of the company w ith the knowledge that itwas being carried on in the manner referred to in subsection

(1)(a), it may order those persons (or any of them) to !hakesuch contributions to the company's assets as the Courtconsiders fair and reasonable.

(3 ) The persons specified in an application madeunder subsection (2) are entitled to be served w ith a copy ofthe application and to appear and be heard as respondents atthe hearing of the application,

(4 ) If the Court makes an order against a personunder subsection (2), it may also make an orderdisqualifying the person from—

(a ) being or acting as a directOr of acompany;

(b ) being or acting as a liquidator,provisional liquidator or administratorof a company;

(c) being or acting as a supervisor of avoluntary arrangement approved by thecompany; or

(d ) in any way, w hether directly orindirectly, being concerned in the




promotion, formation or managementof a company,

for such period, not exceeding fifteen years, as may b especified in the order.

Power of the Courtto make ordersagainst officers ofcompany engagingin wrongfultrading.

506. (1) This section applies—

(a) to a company that is in insolvent

liquidation; and(b) to a person who, a t a time before the

comm encem ent of the liquidation, wasan officer of the com pany.

(2) For the purposes of this section—

(a ) a com pany is in insolvent liquidationif, at the time the liquidationcom men ces, its assets are insufficientfor the paymen t of its debts and otherliabilities and the expenses of theliquidation; and

(b ) the person in respect of whom anapplication is made under subsection(3) is the respondent to the app lication.

(3) If, in the course of the liquidation of acom pany, it appears tothe liquidator that a person to whomthis section applies knew or ought to have known that therewas no reasonable prospect that the company would avoidbeing placed in insolvent liquidation, the liquidator maymake an application to the Court for an order undersubsection (5).

(4) The Court may hear an application madeunder subsection (2) only if the person in respect of wh omthe application was made has been served with a copy ofthe ap plication.

(5) If, on the hearing of an application made




under subsection (3), the Court may, if satisfied that, at therelevant time, the respondent knew or ought to have knownthat there was no reasonable prospect that the companywould avoid being placed in insolvent liquidation, make anorder declaring the respondent to be liable to make suchcontribution (if any) to the company's assets as the Courtconsiders approp riate.

(6) Hol'vever, the Court may not make such anorder if satisfied that the respondent took such steps toavoid potential loss to the company's creditors as(assuming the respondent to have known that there was noreasonable prospect that the company would avoid goinginto solvent liquidation) the respondent ought reasonably tohave taken.

(7 ) Nothing in this section affects the operationof section 505 (fraudulent trading by company inliquidation).

(8 ) If the Court makes an order against a personunder subsection (5), it may also make an orderdisqualifying the person from—

(a ) being or acting as a director of a

company;(b ) being or acting as a liquidator,

provisional liquidator or administratorof a comp any;

(c ) being or acting as a supervisor of avoluntary arrangement approved by thecompany; or

(d ) in any way, whether directly orindirectly, being concerned in thepromotion, formation or managementof a comp any,

for such period, not exceeding fifteen years, as may bespecified in the order.




Supplementary

provisions relatingto proceedingsunder sections 505and 506.

507. (1) On the hearing of an app lication undersection 505 (fraudulent trading by com pany in liquidation)or section 506 (wrongful trading), the liquidator maypersonally give evidence or ca ll witnesses.

(2) If the Court makes an order under section 505or 506, it may m ake such further orders as it considersapp ropriate for giving effect to the order.

(3) In particular, the Court may—

(a) provide for the liability of any personunder the order to be a charge-

(i) on any deb t or obligation duefrom the comp any to the person;Or

(ii) on any m ortgage or charge or anyinterest in a m ortgage or chargeon assets of the com pany held byor vested in the person, or anyother person on the person'sbehalf, or any other person whoclaims as an assignee from o rthrough the person liable or any

person acting on that person'sbehalf; and

(b) from time to time make such furtherorder as may be necessary forenforcing a charge imposed underparagraph (a).

(4) For the purposes of subsection (3)(a)(ii),

assignee —(a) includes a person to whom or in whose

favour, by the directions of the personmad e liable, the debt, obligation,mortgage or charge w as created, issued




or transferred or the interest created;but(b) does not include an assignee for

valuable consideration (not includingconsideration by way of marriage)given in good faith and without noticeof any of the matters on the ground of

which the order is made.(5) If the Court makes an order under section 505or 506 in relation to a person who is a creditor of thecompany, it may direct that the whole or any part of anydebt owed by the company to that person, and any intereston the debt, ranks in priority after all other debts owed bythe company and after any interest on those debts.

(6) The Court can make an order under section505 or 506 even if the person concerned may be criminallyliable in respect of matters giving rise to the making of theorder.

508. (1) This section applies to a person if—

(a) a company is in insolvent liquidationon or after the commencement of thissection; and

(b) the person was a director of thecompany at any time during the twelvemonths immediately preceding the dateon which the liquidation of thecompany commenced.

(2) For the purposes of this section, a name is aprohibited name in relation to such a person if—

(a) it is a name by which the company wasknown at any time during that periodof twelve months; or

Director ofcompany ininsolventliquidationprohibited frombeing director of,or being involvedwith, any othercompany that isknown by aprohibitedname.




(b) it is a name that is so similar to a nameof the kind referred to in paragraph (a)as to suggest an association with thecompany.

(3) Except with leave of the Court, or in suchcircumstances as may be p rescribed by the insolvencyregulations, a person to w hom this section applies shall notat any time during the five years from and including thedate on which the liquidation of the com panycommenced—

(a) be a di rector of any other company thatis known by a prohibited name;

(b ) in any w ay (directly or indirectly) beconcerned or take part in the

promotion, formation or managementof any such company; or

(c ) in any w ay (directly or indirectly) beconcerned or take part in the carryingon of a business carried on (otherwisethan by a comp any) under a prohibitedname.

(4) A person who contravenes this sectioncom mits an offence and on conviction is liable to a fine notexceeding one m illion shillings or to imprisonm ent for aterm not exceeding twelve m onths, or to both.

(5) A reference in this section, in relation to atime, to a name by which a com pany is known is areference to the name of the com pany at that time or to any

nam e under which the comp any carried on business at thattime.

(6) For the purposes of this section, a company isin insolvent liquidation if, at the time the liquidationcommences, the company's assets are insufficient for thepaym ent of its debts and other liabilities and the expensesof the liquidation.




(7) In this section, com pany includes acomp any to which Part VII applies.

509. (1) A p erson is person ally responsible for all'therelevant debts of a comp any if at any time—

(a ) in contravention of section 508— the'person is involved in the man agement

of the compan y; or(b ) as a person wh o is involved in the

management of the company-theperson acts or is willing to act oninstructions given (without the leaveofthe Court) by a person whom theperson . knows at that time to be incontravention of section 508 in relationto the company.

(2 ) If, because of subsection (1), a person ispersonally responsible for the relevant debts of a comp any,the person is jointly and severally liable for those debtswith the company and any other person who, whether underthis section or otherwise, is so liable.

(3 ) For the purp oses of this section, the relevantdebts of a company are—

(a) in relation to a person who ispersonally responsible under paragraph(a) of subsection (1)—such debts andother liabilities of the com pany as areincurred at a time when the p erson was

involved in the M anagemen t of thecomp any; and

(b) in relation to a person who ispersonally responsible under paragraph(b) of that subsection— such debts andother liabilities of the com pany as a re

Personal liability ofdirector for debtsof companyfollowingcontravention ofsection 508.




Prosecution ofdelinquent officersand mem bers ofcompany inliquidation by theCourt.

incurred at a time when the p erson wasacting or was willing to act oninstructions given as referred to in tha tparagraph.

(4 ) For the purpo ses of this section, a person isinvolved in the ma nagemen t of a company if the person is adirector of the comp any or if the person is conce rned,whether directly or indirectly, or takes part, in themanagem ent of the company.

(5) For the purposes o f this section, a personwho, as a person involved in the man agement of acomp any, has at any time acted on instructions given(without the leave of the Court) by another person w homthe person knew at that time to be in contravention ofsection 508 in relation to the com pany is presum ed, unlessthe contrary is shown„to have been w illing at any later timeto act on any instructions given by the other pe rson.

(6) In this section, comp any includes acomp any to which Part VII applies.

510. (1) If, in the co urse of liquidating a com pany, itapp ears to the Court that a person who w as at the relevanttime a past or present officer, or membe r, of the comp anyhas com mitted an offence in relation to the com pany forwhich the person is crim inally liable, the Court m ay (eitheron the a pplication of a person interested in the liquidationor on its own m otion) direct the liquidator to refer thematter to the Attorney General.

(2) If, in the case of a co m pany in liquidation bythe Court, it appe ars to the liquidator (not being the O fficialReceiver) that a person who, at the relevant time was a pastor present officer, or a mem ber, of the company, hascomm itted an offence in relation to the compa ny for whichthe p6rson is crim inally liable, the liquidator shall report thema tter to the Official Receiver.



h eInsolvency Bill 2012 09

(3) If, in the course of a voluntary liquidation, theliquidator forms the view that a p erson who at the relevanttime was a p ast or present officer, or a mem ber of thecomp any, has comm itted an offence in relation to thecom pany for which the person is climinally liable, theliquidator shall imm ediately—

(a ) report the ma tter to the AttorneyGeneral; and

(b ) provide the Attorney General withsuch information and such access toand facilities for inspecting and takingcopies of documents (beinginformation or documents in thepossessionor under the control of theliquidator and relating to the matter in

question) as the Attorney Generalreasonably requires.

(4) On receiving a report is made under.subsection (3), the Attorney General may, for the purposeof investigating the matter reported and such other mattersrelating to the affairs of the com pany as appear to theAttorney General to requ ire investigation, exercise any of

the pow ers that are exercisable by inspectors appointedunder Part XXX of the Com panies Act, 2012 to investigatea company's affairs.

(5) If, in the course of a voluntary liquidation, theCourt forms the view that—

(a ) any past or present officer of thecompany, or any mem ber of it, hascommitted an offence as referred to insubsection (1); and

(b ) no report w ith respect to the matter hasbeen made by the liquidator undersubsection (3),

the Court may, on the application of any person interested




in the liquidation or on its ow n initiative, direct the

liquidator to m ake such a repo rt.(6) On the making of a report in accordance with

subsection (5), this section has effect as though the reporthad been m ade in accordance with subsection (3).

Obligations arising

under section 510.

Cap. 63

5 1 1 . (1) For the purpose of an investigation by the

Attorney General in consequence of a report m ade to theAttorney General und er section 510(3), any obligationimpo sed on a person by a provision of the Comp anies Act,2012 to prod uce docum ents or give information to, orotherwise to assist, inspectors appointed under Part XXX ofthat Act is taken to be an ob ligation similarly to assist theAttorney Gen eral in the investigation.

(2) An answer given by a person to a questionput to the person in exercise of the powers conferred bysection 510(4) may be used in evidence against the person.

(3) However, in criminal proceedings in whichthat person is charged with an o ffence to which subsection(4) applies—

(a) evidence relating to the answer, maynot be adduced; and

(b ) questions relating to it m ay not b easked, by or on behalf of theprosecution,

unless evidence relating to it is adduced , or a questionrelating to it is asked, in the proceedings by or o n behalf of •that person.

(4) This subsection applies to all offences otherthan an offence under sections 107 and 11 4 of the PenalCode (false statements m ade on oath otherwise than injudicial proceedings or m ade otherwise than on oath).

(5) If criminal proceedings are begun by the




Director of Public Prosecutions or the A ttorney Generalfollowing a report or reference under section 510, theliquidator and every officer and agent of the com pany p astand p resent (other than the defendant) shall provide theDirector of Public Prosecutions and the Attorney Generalwith such assistance in connection with the prosecution asthe liquidator, officer or agent is reasonably able to give.

(6) In subsection (5), agent includes any bankor advocate of the compa ny and any person employed bythe com pany as auditor, whether that person, is or is not anofficer of the company.

(7) If a person fails to provide assistance asrequired by subsection (5),. the Court may, on theapp lication of the Director of Public Prosecutions or the

• ttorney General, make an order directing the person tocomply with that subsection.

(8) If the app lication is mad e with respect to aliquidator, the Court may alsomake an order directing thatthe costs are to be borne by the liquidator pe rsonally.

(9) However, the Court may not make such anorder if it is established that the failure to com ply was due

to the liquidator having insufficient assets of the c omp anyto enable the liquidator to provide the required assistance.

PART VII IQUIDATION OF UNREGISTERED CO MPANIES

512. For the purposes of this Part, unregisteredcom pany includes any association and any com pany, otherthan a comp any registered under the Compan ies Act, 2012.

Meaningofunregistered,

company forpurposes of thisPart.



5082 he Insolvency B111 20/2

Liquidation ofunregisteredcompanies.

513. Subject to the provisions of this Part—

(a ) any unregistered company may beliquidated under Part VI; and

(b ) the provisions of that Part relating toliquidation apply to an unregisteredcompany.

(2) An unregistered company cann ot be liquidated

under this Part voluntarily.

Circumstances inwhichunregisteredcompany can beliquidated.

514. (1) The circumstances in which ati unregisteredcompany can be liquidated are as follows:

(a ) if the company is dissolved, or hasceased to carry on business, or is

carrying on business only for thepurpose of liquidating its affairs;

(b ) if the company is unable to pay itsdebts; •

(c ) if the Court is of opinion that it is justand equitable that the company shouldbe liquidated.

(2) An unregistered company is, for the purposesof subsection (1)(b), unable to pay its debts if there is acreditor, by assignment or otherwise, to which the comp anyowes an amount exceeding seventy-five thousand shillingsthen due and—

(a) the creditor has served on the com pany,by leaving at its principal place ofbusiness, or by delivering to an officerof the com pany, or by otherwise servingin such manner as the Court mayapprove or direct, a written demandrequiring the company to pay the




amount due; and

(b) the com pany has, within the twenty-onedays after the service of the dem and,failed to pay the amount or to secure orcomp ound for it to the creditor'ssatisfaction.

(3 ) The amount of money for the time beingspecified in subsection (2) is subject to increase or reduction

by the insolvency regulations, but no increase in theamounts so spec ified affects any case in which theliquidation application was m ade before the increase tookeffect.

(4 ) An unregistered company is, for the purposesof subsection (1)(b), also unable to pay its debts if legalproceedings have been brought against any member of the

comp any for a debt or demand due, or claimed to be due,from the company, or from the member as such, and—

(a ) notice of the bringing of theproceedings has been served on thecomp any by leaving it at the company'sprincipal place of business (or bydelivering it to an officer of the

company, or by otherwise serving it insuch manner as the Court may approveor direct); and

(b ) the comp any has not within twenty-onedays after service of the notice—

(1) paid, secured or comp ounded forthe debt or demand;

(ii) obtained a halt to the p roceedings;or

(iii) indemnified the defendant to thedefendant's reasonablesatisfaction against theproceedings, and against all costs,




damages and expenses to beincurred by the defendant becauseof it.

(5) An unregistered company is, for the purposesof subsection (1)(b), also unable to pay its debts—

(a) if execution or other process issued on ajudgment, decree or order43btained inany Court in favour of a creditor against

the company, or any member of it assuch, or any person authorised to besued as nominal defendant on behalf ofthe company, is returned unsatisfied; or

(b) if it is otherwise prOved to thesatisfaction of the Court that thecompany is unable to pay its debts asthey fall due.

(6) An unregistered company is also unable to payits debts for the purposes of subsection (1)(b) if it is provedto the satisfaction of the Court that the value of thecompany's assets is less than the amount of its liabilities,taking into account its contingent and prospective liabilities.

(7) In this section (3), officer , in relation to an

unregistered company, means the secretary, or a director,manager or principal officer, of the company.

Companyincorporatedoutside Kenyamay be liquidatedthough dissolved.

5 1 5 . (1) If a company incorporated outside Kenya thathas been carrying on business in Kenya ceases to carry onbusiness there, it can be liquidated as an unregisteredcompany under this Act.

(2) Subsection (1) has effect even if the companyhas been dissolved or has otherwise ceased to exist as acompany in accordance with the laws of the country underwhich it was incorporated.




516. (1) If an unregistered company is in liquidation,each person is a contributory who is liable—

(a ) to pay or contribute to the payment ofany debt or liability of the company;

(b ) to pay or contribute to the payment ofany amount for the adjustment of therights of members among themselves,or

(c ) to pay or contribute to the payment ofthe expenses of liquidating thecompany.

(2) Each contributory is liable to contribute to thecompany's assets all amounts due from the contributory inrespect of the contributory is liable under subsection (1).

517. The provisions of this Part with respect to haltingor restraining legal proceedings against a company after themaking of an application for liquidation and before themaking of a liquidation order extend, if the application tohalt or restrain is made by a creditor, to legal proceedingsagainst a contributory of an unregistered company.

518. If an order has been made for liquidating anunregistered company, no legal proceedings may be begunor continued against a contributory of the company inrespect of any debt of the company, except by leave of theCourt, and subject to such terms as the Court may impose.

Contributories inliquidation of

unregisteredcompany.

Power of theCourt to halt orrestrainproceedings.

Actions halted onliquidation order.

Provisions of thisPart to becumulative.

519. (1) The provisions of this Part with respect tounregistered companies are in addition to those of Part VIwith respect to the liquidation of companies by the Court.



5Q86 he Insolvency B ill, 2012

(2) The Co urt or liquidator may exercise anypowers or do any act in the case of unregistered comp aniesthat might be exe rcised or done by it or by the liquidator inliquidating a comp any that is registered under theComp anies Act, 2012.

PART VIII—ADMINISTRATION O F INSOLVENT CO MPANIES

Division 1—Introductory provisions: nature and objective ofadministration

Interpretation:

Part VIII.

520. In this Part—

administrator , in relation to a company, mea ns aperson app ointed under this Part to man age the comp any'saffairs and prope rty, and, if the context requires, includes aformer administrator;

creditors' meeting mea ns a meeting of creditorsof a com pany under adm inistration that is convened by theadm inistrator as provided by the insolvency regulations;

enters adm inistration has the me aning given bysection 521;

floating charge me ans a charge that is a floatingcharge on its creation;

holder of a qualifying floating charge in respectof a com pany's property has the mea ning given by section534 (holder of floating charge ma y app oint administrator ofcompany);

market value means the amount that would.berealised on a sale of property in the open m arket by awilling vendor;



The Insolvency Big 2012 087

objective of administration mea ns an objective

specified in section 522.

521. For the purposes of this Act—

a comp any is under adm inistrationwhile the appointmen t of anadministrator of the com pany continues

to have effect;(b ) a comp any enters adm inistration

when the appointm ent of anadministrator takes effect;

(c ) a comp any ceases to be underadM inistration when the appointmen t ofan adm inistrator of the com pany ends inaccordance with this Part; and&com pany does not cease to be underadministration only because anadministrator vacates office (whetherthrough resignation, death or otherwiseor removal).

(a)

(d )

What isadministration?

522. (1) The objectives of the adm inistration of acompany are—

(a ) to maintain the comp any as a goingconcern;

(b ) to achieve a better outcome for thecomp any's creditors as a who lethanwould likely to be the case if thecom pany were liquidated (without firstbeing under administration); or

(c ) to realise the property of the com panyin order to ma ke a distribution to one or

The objectives ofadministration.




mo re secured or preferential creditors.

(2) Subject to subsection (4), the administrator ofa company shall perform the administrator's functions in theinterests of the company's creditors as a whole.

(3) The administrator shall perform theadministrator's functions with the objective specified insubsection (1)(a) unless the ad ministrator believes either—

(a) that it is not reasonably practicable to

achieve that ob jective; or(b) that the objec tive specif ied in

subsection (1)(b) would achieve a betterresult for the company's creditors as awhole.

(4) The administrator may perform theadministrator's functions with the objective specified insubsection (1)(c) only if—

(a) the administrator believes that i t is notreasonably p racticable-to achieve eitherof the.objectives specified in subsection(1)(a) and (b); and

(b) the administrator does not unnecessari lyharm the interests of the creditors of thecomp any as a whole.

Division 2—App ointment of adm inistrators otherw ise than by theCourt

Who canappoint anadministrator?

523. A person m ay be appointed as adm inistrator of acompany—

(a) by adminis trat ion order of the Court inaccordance with Division 3;

(b) by the holder of a f loating charge under




section 534 (holder of floating chargemay ap point administrator of comp ahy);or

(c) by the company Of its directors.undersection 541.

524. The adm inistrator of a company shall perform the

administrator's functions as quickly and efficiently as isreasonably practicable.

525. An ad ministrator is an officer of the Court (whetheror not the adm inistrator is appointed by the Co urt).

526. A person m ay be app ointed as administrator of acomp any only 4- the adm inistrator is an authorised insolvency

_ practitioner.

527. (1) Except as provided by subsection (2), a personmay not be ap pointed as administrator of a com pany that isalready under administration.

(2) Subsection (1) is subject to sections 606 to 613and sections 616 to 619 (which relate to the appo intment ofreplaceme nt and additional administiators).

Duty ofadministrator.

Status ofadministrator.

Qualificationfor appointmentofadministrators:

Administratornot to beappointed if

company isalready underadministration.

528. (1) A person m ay not be appointed as adm inistrator

of a com pany that is in liquidation because of—(a ) a resolution for voluntary liquidation ; or

(b ) a liquidation order.

(2) Subsection (1)(a) is subject to section 557(power of liquidator to m ake an ap plication for

Administratornot to beappointed ifcompan y is inliquidation.




administration).

(3) Subsection (1)(b) is subject to sections 556(application if com pany is subject to a floating charge).

Administratornot to beappointed inrespect ofbanking,

finance andinsurancecompanies.

529. A personmay notbe appointedas administrator of—

(a ) a comp any that is a bank; or

(b ) a com pany that enters into contracts ofinsurance or carries on insurancebusiness.

Division 3—Appointment of administrators by the Court

What is anadministrationorder?

Conditions formakingadministrationorders.

530. An administration order is an order appointing aperson as theadministrator of a company and providing forthe administration of the company by that person,

531. The Courtmay make an administration order inrelation to acomp4ny only if satisfied—

(a ) that thecompany is or is likelyto becomeunable to pay its debts, and

(b ) that the administration order isreasonably likely to achieve an objectiveof administration.

Applications tothe Court toappointadministrator inrespect ofcompany.

532. (1) An applicationto the Court for anadministration order in respect of a company may be madeonly by the following persons;

(a) the company;



Th e hoolveheyBill 2012 091

(b ) the directors of the company;

(c ) one or more creditors of the company;

(d ) a combination of persons specified inparagraphs (a) to (c).

(2) As soon as is reasonab ly practicable after themaking of an application for administration, the app licantshall notify—

(a ) any person who is or may be entitled toappoint an adm inistrator of the companyunder section 534 (holder of floatingcharge may appoint administrator ofcompany); and

(b ) such other persons (if any) as may beprescribed by the insolvency regulationsfor the purposes of this section.

(3) An application for administration may no t bewithdrawn without the perm ission of the Court.

(4) In subsection-(1), creditor includes acontingent creditor and a prospective creditor.

533. (1) On hearing an application for an administrationorder in respect of a company, the Court may—

(a ) make .the administration order sought;

(b ) dismiss the application;

(c ) adjournthe hearing cond itionally orunconditionally;

(d ) make an interim order;

(e ) treat the application as a liquidationapplication and make any order that theCourt could make under section 426(powers of Court on hearing of

Powers of theCourt onhearingapplication foradministrationorder.




applicatiOn);

(f) make any other order that the Courtconsiders appropriate.

(2) An appointment of an administrator by anadm inistration order takes effect—

(a) at a time specified in the order; or

(b ) if no time is specified, when the order is

made.(3) An interim order under subsection (1)(d) may,

in particular—

(a) restrict the exercise of a power of thedirectors or the com pany;

(b ) make provision conferring a discretion on

the Court or on a person qualified to actas an insolvency; or

(c ) do either o f those th ings .

Division 4—A ppointm ent of administrator by holder of floating charge

Holder offloating chargemay appointadministrator.

534. (1) The holder of a qualifying floating charge inrespect of a company's property may appoint an administratorof the company.

(2) For the purposes of subsection (1), a floatingcharge is a qualifying floating ch arge if it is created by adocument that—

(a) states that this sect ion applies to thefloating ch arge; or

(b) Purpor ts to empower the holder of thefloating charge to ap point anadm inistrator of the com pany.

(3) For the purposes of subsection (1), a person is




the holder of a qualifying Mating charge in respect of a

company's property if the person holds one or moredebentures of the company secured—

(a ) by a qualifying floating charge thatrelates to the whole or substantially thewhole of the company's property;

(b ) by a number of qualifying floatingcharges that together relate to the wholeor substantially the whole of thecompany's property; or

(c ) by charges and other forms of securitythat together relate to the whole orsubstantially the whole of the company'sproperty and at least one of which is aqualifying floating charge.

535. (1) A person may not appoint an administratorunder section 534 (holder of floating charge may appointadministrator ) unless the person has given at least three days'notice to the holder of any prior floating charge that satisfiessubsection (2) of that section.

(2) For the purposes of subsection (1), a floatingcharge has priority over another if—

(a) it was created first; or

(b ) it is to be treated as having priority inaccordance with an agreement to whichthe holder of each floating charge was

party.

Restrictions o nthe power ofholder offloating chargeto appointadministrator.

536. A person may not be appointed as administratorunder section 534 (holder of floating charge may appointadministrator) if the floating charge on which the appointmentdepends is unen forceable.

Administratornot to beappointed ifrelevantfloating chargeis not

enforceable.




Holder ofrelevant

floating chargeto notify theCourt on

• appointingadministrator.

537. (1) A person who appoints an administrator of acom pany under section 534 (holder of floating charge mayappoint administrator) shall lodge with the Court—

(a ) a notice of appointment that comp lieswith subsections (2); and

(b ) such other documents as may beprescribed by the insolvency regulationsfor the purp oses of this section.

(2) A notice of appointment complies with thissubsection if—

(a) it includes a statutory declaration by oron behalf of the person who m akes theappointment—

(i) that the person is the holder of a

qualifying floating charge in respectof the company's property;

(ii) that each floating charge relied onin making the appo intment is (orWas) enforceable on the date of theappointment; and

(iii) that the appointment is in

accordance with this Part; and(b) it identifies the administrator and is

accomp anied by a statemen t by theadministrator-

(i) that the adm inistrator consents tothe appointment;

(ii) that in the administrator's opinionthe purpose of administration isreasonably likely tobe achieved;



The Thselvency Bill 2012 095

and

•

giving such other information andopinions as of a kind prescribed bythe insolvency regulations for thepurposes of this section.

(4) A statutory declaration under subsection (2) isnot effective unless it is made during the period prescribed bythe insolvency regulations far the purposes of this section.

538. The appointment of an administrator under section534 (holder of floating charge may appoint administrator)takes effect when the requirements of section 537 (notice ofappointment to be given to the Court) are satisfied.

539. (1) As soon as is reasonably practicable after therequirements of section 537 (notice of appointment to begiven to the Court) are satisfied, the person who appointed theadministrator under section 534 shall notify the administrator,and such other persons as may be prescribed by theinsolvency regulations for the purposes of this section, that

those requirements have been satisfied.(2) A person who fails without reasonable excuse to

comply w ith subsection (1) commits an offence.

W henadministrator sappointmenttakes effect.

Duty of holderof relevantfloating chargeto notifyappointment toadministratorand otherpersons.

540. If—

(a ) a person purports to appoint anadministrator under section 534 (holderof floating charge may appointadministrator); and

(b ) the appointment is discovered to beinvalid,

any person who appears to the Court to have a legitimate

Power of theCourt to order

person invalidlyappointed to beindemnifiedagainst liability.




interest in the matter may apply to the Court for an order

under subsection (2).(2) On the hearing of an application made under

subsection (1), the Court may order the person who purportedto make the appointment to indemnify the person appointedagainst liability that is solely attributable to the appointment'sinvalidity.

Division 5 ppointm ent of administrator by comp any or directors

Administratormay beappointed bycompan y or byits directors.

Restrictions onpower ofcompan y or itsdirectors toappointadministrator.

541. (1) A compariy may appoint an administrator.(2) The directors of a company may appoint an

administrator.

542. If an administrator of a company—(a) is appointed under section 541

(administrator may be appointed bycompany or its directors); or

(b) is appointed on an application foradministration made by the company orits directors,

another person may not be appointed as an administrator ofthe company appointed under that section during the twelvemonths from and including the date the on which theappointment referred to in paragraph (a) or (b) ends.

Otherrestrictions onpower ofcompan y or itsdirectors toappoint

543. (1) If a moratorium for a company under Division 2of Part IX (Company voluntary arrangements) ends on a datewhen no voluntary arrangement is in force in respect of thecompany, this section applies for the twelve months from and




including that date.

(2) This section also applies for the period oftwelve months from an d including date on which a voluntaryarrangement in respect of a comp any ends if—

(a) the arrangement was made during amo ratorium for the comp any under PartIX; and

(b ) the arrangement ends p rematurely.(3) While this section applies, an administrator of

the comp any may not be appointed under section 541(administrator m ay be appo inted by com pany or its directors).

544. An adm inistrator of a comp any may not beappointed under section 541 (administrator may be appointedby com pany or its directors) if—

(a) an ap plication for the liquidation of thecom pany has been presented and is notyet disposed of;

(b ) an app lication for adm inistration has been

made and is not yet disposed of; or(c ) an adm inistrative receiver of the

comp any is in office.

administrator.

Circumstances

in whichcompan y or itsdirectors m aynot appointadministrator.

Notice to begiven ofintention to

appointadministrator.

545. (1) A person who p roposes to m ake an appointmentunder section 541 (administrator may be appointed by

company or its directors) shall give to—(a ) any person w ho is or m ay be entitled to

appoint an adm inistrative receiver of thecompany; arid

(b ) any person who is or may be entitled toappoint an administrator of the companyunder section 534 (holder of floating




charge may appoint administrator),

a notice that complies with subsection (3).

(2 ) A person who proposes to make an appointm entunder section 541 (administrator may be appointed bycompany or its directors) shall also give such a notice to suchother persons as may be prescribed by the insolvencyregulatimsfor the purposes of this section.

(3 ) A notice complies w ith this subsection if (butonly if) it—

(a ) identifies the proposed administrator ;

(b ) contains such other information (if any)as may be prescribed by the regulationsfor the purposes of this section; and

(c ) is given at least seven days' before theappointment is to be made.

Person givingnotice ofintention toappointadministrator to

lodge certaindocuments withthe Court.

5 4 6 . (1) As soon as practicable after a person has givennotice of an intention to make an appointment under section545, the peison shall lodge w ith the Court—

(a ) a copy of the notice and of any docum entthat accompanied it; and

(b ) a statutory declaration by the person thatcomplies with subsection (2).

(2) A statutory declaration com plies with thissubsection i f—

(a) it declares-

(i) that the company is or is likely tobecome unable to pay its debts;

(ii) that the company is not inliquidation; and

(iii) t ha t , sof r s he d e c l a r a n t is a b l e t o



The Insolvency Bill 2012

ascertain, the appointment is notprevented by sections 542 to 544;

(b ) contains such additional information (ifany) as may be prescribed by theinsolvency regulations for the purposes ofthis section; and

(c ) is made within such period as is soprescribed.

547. (1) An appointment may n ot be made un der section541 (administrator may be appointed by com pany or itsdirectors) unless the person who makes the appointment hascomplied with the requirem ent of section 545 (notice ofintention to appoint administrator) and section 546 (persongiving notice of intention to appoint administrator to lodgecertain documents with the Court) and—

(a ) the period of notice specified in section545(1) has expired; or

(b ) each person/ to whom notice has beengiven undet section 545(1) has consentedin writing to , the making of the

appointment.(2) An appointment may not be made under section

541 after the period of fourteen days beginning w ith the dateon w hich the notice of intention to appoint is lodged undersection 546 (1).

Furtherrestrictions onmakingappointmentsunder section541.

548. (1) A person w ho appoints an administrator of acompany under section 541 (administrator may be appointedby company or its directors) shall lodge w ith the Court—

(a ) a notice of appointment that identifies theadministrator,

(b ) a statement by the administrator that

Personappointingadministratorunder section541 to lodgecertaindocuments withthe Court




com plies with subsection (2)

(b )a statutory declaration by the personmaking the appointm ent that com plieswith subsection (3); and

(c ) such other docum ents (if any) as may beprescribed by the insolvency regulationsfor the purpo ses of this section.

(2) A statement complies with this subsection if

it (a ) states that the ad ministrator consents tothe appointment;

(b ) states that ,in the administrator's opinion,the objective of the adm inistration isreasonably likely to be achieved; and

(c) gives such other information andopinions (if any) as may be prescribed bythe insolvency regulations for thepurpo ses of this section.

(3) A statutory declaration complies with thissubsection if it—

(a) declares—

(i) that the declarant is entitled to m akean appointment under section 541(administrator may be appointed bycom pany or its directors);

( ii ) tha t the appointment i s inaccordance with this Part; and

(iii) that, so far as the declarant is able toascertain— the statements made andinformation given in the statutorydeclaration lodged with the noticeof intention to appoint remainaccurate; and




(b) is made within such period as isprescribed by the insolvency regulationsfor the purposes of this subsection

(4) For the purpose o f a statement under subsection(2), an administrator may rely on information supp lied bydirectors of the compan y (unless the administrator has reasonto doubt its accuracy).

549. If no person is entitled to no tice of intention toappo int under section 545(1) (and section 547 therefore doesnot app ly), the statutory declaration accom panying the n oticeof app ointment is ineffective unless it includes the statementsand information required under section 546(2), in which c asesection 548(2)(c) does not app ly.

550. The app ointment ofan adm inistrator under section541 (administrator may be ap pointed by com pany or itsdirectors) takes effect when the requireme nts of section 548(powers of the Court on hearing of ap plication) are satisfied.

What happensif no one isentitled tonotice ofintention to•appointadministrator.

Whenappointment ofadministratorunder thisDivision takeseffect.

551. (1) As soon as is reasonably practicable after therequirementg of section 548 (pow ers of the Court on hearingof app lication) are satisfied, the person w ho has ap pointed theadministrator under section 541 (administrator may beappointed by comp any or by its directors) shall notify theadministrator, and such other persons as m ay be prescribed bythe insolvency-regulations for the purposes of this section, ,

that those requirements have been satisfied.(2) A pe rson who , without reasonable excuse, fails

to comp ly with subsection (1) comm its an offence and onconviction is liable to a fine not exceeding five hundredthousand shillings.

Person makingappointment tonotifyappointment toadministratorand others.

5102 h l ll



5102 he insolvency Bill 2012

Appointmentunder section541 not to takeeffect in certaincases.

Power of theCourt to orderperson invalidlyappointed to beindemnifiedagainst liability.

552. lf, before the requirements of section 548 (pow ers ofthe Court on hearing of ap plication) are satisfied, thecompany enters administration under an administration order,or because of an app ointment under section 534 (holder offloating charge m ay ap point adm inistrator)—

(a ) the appointment under section 541(administrator may be appointed bycom pany or by its directors) has noeffect; and

(b ) the requirement imposed by section 551(notification of app ointment ofadministrator) does hot apply.

553. (1) If—

(a ) a person purports to appoint anadm inistrator under section 541(administrator may be appointed bycom pany or its directors); and

(b ) the appointment is discovered to beinvalid,

any person who appears to the Court to have a legitimate

interest in the m atter may app ly to the Court for an orderunder subsection (2).

(2) On the hearing of an application m ade undersubsection (1), the Court may order the pe rson who purp ortedto make the app ointment to indemnify the person appointedagainst liability that is solely attributable to the appointment'sinvalidity.

Division 6— Applications for administration— special cases




554. (1) If an application for ad ministration in respect of

a company—(a ) is made by the holder of a qualifying

floating charge in respect of thecompany's property; and

(b ) includes a statement that the app licationis made in reliance on this section,

the Court may make an administration order w hether or not itis satisfied that the company is or is likely to become unableto pay its debts.

(2) However, the Court may make such an orderonly if it is satisfied that the applicant could properly appointan administrator under section 534 (holder of floating chargemay appoint administrator):

555. If—

(a ) an application for adm inistration inrespect of a company is m ade by a personw ho is not the holder of a q ualifyingfloating charge in respect of thecompany's property; and

(b ) the holder of a qiialifying floating chargein respect of the company's propertyapplies to the Court to have a specifiedperson appointed as administrator (andnot the person specified by theadministration applicant),

the Court shall grant the application unless the Court believesit should be refused because of the particular circumstances ofthe case.

556. (1) If the holder of a qualifying floating charge in ther

Power of theCourt to makeadministrationorder in respectof company onapplicationmade by holderof qualifyingfloating chargeeven ifcompany maybe able to payits debts.

Holder ofqualifyingfloating chargemay intervenein applicationmade by personwho is not theholder of such a

charge.




y ,

circumstance inwhich holder ofqualifyingfloating chargemay makeapplication foradministrationorder.

Power ofliquidator ofcompany tomake anapplication foritsaaministration.

respect of a company's property could appoint anadm inistrator under section 534 b ut for section 528(1)(b), thatholder may nevertheless make an app lication to the Court foran adm inistration order under sub section (2).

(2) If the Court makes an administration order onhearing an application made under subsection (1), the Court—

(a ) shall discharge the liquidation order;

(b ) shall make provision for such matters as

may be p rescribed by the insolvencyregulations for the purposes o f thissection; and

(c ) may make such other provision of aconsequential nature as it considersapprop riate; and

(d) shall speci fy which of the powers underthis Part are to be exercisable by theadministrator,

(3) If the Court spe cifies the paCC rers under this Partthat are to be exercisable by the administrator, this Part has, inrelation to the exercise of those po wers, effect with suchmo difications as the Court m ay specify.

557. (1) The liquidator of a company may make anapplication to the Court for an adm inistration order undersubsection (2).

(2) If the Court makes an administration order onthe hearing of an ap plication m ade under subsection (1), theCourt—

(a ) shall discharge any liquidation orderexisting in respect of the com pany;

(b ) may make such other provision of aconsequential nature as it considersappropriate; and





(c) shall specify which of the powers underthis Part are to be exercisable by theadministrator.

(3) If the Court specifies the powers under this Partthat are to be exercisable by the administrator, this Part has, inrelation to the exercise of those powers, effect with suchmo difications as the Court m ay specify.

Division 7 ffect of adm inistration orders

558. (1) On the making of an administration order inrespect of a company—

.(a) an application for the liquidation of thecompany may not be made; and

(b) any application for the liquidation of thecompany that is then pending issuspended while the company is underadministration.

(2) Subsection (1)(b) does not apply to anapplication made under section 425 (application for

liquidation on grounds o f pub lic interest).(3 ) If an administrator becomes aware that an

application was made under section 425 before theadministrator's appointment, the administrator shall apply tothe Court for directions under section 580 (general powers ofadministrator).

Administrationorder in respectof companypreventsmaking of

application forliquidationorder andsuspendspendingapplications forliquidationorder.

568. (1) While a company is under administration—

(a ) a resolution for the liquidation of thecom pany is of no effective; and

(b ) an order of the Court for the liquidation

Moratorium oninsolvencyproceedingswhileadministrationorder has effect.




y

Moratorium onother legalprocess whileadministrationorder has effect.

of the company may not be made.

(2 ) Subsection (1)(b) does not apply to an girdermade on an application made under section 425 (applicationfor liquidation on g rounds of public interest).

(3 ) On becoming aware that an application for aliquidation order has been made under section 425, theadministrator shall apply to the Court for directions undersection 580 (general powers of adm inistrator).

560. W hile a company is under administration—

(a) a person may take steps to enf orce asecurity over the company's property—

(i) only with the consent of theadministrator or with the leave of

the Court; arid(ii) if the Court gives leave—subject to

such terms (if any) as the Courtimposes;

(b) a person. may take steps to repossessgoods in the company's possession undera credit purchase transaction—

( 1 ) only with the consent of theadministrator or with the leave ofthe Court; and

(ii) if the Cou rt gives leave— subject tosuch terms (if any) as the Courtimposes;

(c) a landlord may exercise a right offorfeiture by peaceable re-entry inrelation to prem ises let to the com pany-

(i) only w ith the consent of theadministrator or with the leave of

1 0 7




the Court; and

(ii) if the C ourt gives leave—Subject tosuch terms (if any) as the Courtimposes; and

(d) a person may b egin or continue legalproceedings (including execution anddistress) against the company .or thecompany'4property-

(i) only with the consent of theadministrator or with the leave ofthe Court; and

(ii) if the Court g ives leave—subject tosuch terms (if any) as the Courtimposes.

561. (1) This section applies if an application foradministration in respect of a company has been made and—

(a ) the application has not yet been grantedor dismissed; or

(b ) the application has been g ranted but the

administration order has not yet takeneffect.

(2) This section also applies from the time w hen acopy of notice of intention to appoint an administrator undersection 524 is lodged w ith the Court until—

(a ) the appointment of the administratortakes effect; or

(b ) the expiry of seven days from and'including the date of lodgement w ithoutan administrator having been appointed.

(3) Subsection (2) has effect in relation to a noticeof intention to appoint only if it is in the prescribed form.

Interimmoratoriumwhenapplication foradministrationorder has beenmade.





Company'sbusinessdocuments tostate thatcompany'saffairs areunderadministration.

(4) This section applies from the time when a copyof notice of intention to appoint an adm inistrator is lodgedwith the Court under section 546(1) until—

(a) the appointm ent of the administratortakes effect; or

(b ) the period sp ecified in section 547(2)expires without an adm inistrator havingbeen app ointed.

(5) Sections 559 and 560 apply (ignoring anyreference to the consent o f the adm inistrator).

(6) This section does not prevent or require , thepermission of the Court for—

(a) making an app lication for the liquidationof the comp any under section 425; or

(b ) the appointmen t of an administratorunder section 534.

562. (1) While a company is under administration, theadm inistrator shall ensure that all business documents issuedby or on beh alf of the compan y or the adm inistrator, and all

the company's websites, state—(a ) the name of the adm inistrator; and

(b) that the affa irs and proper ty of thecompany are being managed by theadministrator.

(2 ) An ad ministrator Wh o, without reasonableexcuse, fails to com ply with subsection (1) comm its anoffence and o n conviction is liable to a fine no t exceeding fivehundred thousand shillings.

(3) If, while under administration, a company sendsor publishes a business document that does not state—

(a) the name of the adm inistrator; and





(b) that'theefaits and pro he

company are being managed by theadministrator,

the company, and each officer of the company who is indefault, commit an offence and on conviction are each liableto a fine not exceeding five hundred thousand shillings.

(4) In this section, "business document" means—

(a) an invoice;(b ) an order for go ods or services;

(c ) a business letter; or

(d ) an order form ,

whether in hard copy, electronic or any other form.

Division 8—Process of administration

563. (1) As soon as practicable after becomingadministrator of a company, the administrator shall complywith subsection (2) and (3).

(2) The administrator shall—

(a ) send a notice of the administrator'sappointment to the company; and

•(b ) publish a ndt ice of the administrator'sappointment in such publications and insuch locations as are prescribed by theinsolvency regulations for the purposes ofthis.section.

(3) The administrator shall also—

(a ) obtain a list of the company's creditors;and

send a notice of the administrator'sb )

Announcementofadministrator'sappointment.

5110 nsolvency Bill, 2012



appointment to each creditor of whoseclaim and address the administrator isaware.

(4) Within seven d ays from and including theprescribed date, the adm inistrator shall lodge with theRegistrar for registration a notice of the administrator'sappointment.

(5) Within fourteen days from and including theprescribed date, the adm inistrator shall also send a notice ofthe adm inistrator's app ointment to such classes of p ersons asmay be p rescribed by the insolvency regulations for thepurpo ses of this section.

(6) The prescribed date for the purpose ofsubsections (4) and (5) is—

(a ) in the case of an administrator appointed

by adm inistration order— the date of theorder;

(b ) in the case of an adm inistrator appointedunder section 534 (holder effloatingcharge may appoint adm inistrator)—thedate on which the administrator receivesnotice under section 539 (duty to notify

appointment to administrator and otherpersons); and

(c ) in the case of an administrator appointedunder section 541 (administrator may beappointed by com pany or by itsdirectors)— the date on which theadministrator receives notice under

section 551 (notification of appointmentof adm inistrator).

(7) On the ap plication o f the adm inistrator,'theCourt ma y order that subsection (3)(b) or (5)-

(a) is not to apply; or

Th I l Bill 2012 111




b) is to apply with the substitution of adifferent period.

(8 ) An administrator who fails without reasonableexcuse to comply with a requirement of this section commitsan offence and on conviction is liable to a fine not exceedingfive hundred thousand shillings.

(9 ) If, after being convicted of an offence undersubsection (8), an administrator continues to fail to complywith the relevant requirement, the administrator commits afurther offence on each day on which the failure continuesand on conviction is liable to a fine not exceeding fiftythousand shillings for each such o ffence.

564. (1) As soon as practicable after becomingadministrator of a company, the administrator shall givenotice requiring one or more relevant persons to provide theadministrator with a statement of the affairs of the companythat complies with subsection (2).

(2) A statement complies with this subsection ifit

(a ) is verified by a statutory declaration;(b ) gives the particulars of the company's

property, debts and liabilities prescribedby the insolvency regulations for thepurposes o f this section;

(c ) gives the names and addresses of thecompany's creditors;

(d ) specifies the security (if any) held byeach creditor;

(e ) gives the date on which each suchsecurity was given; and

(f) contains such other information (if any)as may b e so prescribed.

Relevant

persons toprovideadministratorwith statementof company'saffairs.





(3) In subsection (1) "relevant person" means any

of the following:(a ) a person who is or has been an officer of

the company;

(b) a person who took part in the formationof the company during the period oftwelve months ending w ith the date onwhich the com pany enters adm inistration;

(c ) a per son employed by the companyduring that period;

(d) a person who is or has been during tha tperiod an officer or emp loyee of thecompany.

(4) For the purpose of subsection (3), a reference to

emp loyment is a reference to emp loyment through a contractof emp loyment or a con tract for the supply of services.

Deadline forsubmittingstatement ofaffairs.

565. (1) The deadline for submitting a statement ofaffairs is the end of twelve days from and including the dayon wh ich the relevant person receives notice of the

requirement.(2) The administrator may—

(a ) revoke a requirement und er section564(1); or

(b ) extend the deadline sp ecified insubsection (1) (whether before or afterexpiry).

(3) If the administrator refuses a request to actunder subsection (2)-

(a ) the person who se request is refused mayapply to the Court; and

(b) the Court may take ac tion of ak ind

The hisolveneviiill. 2012 5113



specified in subsection (2).

(4 ) A person who, without reasonable excuse, failsto comply with a requirement under section 564(1) commitsan offence and on conviction is liable to a fine not exceedingfive hundred thousand shillings.

(5 ) lf, after being convicted of an offence undersubsection (4). a person continues to fail to comply with therelevant requirement, the person commits a further offence oneach day on which the failure continues and on conviction isliable to a fine not exceeding fifty thousand shillings for eachsuch offence

566. (1) The administrator of a company shall make aStatement setting out proposals for achieving the purpose of

adminisiration.(2) A statement under subsection (1) must, in

particular—

(a ) deal with such matters as may beprescribed by the insolvency regulationsfor the purposes of this section; and

(b) i f applicable , expla in why theadministrator believes that the objectivespecified in section 522(1)(a) or (b)cannot be achieved.

(3) Proposals under this section may include—

(a ) a proposal for a voluntary arrangementunder Part IX (Company voluntary

arrangements); or(b ) a proposal for a compromise or

arrangement to be sanctioned under PartXXXIV of the Companies Act. 2012(Arrangements and reconstructions).

(4) The administrator—

Administratorto makestatement

s tting outadministrator sproposals forachieving thepurpos of thadministration.




(a) shall send a copy of the statement of the

administrator's proposals—(i ) to every creditor of the comp any of

whose claim and address.theadministrator is aware; and

(ii) to every mem ber of the comp any ofwhose address the administrator isaware; and

(b) shall lodge a copy of the statement withthe Registrar for registration.

(5) The administrator shall comply with subsection(4)—

(a ) as soon as is reasonably practicable afterthe com pany enters adm inistration; and

(b ) in any case , not later than sixty days afterthe date on which the company entersadministration.

(6) Subsection (4)(a)(ii) is comp lied with if theadministrator publishes in accordance with the insolvencyregulations a notice undertaking to provide a copy of thestatement of proposals free of charge to any mem ber of thecomp any who ap plies in writing to a specified address.

(7) An administrator who fails, without reasonableexcu$e, to comply w ith subsection (5) commits an offence andon conviction is liable to a fine not exceed ing five hundredthoUsand shillings.

(8) If, after being convicted of an offence undersubsection (7), an administrator person c ontinues to fail tocom ply with the relevant requirement of this section, theadministrator comm its a further offence on each day on whichthe failure continues and on con viction is liable to a fine notexceeding fifty thousand shillings for each such offence.

(9) A period specified in this section can be varied




in accordance with section 622 (pow er to extend.time lim it).

567. The p erson presiding at a creditors' meeting shallensure that it is conducted in the mann er prescribed by theinsolvency regulations.

568. (1) The..administrator shall ensure that each copy ofthe adm inistrator's statement o f proposals sent to a creditor inaccordance with section 566(4)(b) is accomp anied by aninvitation to an initial creditors' meeting to be held—

(a ) as soon as is reasonably practicable afterthe comp any enters administration; and

(b ) in any case, within seventy days from an d

including the date on w hich the comp anyenters administration.

(2 ) The adm inistrator shall present a copy of theadm inistrator's statement of p ropo sals to the initial creditors'meeting.

(3 ) The p eriod specified in subsection (1)(b) can bevaried in accordance with section 622 (power to extend timelimit).

Conduct ofcreditors'meetings.

Requirement toconvene initialcreditors'meeting

569. (1) Section 568(1) does not app ly if the statementof proposals states that the adm inistrator believes—

(a) that the company has sufficient propertyto enable each creditor of the company tobe paid in full;

'b that the company has insufficientproperty to enab le a distribution to b emade to unsecured creditors otherwisethan in a ccordance w ith section 474(2)(a)(share of assets for unsecured creditors);

Whenrequirement toconvenemeeting is notrequired.

51 I6 he Insolvency Bill. 20/2



Business to beconducted atinitial creditors'meeting andobligation ofadministrator toreport outcome

or

(c ) that neither of the objectives specified insection 522(1)(a) and (b) can beachieved.

(2) However, the administrator shall convene aninitial creditors' meeting if requested to do so—

(a ) by creditors of the comp any holdingdebts amounting to at least ten percent of

the total debts of the company; and(b) in the manner, and within the period,

prescribed by the insolvency regulationsfor the purp oses of this section.

(3) The administrator shall convene a meetingrequested under subsection (2) for a date within the periodprescribed for the p urpose of subsection (2)(b).

(4) The period so prescribed can be varied inaccordance with section 622 (power to extend tim e limit).

(5) An administrator who fails, without reasonableexcuse, to comply with subsection (3) commits an offence andon conviction is liable to a fine not exceeding five hundredthousand shillings.

(6) If, after being convicted of an offence undersubsection (5), an adm inistrator continues to fail to convene acreditors' meeting as required by subsection (3), theadministrator comm its a further offence on each day on w hichthe failure continues and on conviction is liable to a fine notexceeding fifty thousand shillings for each such offence.

570. (1) An initial creditors' meeting to which anadministrator's proposals are presented shall consider themand may—

(a ) approve them without modification; or

(b ) approve them with mod ification to which


h d i i



the adm inistrator consents.

(2) As soon as practicable after the initial creditors'meeting has ended, the administrator—

(a) shall report any decision at the meetingtaken-

(i) to the Court; and

(ii) to such other persons as may beprescribed by the insolvencyregulations for the purposes of thissection; and

(b) shall lodge a copy of the report with theRegistrar for registration.

(3) An administrator who, without reasonableexcuse, fails to comply with subsection (2)(a) or (b) commits

an offence and on conviction is liable to a fine not exceedingtwo hun dred thousand shillings.

(4) If, after being convicted of an offence undersubsection (3), an administrator continues to fail to complywith the relevant requirement of that subsection, theadministrator commits a further offence on each day on whichthe failure continues and on conviction is liable to a fine not

exceeding twenty thousand shillings for each such offence.

to the Court andothers.


(a ) an administrator's proposals have beenapproved (with or without modification)at an initial creditors' meeting;

(b ) the administrator proposes a revision tothe proposals; and

(c ) the administrator believes that theproposed revision is substantial.

(2) When this section applies, the administrator

Administrator'sproposals canbe revised.

5 8 he Insolvency Bill. 20/2

h ll



shall—

(a ) convene a creditors' meeting;

(b ) send a statement of the proposed revisionwith the notice of the meeting sent toeach creditor;

(c ) send a copy of the statement, within theperiod prescribed by the insolvencyregulations for the purposes of this

paragraph, to each member of thecompany of whose address theadministrator is aware; and

(d ) present a copy of the statement to themeeting.

(3) An administrator complies with subsection(2)(c) by publishing a notice undertaking to provide a copy of

the statement free of charge to any member of the companywho applies in writing to the administrator at an addressspecified in the notice.

(4) The administrator shall publish the notice insuch publications and within such period as may be prescribedby the insolvency regulations for the purposes of thissubsection.

(5) A creditors' meeting to which a proposedrevision is presented shall consider it and may—

(a ) approve it without modification; or

(b ) approve it with modification to which theadministrator consents.

(6) As soon as practicable after the conclusion of a

creditors' meeting, the administrator—

(a) shall report every decision that was takenat the meeting-

(i) to the Court; and

(ii) to such other persons as may be


prescribed by the insolvency



prescribed by the insolvencyregulations for the purposes of this

section; and(b) shall lodge a copy of the report with the

Registrar for registration.

(7 ) An administrator who, without reasonableexcuse, fails to comply with a requirement of this sectioncommits an offence and on conviction is liable to a fine notexceeding five hundred thousand shillings.

(8 ) If, after being convicted of an offence undersubsection (7), an administrator continues to comply with therelevant requirement, the administrator commits a furtheroffence on each day on which the failure continues and onconviction is liable to a fine not exceeding fifty thousandshillings for each such offence.

572. (1) This section applies if an administrator reportsto the Court that—

(a) an initial creditors' meeting has failed toapprove the administrator's proposalspresented to it; or

(b ) a creditors' meeting has failed to approvea revision of the administrator'sproposals presented to it.

(2) The Court may—

(a ) make an order terminating theappointment of an administrator withimmediate effect or with effect from a

specified date;(b ) adjourn the hearing conditionally or

unconditionally;

(c ) make an interim order;

(d ) m ake an order on an application for

Consequencesof failure toobtain approvalofadministrator'sproposals.


liquidation suspended because of section



q p558(1)(b);

(e) make any other order (including an ordermaking consequential provision) that theCourt considers app ropriate.

Power ofadministrator toconvene furthercreditors'meetings.

573. (1) The administrator of a company shall convene acreditors' meeting if—

(a ) in the manner prescribed by theinsolvency regulations, it is requested bycreditors of the com pany ho lding debtsamo unting to at least ten percent of thetotal debts of the company; or

(b ) the adm inistrator is directed by the Courtto convene a creditors' meeting.

(2 ) An adm inistrator who, without reasonableexcuse, fails to convene a creditors' meeting as required bythis section commits an offence =d on conviction is liable toa fine not exceeding five hundred thousand shillings.

(3 ) If, after being convicted of an offence undersubsection (2), an adm inistrator continues to fail to com ply

with the relevant request, the administrator comm its a furtheroffence on each day o n which the failure continues and onconviction is liable to a fine not exceeding fifty thousandshillings for each such offence.

(4 ) The fact that an administrator may beprosecuted for, and convicted of an offence, under this sectiondoes not preclude the Court from finding the administrator

guilty of contem pt of the Court for failing to com ply with adirection o f the C ourt.

Creditors'meeting maye s t a b l i sh

574. (1) A creditors' meeting may establish a creditors'committee,


(2 ) A creditors' committee shall perform the creditors'



( ) A creditors committee shall perform thefunctions conferred on it by or und er this Act.

(3 ) A creditors' committee may require theadministrator—

(a ) to attend on the committee at anyreasonable tine of which theadministrator is given at least seven days'notice; and

(b ) to provide the committee with suchinformation about the performance of theadministration's functions as thecom mittee,reasonably requires.

committee.

575. (1) Any matter or decision that is required orpermitted by or under this Part to be dealt with or made at acreditors' meeting may be dealt with or made bycorrespondence between the administrator and creditors—

(a ) as provided by the insolvencyregulations; an d

(b) subject to any condit ion specif ied in thoseregulations for the purposes of this

section.(2 ) A reference in this Part to anything done at a

creditors' meeting includes anything done in the course ofcorrespondence in reliance on subsection (1).

(3 ) A requirement to hold a creditors' meeting issatisfied by conducting correspondence in accordance withthis section.

Creditors'meeting can beconducted bycorrespondence.

Division 9—Functions and powers of administrator


Specific 576. The adm inistrator of a company has the functions



functions ofadministrator

Power ofadministrator toremove andappointdirectors ofcompany.

Power ofadministrator toconvenemeetings ofmembers andcreditors of

company.

Power ofadministrator toseek directionsfrom the Court.

p yand powers specified in the Fourth Schedule.

577. The administrator of a company—

(a ) may rem ove a director of the com pany;and

(b ) may ap point a director of the company

(whether or not to fill a vacan cy).

578. The administrator of a comp any may convene ameeting of m embers or creditors of the company.

579. (1) On the application o f the adm inistrator of acompany, the Court may give directions with respect to theperformance and exercise of the adm inistrator's functions andpowers and the conduct of the administration generally.

(2) An adm inistrator shall com ply with anydirections given to the adm inistrator under subsection (1).

General powersofadministrator.

580. (1) The administrator of a comp any may take anyaction that contributes to, or is likely to contribute to, theeffective and efficient management of the affairs and property

of the company.(2 ) A provision of this Part that expressly perm its

the adm inistrator to do or not to do a specified act does notlimit the effect of subsec tion (1).

(3 ) A person wh o deals with the adm inistrator of a


company in good faith and for value need not inquire whether



company in good faith and for value need not inquire whetherthe administrator is acting within the administrator's powers.

581. (1) A company under administration, or an officerof a company under administration, shall not perform orexercise a management function without the consent of theadministrator.

(2) For the purpose of subsection (1)-(a) management function means a functionor power that could be performed orexercised so as to interfere with theexercise of the administrator's functions;and

(b) consent may be general or specific.

(3) A company that contravenes subsection (1)commits an offence and on convictionis liable to a fine notexceeding one million shillings.

(4) An officer of a company who contravenessubsection (1) commits an offence commits an offence and onconviction is liable to a fine not exceeding five hundredthousand shillings or to imprisonment for a term notexceeding six months, or both.

Company underadministrationnot to performmanagementfunctionswithout

administrator'sconsent.

582. (1) The administrator of a company may make adistribution to creditors ofthe company.

(2) Section 471 (preferential debts) applies inrelation to a distribution under this section as it applies inrelation to the liquidation of a company.

(3) In the case of a creditor of the company who isneither a secured nor a preferential creditor, a payment maybe made to the creditor as part of a distribution under thissection only with the approval of the Court.

Power ofadministrator todistributecompany'sassets to

creditors.


(I) An administrator who makes a payment in



contravention of subsection (3) is guilty of contemp t of theCourt and is liable to be punished accordingly (in addition toany other punishmen t to which the administrator may besubject).

Power ofadministratorsto make special

payments incertain cases.

583. The administrator of a comp any may m ake apaym ent otherwise than in accordance with section 582

(power of administrator to distribute company's assets) orparagraph 13 of the Fourth Schedule if the administratorbelieves it likely to assist achievement of the purpose ofadministration.

Duty ofadministrator to

assume controlof property ofcompany.

584. Immediately on being appointed as administrator of

a com pany, the adm inistrator shall assume control of all theproperty to which the adm inistrator believes the comp any isentitled.

Duty ofadministrator tomanage affairsand property ofcompany.

585. (1) Subject to subsection (2), the administrator of acom pany shall man age its affairs and property in accordancewith—

(a) any proposals approved under sec tion570 (busine ss and result of initialcreditors' meeting);

(b) any revision of those proposals that ismade by the administrator and that theadm inistrator does not consider

substantial; and(c) any revision of those proposals approved

under section 571 (revision ofadministrator's proposals).

(2) If the Court gives directions to the administratorof a comp any in connection with any aspect of the


administrator's management of the company's affairs,



g p y ,business or prop erty, the 'administrator shall comp ly with thedirections.

(3) The Court may give directions under subsection(2) only if-

no proposals have been approved undersection 570;

(b ) the directions are consistent with anyproposals under section 570 or revisionapproved und er section 571;

(c ) the Court believes that the directions arerequired in order to reflect a change incircumstances since the approval ofproposals under section 570 or a revisionunder section 571; or

(d ) the Court believes the directions aredesirable because of a misunderstandingabout proposals approved under section570 or a revision approved under section571.

586. In performing and exercising the administrator'sfunctions and powers under this Part, the administrator of acom pany acts as its agent.

Administrator isagent ofcompany.

587. (1) The administrator of a company may dispose of,or take action relating to, property that is subject to a floating

charge as if it were not subject to the charge.(2 ) If property is disposed of in reliance on

subsection (1), the holder of the floating charge has the samepriority in respect of acquired property as that holder had inrespect of the property disposed of.

(3 ) In subsection (2), acquired property means

Power ofadministrator todispose of, anddeal with,chargedproperty:floating charge.


property of the co mp any that directly or indirectly represents



the property disposed of.

Power ofadministrator todispose of, anddeal with,chargedproperty: non-floating charge.

588. (1) On the application of the administrator of acom pany, the Court may m ake an order enabling theadm inistrator to dispose of property that is subject to asecurity as if it were not sub ject to the security.

(2) An order under subsection (1) may be made ifthe Court believes that disposal of the property would belikely to prom ote the purpose of the adm inistration of thecompany.

(3) An order under this section is subject to thecondition that—

(a) the net proceeds of disposal of the

property; and(b) any addi tional money required to be

added to the net proceeds so as toproduce the amoun t determined by theCourt as the-net amount that would berealised on a sale of the prop erty atmarket value,

will be applied towards discharging the amounts secured bythe security.

(4) If an order under this section relates to morethan one security, the administrator shall apply the netproceeds of d isposal in the order of the priorities of thesecurities.

(5) Within fourteen days after the date on which anorder is m ade und er this section, the adm inistrator shall lodgea cop y of the order with the R egistrar for registration.

(6) An administrator who, without reasonableexcuse, fails to com ply with subsection (5) comm its anoffence and on conviction is liable to a fine not exceeding two

O y o t o : q vThe Insolvency Bill 2012 1 2 7



hundred shillings.

(7) If, after being convicted of an offence undersubsection (6), the administrator continues to fail to lodge therequired order w ith the Registrar, the administrator commits afurther offence on each day on w hich the failure continuesand on conviction is liable to a fine not exceeding tw entythousand shillings for each such offence.

589. (1) The Court may make an order authorising theadministrator of a company to dispose of goods that are in thepossession of the company under a credit purchase transactionas if all the rights of the ow ner under the agreement w erevested in the company.

(2) An order under subsection (1) may be made—

(a ) only on the application of theadministrator; and

(b ) only if the Court believes that disposal ofthe goods w ould be likely to promote thepurpose of administration of thecompany.

(3) An order under subsection (1) is subject to thecondition that—

(a ) the net proceeds of disposal of the goods;and

(b ) any additional money required to beadded to the net proceeds so as to

produee the amount determined by theCourt as the net amount that would berealised on a sale of the goods at m arketvalue,

will be applied towards discharging the amounts payableunder the credit purchase transaction.

(4) Within fourteen days from and including the

Power ofa d m i n is t r a to r t odispose ofg o o d s t h a t a r es u b j e c t t o c r e d i tp u r c h a s et r a n s a c t i o n .


date of the order, an adm inistrator who m akes a successful



Protection forsecured andpreferentialcreditors.

date of the order, an adm inistrator who m akes a successful

application for an order und er this section shall lodge a copyof the order with the Registrar for registration.

(5 ) An adm inistrator who, without reasonableexcuse, fails to comp ly with subsection (4) and on convictionis liable to a fine not exceeding two hundred thousandshillings.

(6) If, after being convicted of an offence undersubsection (5), an adm inistrator continues to fail to lodge therequired copy, the administrator com mits a further offence oneach day on which the failure continues and on co nviction isliable to a fine not exceeding twenty thousand shillings foreach such offence.

590. (1) An administrator's statement of proposals undersection 566 m ay not include action that—

(a) affects the right of a secured creditor ofthe company to enforce the creditor'ssecurity,

(b) would result in a preferential debt of thecom pany being paid otherwise than inpriority to its non-preferential debts; or

(b) would result in one preferential creditorof the comp any being paid a smallerproportion of that creditor's debt thananother.

(2) Subsection (1) does not apply to—

(a) action to which the relevant creditorconsents;

(b) a proposal for a voluntary arrangementunder Part IX (Comp any voluntaryarrangements);

(c ) a proposal for a comprom ise or




appropriate.



(4) In particular, an order under this section may d oall or any of the following:

(a ) regulate the administrator's p erformanceor exercise of the adm inistrator'sfunctions or powers;

(b ) require the adm inistrator to do or not do aspecified act;

(c ) require a creditors' meeting to be held fora specified purpose;

(d ) end the ap pointment of an administrator;

(e ) make provisions of a consequentialnature.

(5) An order m ay be made on a claimmade

undersubsection (1) whether or not the action com plained of—

(a ) is within the ad ministrator's powersunder this Part; or

(b ) was taken in reliance on an order undersection 588 (charged prope rty: non-floating charge) or section 589 (pow er of

adm inistrator to dispose of goods that aresubject to credit purchase transaction).

(6) An order may n ot be ma de undenthis section ifit would impede or prevent the implementation of—

(a ) a voluntary arrangement approved underPart IX (Company voluntaryarrangements);

(b ) a com promise or arrangement sanctionedunder Part XX XIV of the CompaniesAct, 2012 (Arrangements andreconstructions);

(c) a m e rg e rof a kind prescribed by theinsolvency regulations made for the

The Insolvency B ill,2013 1 3 1

purp oses of this section; or

(d) proposals or a revision approved under



(d) proposals or a revision approved undersection 579 (bu siness and result of initialcreditors' meeting) or section 580(revision of administrator's proposals)m ore than twenty-eight days before theday on w hich the application for the orderunder this section is made.

592. (1) The Court m ay exam ine the condu ct of a personw h o —

(a ) is or purports to be the adm inistrator of acompany; or

(b ) has been, or has pur ported to be, the

adm inistrator of a company .(2) An exam ination under this section m ay be held

only on the ap plication of—

(a ) the O fficial Receiver;

(b ) the adm inistrator of the com pany;

(c ) the liquidator (if any) of the com pany;

(d ) a creditor of the comp any; or

(e ) a contributory of the comp any.

(3) An application un der subsection (2) may b em ade only if it alleges that the adm inistrator or personpurpo rting to be the administrator—

(a ) has m isapplied or retained money o rother property of the company;

(b ) has become accountable for,oney orother property of the company;

(c ) has breached a fiduciary or other duty inrelation to the com pany; or

Power of theCourt toexamineconduct ofadministrator'sadministrationof the company.


(d) has been committed an act or omission ofmisfeasance.



(4) On an examination under this section into theconduct of an administrator or a person purporting to act assuch, the Court may order the administrator or person to do allor any of the following:

(a) to repay, restore or account for money orproperty;

(b) to pay interest;(c) to contribute an amount to the company's

property as compensation for breach ofduty or misfeasance.

(5) An application under subsection (2) may bemade in respect of an administrator who has been dischargedunder section 614 (vacation of office: discharge from liability)only with the approval of the Court.

Automatic endofadministration.

593. The appointment of an administrator automaticallyends at the end of twelve months from and including the dateon which it took effect.

Circumstancesin whichadministrator'sterm of officecan beextended.

594. (1) Despite section 593-(a) on the application of an administrator ,the

Court may by order extend theadministrator's term of office for aspecified period; and

(b) an administrator's term of office may beextended by consent for a specifiedperiod not exceeding six months.

(2) An order of the Court made under subsection(1)(a)—

(a) may be made in respect of an


adm inistrator who se term of office hasalready been extended; but



(b) may not be made after the administrator'sterm of office has ended.

(3) As soo n as practicable after an order is madeunder (1)(a), the adm inistrator shall lodge a copy o f the orderwith the Registrar for registration.

(4) In subsec tion (1)(b), "consen t" means c onsent

of—(a ) each secured creditor of the company;

and

(b ) if the company has u nsecured debts,creditors of the com pany holding deb tsamo unting to m ore than fifty percent ofthe com pany's unsecured debts

(disregarding debts held by any creditorwh o does not respond to an invitation togive or w ithhold consent).

(5) However, if the administrator has m ade astatement und er section 569(1)(b) (when requirem ent toconvene m eeting is not required), "consent" means—

(a ) consent of each secured creditor of thecompany; or

(b ) if the adm inistrator believes that adistribution m ay be m ade to preferentialcreditors—consent of—

(i) each secured c reditor of thecompany; and

(ii) preferential creditors of thecompany holding debts amou ntingto mo re than fifty percent of thepreferential debts of the com pany(disregarding debts held by anycreditor who does no t respond to an


invi tation to give or w ithholdconsent) .



(6) Consent for the p urposes of subsec t ion (1) (b)m a y b e —

(a ) written; or

(b ) signif ied o ral ly a t a credi tors ' meet ing.

(7) An adm inis t ra tor ' s te rm of off ice—

(a ) m ay be ex tended by consent on ly once ;

(b ) m ay not b e ex tended by consent a f te r ithas been ex tended by an order of theCourt; and

(c ) m ay not b e ex tended by consent a f te r ithas ended.

(8) As soon as pract icable af ter an adm inistrator 's

term o f off ice is extended by co nsent , the adm inistratorsha l l—

(a ) lodge a n ot ice of the ex tens ion w i th theCourt ; and

(b ) lodge a copy of the not ice wi th theRegistrar for registration.

(9) An adm inis t ra tor w ho, wi thout reasonableexcuse , fa il s to com ply w i th sub sec t ion (3) or (8) com m its anoffence and o n con vic tion i s li ab le to a f ine not exceeding tw ohun dred thousan d shi ll ings for each such offence.

(10) If , af ter being con victed of an offence un dersubsect ion (9) , an adm inistrator continues to fai l to lodge therequired copy , the adm inistrator com m its a fur ther offence oneach day on w hich the fa ilure cont inues and on con vic tion i sl iable to a f ine no t exceeding twe nty tho usan d shi l lings foreach such offence .

Court mayterminateadministrationon app l icationofadministrator.

5 9 5 . (1) The adm inistrator of a company shall mak e an


application to the C ourt for an orde r terminating theadm in is tra to r 's appo in tm et -



(a ) on form ing the bel ief that—the objective of the adm inistrationcanno t be achieved in relation to thecompany; or

( i i) the com pany sh ould not haveentered adm inistration; or

(b ) if a creditprs ' m eeting requ ires theadministrator to m ake such anapplication.

(2) An ad m inistrator shal l also mak e such anapplicat ion if—

(a ) the adm inistration results from anadministration order; and

(b ) the adm inistrator believes that thepurpose of adm inistration has beensufficiently achieved in relation to thecompany.

(3) On the h ear ing of an appl ica t ion m ade underth is sec tion , the Cour t m ay m ake—

(a ) an order term inating the adm inistrator 'sappointment w ith im m ediate effect orfrom a specified later date;

(b ) an order dism issing the application; or

(c ) an interim o rder.

(4) If the Cour t m akes an order under subsection

(3) , i t m ay a lso m ake—(a ) an order adjourning the hearing

conditionally or uncon ditionally; and

(b ) such ancillary or supplem entary order asi t considers approp riate.

5136 he 1,,,,olvency Bill, 2012

Termination ofadministrationwhen objectiveachieved,

596. (1) This section applies to an administrator of acompany w ho is appointed—



(a ) under section 534 (holder o f floatingcharge m ay appoint administrator); or

(b ) under section 541 (administrator may beappointed by com pany or its directors).

(2) If the administrator believes that the purpose ofadm inistration has been sufficiently achieved in relation to thecompany, the administrator may lodge—

(a ) with the Court; and

(b ) with the R egistrar,

a notice containing the information prescribed by theinsolvency regu lations for the purpose s of this section.

(3) The administrator's appointment ends when therequirem ents of subse ction (2) are satisfied.

(4) Within seven days after lodging a notice withthe Court under subsection (2), the administrator shalt send acopy of it to every creditor of the company of w hose claimand address the adm inistrator is aw are.

(5) The insolvency regulations may provide that theadm inistrator is taken to have com plied with subsection (4) if,

before the en d of the period specified in that subsection, theadministrator publishes in such publications, and in suchlocations, as may be spe cified in those regulations a noticeundertaking to provide a copy of the notice under subsection(2) to any creditor of the com pany w ho applies in writing to aspecified address.

(6) An administrator who, without reasonable

excuse, fails to comply with subsection (4) commits anoffence and o n conviction is liable to a fine not exceeding fivehundred thousand shillings.

(7) If, after being convicted of an offence under



5 1 3 8 he Insavency Bill, 2012

Court toterminateadministrator'sappointment onmak ing of

598. (1) I f a l iquida t ion order i s m ade for the l iquida t ionof a com pany un der adm inis tra t ion on an appl icat ion m adeund er sect ion 425 (app licat ion for l iquidat ion on g roun d of

bli i t t) th C t h ll k d



mak ing ofpublic interestliquidationorder.

public interest) , the Cour t shall mak e an order—

(a ) term inat ing the appointm ent of theadm inistrator; or

(b ) direct ing the appointm ent of theadm inistrator to cont inue to have effect .

(2) I f the Co ur t m akes an o rder under sub sec tion

(1)(b) , it m ay a l so—(a ) specify which of the pow ers under this

Part are to be exercisable by theadministrator; and

(b ) order th at this Part has effect in relationto the adm inistrator w ith specif iedmodificat ions.

Procedure formoving fromadministrationto creditors'voluntaryliquidation.

599. (1) This sec t ion ap pl ies if the adm inis tra tor of acom pany be l ieves—

(a ) that the total am ount that each securedcredi tor of the com pan y is likely to

receive has been p aid to the credi tor orset aside for the creditor; and

(b ) that a dis tr ibut ion w ill be m ade tounsecu red credi tors of the com pany ( i fthere are any ) .

(2 ) The adm inistrator may lodge w ith the Registrarfor regis trat ion a n ot ice that this sect ion app l ies .

(3 ) O n receipt of a not ice und er subsect ion (2) , theRe gistrar shall register i t .

(4 ) As soon a s pract icable lodging a not ice under

The In solvency Bill, 2012 1 3 9

subsect ion (2) , the adm inistrator shal l—

(a ) lodge a copy of the notice with the Court ;



(a ) lodge a copy of the not ice with the Court ;and

(b ) send a cop y of the no t ice to each cred i torof who se c la im, and of wh ose address ,the adm inistrator is aware.

(5) On the reg is t ra t ion of a no t ice in accordancewith subsection (3)-

(a ) the adm inistrator 's appointmen t inrespec t of the compan y ends ; and

(b ) the com pany is required to be l iquidatedas i f a resolut ion for voluntary l iquidat ionunder sec t ion 39 1 (c ircum stances inwh ich com pany m ay be l iqu ida ted

voluntar i ly) w ere passed on the day onw hich the no t ice is registered.

(6) The l iqu ida tor for the p urpo ses of thel iquidat ion is—

(a ) a person no m inated by the c red itors ofthe company in the prescr ibed mannerand w ithin the prescr ibed period; or

(b ) i f no person is nom inated under sect ion(a)— the adm inistrator.

(7) In the app l ica t ion of Par t VI to a l iqu ida t ion inaccordance w i th th i s sec tion—

(a ) sec t ion 393 (no t ice of reso lu t ion tol iquidate) does n ot app ly,

(b ) sec tion 394 ( comm encem en t o fl iquidat ion) app lies as i f the reference tothe t ime of the pass ing of the reso lu t ionfor voluntary l iquidat ion w ere a referenceto the beginning of the da te ofregistration of the notice under subsection


(2);

(c ) section 397 (statutory declaration ofsolvency) does not apply;



solvency) does not apply;

(d ) section 405 (meeting of creditors),section 406 (directors to lay statement ofaffairs before creditors) and section 407(appointment of liquidator) do not apply;

(e ) section 430 (when liquidation by the

Court com mences) applies as if thereference to the time of the passing of theresolution for voluntary liquidation w erea reference to the beginning o f the date ofregistration of the notice und er subsection(2); and

any creditors' com mittee that is in

existence imm ediately before thecompany ceased to be und eradm inistration con fines in existenceafter that time as if appointed as aliquidation comm ittee under section 408(appointment of liquidation com mittee).

Moving fromadministrationto dissolution.

600. (1) On forming the b elief that a com pany that isunder adm inistration has no property that might allow adistribution to its creditors, the adm inistrator shall lodge w iththe Reg istrar a notice to that effect.

(2 ) On the application of the adm inistrator of acom pany, the Cou rt may disapply subsection (1) in respect ofthe company.

(3 ) On receiving of a notice lodged und ersubsection (1), the R egistrar shall register it.

(4 ) The appointment of the administrator ends wh enthe notice is registered.

The Insolvency Bill, 20 12 141

(5) As soon as practicable after lodging a noticeunder su bsection (1), the ad ministrator shall—

( ) l d f h h h



(a ) lodge a copy of the no tice with the Court;.

nd

(b ) send a copy of the no tice to each creditorof who se claim, and whose add ress, theadministrator is aware.

(6) At the end Of three mo nths from and includingthe date of registration of a no tice in respect of a companyunder subsection (1) the company is dissolved.

(7) On an application in respect of a company.m adeby the administrator or som e other person who has alegitimate interest in the matter, the Court m ay—

(a ) extend the period specified in subsection(6),

(b ) suspend that period; or

(c ) disapply subsection (6).

(8) As soon as practicable after an order is ma deunder sub section (7), the adm inistrator shall lodge a copy ofthe order w ith the R egistrar for registration.

(9) On receiving of a notice lodged und ersubsection (8), the Registrar shill register it.

(10) An adm inistrator who, w ithout reasonableexcuse, fails to com ply with a requiremen t of this sectioncom mits an offence and o n conviction is liable to a fine notexceeding two hundred thou sand shillings.

(11) If, after being convicted of an offence undersubsection (10), an adm inistrator continues to fail to com plywith the relevant requirement, the administrator com mits afurther offence on ea ch day on wh ich the failure continuesand o n conviction is liable to a fine not exceeding twen tythousand shillings for each such offence.


Discharge ofadministration

order ifadministrator's

601. If—

(a ) the Court has made an order under thisPart terminating an administrator's



administrator sappointment isterminated.

Administratorto lodge copy oforder of theCourtterminatingappointmentwith Registrarof Companies.

(a ) t e Cou t as ade a o de u de t sPart terminating an administrator'sappointment; and

(b ) the administrator was appointed by theCourt,

the Court shall discharge the administration order.

602. (1) Within fourteen days after the Court has m adean order under this Part terminating the appointment of anadministrator, the administrator shall lodge a copy of theorder w ith the Registrar for registration.

(2) On receiving the copy lodged under subsection(1), the Registrar shall register it.

(3 ) An administrator who, without reasonableexcuse, fails to comply w ith subsection (1) comm its anoffence and on conviction is liable to a fine not exceeding twohundred thousand shillings.

(4 ) If, after being convicted of an offence undersubsection (3), an administrator continues to fail to com ply

with the relevant requirement, the administrator commits afurther offence on each day on wh ich the failure continuesand on conviction is liable to a fine not exceed ing twentythousand shillings for each such offence.

D iv is io n 1 0 — Te r m i n a ti o n o f a p p o i n t m e n t a n d r e p la c e m e n t o f

adminis t ra tors

Resignation ofadministrator.

603. (1) An adm inistrator may resign only in thecircumstances prescribed by the insolvency regulations for thep u r p o s e s o f th is s e c t io n .


(2) If a circumstance has arisen that permits anadministrator to resign, the administrator may do so only—

(a) in the case of an administrator appointed



( ) ppby the Court—by notice given to theCourt;

(b ) in the case of an administrator appointedunder section 534 (holder of floatingcharge may appoint administrator))—bynotice given to the holder of the floating

charge under which the appointment wasmade;

(c ) in the case of an administrator appointedunder section 541(1) (administrator maybe appointed by company)—by noticegiven to the company; or '

(d ) in the case of an administrator appointedunder section 541(2) (administrator maybe appointed by directors)—by noticegiven to the directors of the company.

604. The Court may by order remove an administratorfrom office if it is satisfied that circumstances exist that makeit inappropriate for the administrator to continue in office.

605. (1) The administrator of a company vacates office ifthe administrator ceases to be an authorised insolvencypractitioner.

(2) If an administrator vacates office because ofsubsection (1), the administrator shall give notice of thatfact—

(a ) in the case of an administrator appointedby administration order—to the Court;

(b ) in the case of an administrator appointed

Court mayremoveadministratorfrom office.

Administratorto vacate officeon ceasing to bequalified.


under section 534 (holder of floatingcharge m ay appoint administrator)— bynotice given to the ho lder of the floatingcharge under which the appointment was



g ppmade;

(c ) in the case of an adm inistrator appointedunder section 541(1) (adm inistrator maybe appointed by com pany)—by noticegiven to the company; or

(d ) in the case of an adm inistrator appointedunder section 541(2) (administrator maybe appointed by directors)—by noticegiven to the directors of the com pany.

(3) An administrator who, without reasonableexcuse, fails to comply with subsection (2) commits anoffence and on conviction is liable to a fine not exceeding on e

m illion shillings.(4) If, af ter being convicted of an offence under

subsection (3), an adm inistrator continues to fail to complywith the relevant requirement, the administrator commits afurther offence on each day on w hich the failure continuesand on co nviction is liable to a fine not exce eding onehundred thousand shillings for each such offence.

Filling vacancyin office ofadministrator.

606. Sections 607 to 611 apply to an administrator wh o

(a ) dies;

(b ) resigns;

(c ) is removed from office under section 604

(Court may rem ove adm inistrator fromoffice); or

(d ) vacates office under section 605(adm inistrator to vacate office on cea sing,to be qualified).


607. (1) If the administrator was appointed by anadministration order, the Court may make an order replacing

the administrator on an application under this subsectionmade by—

Power of theCourt to replaceadministrator.



made by

(a ) a creditors' committee of the company;

(b ) the company;

(c ) the directors of the company;

(d ) one or more creditors of the company; or

(e ) if more than one person was appointed toact jointly or concurrently as theadministrator—any of the persons whorema in in office.

(2) However, an application may be made inreliance on subsection (1)(b) to (d) only if—

(a ) there is no creditors' committee of thecompany;

(b ) the Court is satisfied that the creditors'committee or a remaining administrator isnot taking reasonable steps to make areplacement; or

(c ) the Court is satisfied that for any otherreason it is right for the application to bemade.

608. If the administrator was appointed under section 534(holder of floating charge may appoint administrator), theholder of the floating charge under which the appointment

was made may replace the administrator.

Power of holderof floatingcharge toappoint

replacementadministratorappointed undersection 534.


Power ofcompany toappoint

replacementadministrator

609. (1) If the administrator of a company was appointedunder section 541(1), the company may replace the

administrator.(2) A replacement under this section may be made



appointed undersection 541(1).

(2) A replacement under this section may be madeonly

(a ) with the consent of each person w ho isthe holder of a qualifying floating cha rgein respect of the company's property; or

(b ) if consent is withheld—with the approvalof the C ourt.

Power ofdirectors ofcompany toappointreplacement

administratorappointed undersection 541(2).

610. (1)under sectionreplace the ad

(2)only—

If the adm inistrator of a company w as appointed541(2), the directors of the com pany m ayministrator.

A replacement under this section may be made

(a ) with the consent of each person w ho isthe holder of a qualifying floating chargein respect of the company's property; or

(b ) if consent is withheld—with the approvalof the C ourt.

Power of theCourt to replaceadministrator incertain othercircumstances.

611. (1) The Court may make an order replacing anadm inistrator on the application of a person by whom anapplication is made under section 607(1) if the Court—

(a ) is satisfied that a relevant person is no ttaking reasonable steps to make a

replacement; or(b) that for another reason i t is r ight for the

Court to m ake the replacement.

(2) In subsection (1), a relevant person is a person

The insolvency Bill, 201 2 147

who is entitled to replace the administrator under any ofsections 608 to 610.



612. 1) If an administrator of a company is appointedunder section 534 (holder of floating charge may appointadm inistrator) by the holder of a qualifying floating charge inrespect of the com pany's property, the ho lder of a priorqualifying floating charge in respect of the compan y's

property may apply to the C ourt for the adm inistrator to bereplaced by an adm inistrator nom inated by the holder of theprior floating charge.

(2 ) On the hearing of an application made u ndersubsection (1), the Cou rt may m ake an order replacing theexisting administrator with the person nominated by theapplicant, but only if satisfied that to d o so wo uld result in the

com pany being ad ministered m ore effectively and efficiently,(3 ) An application made un der subsection (1) may

not be heard un less the existing administrator and the holderof the qualifying floating charge w ho appointed thatadm inistrator have been served w ith a copy of the applicationand have b een given an oppo rtunity to appear at the hearing asparties

(4 ) One floating charge is prior to another for thepurposes of this section if—

(a ) it was created first; or

(b ) it is to be treated as having priority inaccordance with an agreement to whichthe holder of each floating charge was

party.

Court mayreplaceadministratorwhen there is acompetingfloating charge-holder.

613. (1) A creditors' meeting may replace anadm inistrator of a com pany If—

(a) the administrator has been appointed by

Creditors'meeting mayreplaceadministratorappointed by


company ordirectors.

the com pany or its directors under section541 (administrator may be appointed by

com pany or its directors); and(b) there is no holder of a qualifying floating



(b) there is no holder of a qualifying floatingcharge in respect of the company'sproperty.

(2) A creditors' meeting may act under subsection(1) only if the replacement administrator's written consent toact is presented to the meeting before the replacement ismade.

Discharge fromliability onadministrator'svacating office.

614. (1) If the appointment of a person as theadministrator of a company ends (irrespective of the reason),the administrator is discharged from liability in respect of allacts done or om itted to be done as a dm inistrator.

(2) . The discharge provided by subsection (1) takeseffect—

(a ) in the case of an adm inistrator whodies—on the lodging with the Court ofnotice of the administrator's death;

(b) in the case of an administ ra tor appointed

under section 534 (holder of floatingcharge may appoint administrator) orsection 541 (administrator may beappointed by company or its directors)—at a time fixed by resolution of thecreditors' committee or,if there is nocreditors' committee, by resolution of thecreditors; or

(c) in any other case—at a t ime specif ied bythe Cou rt.

(3) For the purpose of the application of subsection(2)(b), if the adm inistrator has m ade a statem ent that the,com pany has insufficient property toenable a distribution to


be mad e to unsecured creditors otherwise than in accordancewith section 474(2)(a), a resolution is taken to have beenpassed if (and only if) passed w ith the approval of—

(a ) each secured creditor of the compan y; or



(a ) each secured creditor of the compan y; or

(b ) if the administrator has m ade adistribution to preferential creditors orbelieves that a distribution m ay be m adeto preferential creditors—

(i) each secured creditor of thecompany; and

(ii) preferential creditors wh ose deb tsamou nt to m ore than fifty percent ofthe preferential debts of thecom pany, disregarding debts of anycreditor who does no t respond to an

invitation to give o r withholdapproval.

(4) A discharge—

(a ) applies to liability accrued before thedischarge takes effect; and

(b ) does no t prevent the exercise of the

Court 's powers under section 592(examination of con duct ofadministrator).

615. (1) This section applies if a person's appointment asthe administrator of a com pany has ended for wh ateverreason.

Formeradministrator'sremunerationand expensespayable ofcompany'sproperty and tohave priorityover holders offloatingcharges.

(2) In this section—

(a ) "the former adthinistrator" means theperson referred to in subsection (1); and

(b ) "termination" means the time when theperson's appointment as the com pany's


administrator ended.

(3) The former administrator's remuneration andexpenses is—



(a ) a charge on an d payable out of propertyover which the person had controlimm ediately before the termination; and

(b ) payable in priority to any security towhich section 587 (charged property:

floating charge ) applies.(4) An am ount payable in respect of a debt or

liability arising ou t of a co ntract entered into by the formeradm inistrator or a predecessor before the termination is—

(a ) a charge on and payable'out of propertyover wh ich the former administrator hadcontrol immed iately before thetermination; and

(b ) payable in priority to any charge arisingunder subsection (3).

(5) Subsection (4) app lies to a liability arising und era contract of employment that was adopted by the formeradm inistrator or a predecessor before the termination; and forthat purpose—

(a ) action taken within fourteen days after anadm inistrator's appointmen t is not to betreated as action adopting or contributingto adopting the contract;

(b ) no acc ount is to taken of a liability thatarises, or in so far as it arises, by

reference to anything that is done o r thatoccurs before the adoption o f the contractof employment; and

(c ) no account is to be taken of a liability tomake a paym ent other than w ages or


salary.

(6) In subse ction (5)(c), "wa ges or salary"includes—

( ) t bl i t f i d f



(a ) amo unts payable in respect of periods ofholiday (for wh ich purpose the amountsare to be treated as relating to the periodby reference to which the entitlement toholiday accrued);

(b ) amounts payable in respect of periods ofabsence through illness or other goodcause;

(c ) amou nts payable instead of a period ofholidays;

(d ) in relation to a particular period—amo unts that would be treated as earningsby any enactm ent prescribed by theinsolvency regulations for the purposes ofthis section; and

(e ) contributions to occupational pensionschemes.

Div is ion 11—Supp lemen ta ry p rov i s ions

616. (1) In this Part— oint andconcurrent

(a ) a reference to the appointment-of an dministrators.

adm inistrator of a com pany includes areference to the appointmen t of a num berof persons to act jointly or con currentlyas the adm inistrator o•a com pany; and

(b ) a reference to the appointment of aperson as administrator of a companyincludes a reference to the appointmen t of


a person as one of a number of persons toact jointly or conc urrently as the

administrator of a company.(2) A person who appoints more than one person as

d i i f h ll if



an administrator of a company shall specify—

(a ) wh ich functions (if any) are to beperformed by the persons appointedacting jointly; and

(b ) wh ich functions (if any) are to beexercised by a ny or all of the personsappointed.

Offencescommitted byjointadministrators.

617. (1) If two or more persons are appointed to act asjoint administrators of a company, a reference to theadministrator of the company in this Part is to those personsacting jointly.

(2) However, a reference to the administrator of acompany in Division 10 is to all or any of the personsappointed to a ct jointly.

(3) If—

(a ) a provision of this Part requiring an

administrator of a company to complywith a specified requirement constitutesan offence;

(b ) the requirement is not complied with inrelation to a particular compan y; and

(c ) two or more administrators are appointedto act jointly in respect of the com pany,

each of the persons commits the offence and may beproceeded ag ainst and punished individually.

(5) The reference in section 562(1) (company'sbusiness documents to state that company's affairs are underadministration) to the name of the administrator is a reference


to the name of each of the persons appointed to act jointly.

,(6) If persons are appointed to act jointly to performor exercise only some of the functions or powers of theadministrator of a company, this section applies only in



p y, pp yrelation to the functions or powers in respect of which thosepersons are appointed.

618. If two or more persons are appointed to actconcurrently as the administrator of a company, a reference tothe administrator of a company in this Part is to any of thepersons appointed (or any combination of them).

Administrators

actingconcurrently.

619. (1) If a company is under administration, a personmay be appointed to act as administrator jointly orconcurrently with the person or persons acting as theadministrator of the company.

(2) If a company entered administration byadministration order, an appointment under subsection (1)may be made only by the Court on the application of—

(a ) a person or group listed in section532(1)(a) to (e) (application to Court toappoint administrator in respect ofcompany); or

(b ) the administrator of the company.

(3) If a company entered administration because ofan appointment under section 534 (holder of floating chargemay appoint administrator), an appointment under subsection

(1) may be made only by—(a ) the holder of the floating charge under

which the appointment was made; or

(b ) the Court on the application of theadministrator of the company.

Power toappointadministratorsto actconcurrently.

5154 ho Insolvency Bill, 2012

(4) If a company entered administration because ofan appointme nt under section 541(1) (adm inistrator may be

appointed by company), an appointment under subsection (1)may be made only—

( ) by the C ourt on the application of the



(a ) by the C ourt on the application of theadministrator of the company; or

(b ) by the com pany with the consent of eachperson wh o is the holder of a qualifyingfloating ch arge in respect of the

company's property or, if consent iswithhe ld, with the approval of the Court.

(5) If a company entered administration because ofan appointme nt under section 541(2) (adm inistrator may beappointed by directors), an appointm ent under subsection (1)may be made only—

(a ) by the C ourt on the application of theadministrator of the company; or

(b ) by the directors of the com pany w ith theconsent of each person vhois the holderof a qualifying floating charge in respectof the company's property or, if consentis withheld, with the approval of theCourt.

Presumption ofvalidity of acts

ofadministrator.

(6) An appointment under subsection (1) may bemade only with the consent of the administrator of thecompany.

6 2 0 . An act of the administrator of a company is valideven if the administrator's appointment or qualification issubseque ntly found to be defective.

Majority 21. A referenc e in this Part to act done or om itted to bed e c i s io n o f one by the directors of a com pany includes the same act




creditors—consent of-

(i) each secured creditor of thecompany; and

(ii) preferential creditors whose debtsamount to more than fifty percent of



the total preferential debts of thecompany, disregarding debts of anycreditor who doe s not respond to aninvitation to give or withholdconsent.

(4) Consent for the purposes of subsection (1) maybe

(a ) written; or

(b ) signified orally at a creditors' meeting.

(5) The power to extend under subsection (1)-

(a ) m ay be exercised in respect of E•peiiodonly once,

(b ) may not be exercised to extend a periodby m ore than twenty-eight days,

(c) may not be exerc ised to extend a periodthat has been extended by the Court, and

(d ) may not be exercised to extend a periodafter it has ex pired.

PA RT I X — C O M PA N Y V O L UN TA R Y A R R A N GE ME NT S

D iv i si o n 1 — P r o p o s a ls f o r c o m p a n y v o l u n t a r y a r r a n g e m e n t s



624. In this Division—prescribed publication , in relation to a company,

means—(a) a newspaper circulating in the area in

hi h th i b i



which the company carries on business;(b) the company's website (if any);(c) any other publication of a description

prescribed by the insolvency regulations

for the purposes of this Part;proposal means a proposal by the directors of

company for a voluntary arrangement made in accordancewith section 625;

proposers , in relation to a proposal for a voluntaryarrangement in respect of a company, means the directorsmaking the proposal;

supervisor means the person appointed to supervisea voluntary arrangement, and includes any replacementsupervisor appointed under section 626 or 627;

voluntary arrangement , in relation to a companymeans a composition or scheme of arrangement that haseffect as provided by section 630.

625. (1) The directors of a company may make aproposal under this Division to the company and to itscreditors for a voluntary arrangement under which thecompany enters into a composition in satisfaction of its debtsor a scheme for arranging its affairs.

(2) In making such a proposal, the directors shallprovide for the appointment of a person to supervise theimplementation of the voluntary arrangement.

(3) Only an authorised insolvency practitioner may

Proposal forvoluntaryarrangement.


be appointed to supervise a voluntary arrangem ent.

(4) A proposal under this Division may also bemade—

(a ) if the company is under administration—by the adm inistrator; or



Procedure ifprovisionalsupervisor isnot theliquidator oradministrator.

(b ) if the com pany is in liquidation—b y theliquidator.

626. (1) This section applies if the provisional supervisorin respect of a director's proposal is not the liquidator oradministrator of the company and the directors do not proposeto take steps to obtain a moratorium for the company underDivision 2.

(2) The provisional supervisor shall, within twenty-eight days (or within such extended period-as the Court mayallow) after that supervisor is given notice of the proposal,subm it a report to the Court stating—

(a ) whether, in that supervisor's opinion, theproposal has a reasonable prospect ofbeing approved and implem ented;

(b ) whether, in that supervisor's opinion,

meetings of the company and of thecompany's creditors should be convenedto consider the proposal; and

(c) i f tha t supervisor be lieves tha t thosemeetings should be convened—the dateon w hich, and the time and place atwh ich, it is proposed to hold the

meetings.(3) For the purposes of enabling the provisional

supervisor to prepare the report, the proposers shall submit tothat supervisor—

(a) a docum ent setting out the termsof the


proposal; and

(b) a statement of the company's affairscontaining-

(i) such particulars of its creditors and



of its debts and other liabilities andof its assets as may be prescribed bythe insolvency regulations for thepurposes of this subsection; and

(ii) such other information as m ay be soprescribed.

(4) An application may be made to the Court for anorder under subsection (5)-

(a ) if the provisional supervisor has failed tosubmit the report required by this sectionor has died—by the proposers; or

(b ) if it is impracticable or inappropriate forthat supervisor to continue to act assuch— by the proposers or that supervisor.

(5) On the hearing of an application made undersubsection (4), the Court may make an order directing theprovisional supervisor to be replaced as such by another

authorised insolvency practitioner.

627. (1) If the provisional supervisor appointed undersection 625 (proposal for voluntary arrangement) is not theliquidator or administrator and has reported to the Court thatthe meetings referred to in section 626(2) should be convened,

that supervisor shall (unless the Court otherwise directs)convene those meetings to be held on the date, and at the timeand place, proposed in the report.

(2) If the provisional supervisor is the liquidator oradministrator, that supervisor shall convene meetings of thecompany and of the company's creditors to consider the

Provisionalsupervisor toconvenemeetings ofcompany andof its cred itors.

5160 he Insolvency Bill. 20 12

proposal to be held on such date, and at such time an d place,as that supervisor considers appropriate having regard towhere the creditors carry on their businesses or reside.

(3 ) The persons to be summ oned to a creditors'meeting convened un der this section are all creditors of the



meeting convened un der this section are all creditors of thecompany of whose claims and addresses the provisionalsupervisor is aware.

(4 ) The directors of the company m ay, not later thanseven days before the dates on which the meetings are, oreither of those m eetings is, to be held, give notice to theprovisional supervisor of any m odifications of the proposal forwh ich the directors intend to seek the approval at thosemeetings.

Conduct of

meetings ofcompany andits creditors.

628. (1) The main purpose of a meeting convened un dersection 627 (provisional supervisor to convene meetings ofcompany and o f its creditors) is to decide whether.toapprovethe proposal or that proposal w ith mod ifications.

(2 ) At the beginn ing of a creditors' meeting, themeeting shall elect one of their num ber to be chairperson ofthe meeting.

(3 ) At the first meeting o f the creditors, thechairperson shall divide the meeting into three groups forvoting purposes, with the 'first group com prising securedcreditors (if any), the second group com prising preferentialcreditors (if any) and the third grotip comprising unsecuredcreditors.

(4 ) A m odification to the the directors' proposalmay be approved only if the company consents to it.

(5 ) A m odification to the directors' proposal mayprovide for the replacement of the provisional supervisor byanother authorised insolvency practitioner who will act as thes u p e r v i s o rof the proposal if it takes effect as a voluntaryarrangement.


(6) If the p ropo sal or a m odificat ion to i t affects theright of a secured creditor of the com piny to enforce the

creditor 's securi ty, i t may n ot be approved unless—(a ) the creditor con sents to it; or

(b ) if the cred itor does no t consen t to it the



(b ) if the cred itor does no t consen t to it , thecreditor-

(i) wou ld be in a pos it ion no worsethan if the company was in

l iquidation;(ii) wo uld rece ive no less from the

assets to wh ich the creditor 'ssecurity relates, or from theirproceeds of sale , than any othersecured creditor having,a securityinterest in those assets that has the

sam e priority as the creditor 's; and(iii) w ould be paid in full from those

assets, or their proce eds of sale,before any paym ent from them ortheir proceeds is m ade to any othercreditor wh ose securi ty interest inthem is rank ed below that of the

creditor, or wh o has no securi tyinterest in them .

(7) Subject to this sect ion, the m eetings of thecom pany and of the creditors are to be condu cted inaccordan ce w ith the rules (if any) prescribed b y theinsolvency regulat ions.

(8) Ei ther m eet ing m ay a t any t im e resolve tha t i t be

adjourned, or further adjourned.(9) As soon as practicable after the conclusion of a

conipany m eet ing ora creditors ' meeting, the chairperson o fthe m eet ing shall—

(a) repor t the resul t of the m eet ing to the


Court; and

(b) immediately after reporting to the

Court—give notice of the result of themeeting to those persons who attendedthe m eeting, and to those persons ofwhom the chairperson is aware who were



whom the chairperson is aware who wereentitled to attend the m eeting but did no tdo so.

Approval ofproposal forvoluntaryarrangement.

629. (1) This section applies to the decisions taken at themeeting of the company and the meeting of the company'screditors held in accordanc e with section 628 (conduct ofmee tings of compan y.and its creditors) to consider a directors'proposal (with or w ithout m odifications).

(2) The proposa l (including an y m odifications) isapproved if—

(a) it is a approved—

(i) by a majority the memb ers of thecom pany present (either in person orby proxy) at the me eting of thecompany; and

(ii) by a majority (in number and value)of the mem bers of each group ofcreditors present (either in person orby proxy) at the meeting ofcreditors; or

(b) if, despite not being not approved by amajority of the mem bers referred to inparagraph (a)(i), it is approved by amajority (in nu mber and value) of the •mem bers of each of the groups ofcreditors referred to in paragraph (a)(ii).

(3) For the purposes on ly of deciding whethe r therequisite majorityby value has voted in favour of a resolution


to approve the proposal—

(a) the chairperson of the meeting may-

(i) adm it or reject proofs of debt; and

(ii) adjourn the m eeting in order toadm it or reject proofs of debt; and



adm it or reject proofs of debt; and

(b) a person whose debt has been admitted isa creditor.

(4) At any time before the deadline for making anapplication under this subsection, any mem ber of thecom pany, or any creditor, wh o attended or w as entitled toattend the meetings m ay ma ke an application to the Cou rt foran order un der subsection (7).

(5) The d eadline for making an application undersubsection (4) is—

(a ) the expiry of twenty-eight days after theholding of the meetings of the companyand its creditors (or if the meetings w ereheld on different days, the later of themeetings); or


(6) Any m em ber of the company, and any creditor,wh o attended or w as entitled to attend the mee tings is entitledto appear and be he ard at the hearing of the application even ifthe m em ber or creditor is not the applicant. The rightconferred by this subsection may be exe rcised by such amem ber or creditor irrespective of wh ether the mem ber orcreditor supports or has an interest in the im plemen tation ofthe proposal.

(7) On the hea ring of an application m ade undersubsection (4), the Co urt may—

(a) make an order approving the proposal(with or withou t the mo difications (if any)


put to the m eetings in accordance wi thsect ion 628); or

(b ) mak e such o the r o rde r a s i t cons ide r sappropriate.

(8 ) The C our t may m ake an o rde r unde r subsec tion(7)(a) even if the prop osal (or a mo dif icat ion to i t )



(7)(a) even if the prop osal (or a mo dif icat ion to i t )—

(a ) was not approved a t the companym eet ing ; o r

(b ) w as not appioved at the credi tors 'm eet ing by a m ajori ty of the preferent ialcredi tors' group or the un securedcredi tors ' group , but do so o nly i f theproposa l (or the m odi f ica t ion)—

(i) has been approved by a m ajor ity ofthe secured credi tors ' group;

does not d i scr im ina te am ong them emb ers of the d issent ing group orgroups of credi tors and ensures thatthey wi l l be no w orse off than theywou ld have been i f the com panyhad been l iquidated; and

( i ii ) respects the p riori t ies of p referen t ial

credi tors over un secured credi tors .

Approvedproposal to takeeffect asvoluntaryarrangementand to be

binding oncompany andits creditors.

630. (1 .) A d i rec tors ' p rop osa l (w i th or w i thou tm odif icat ions) takes effect as a voluntary arrangem ent by thecom pany on the day af ter the da te on wh ich i t is approved bythe Cour t by order m ade under sec t ion 629(7)(a) or on suchla ter date as m ay be specif ied in the order.

(2) O n tak ing effec t , a vo luntary a r rang em entb i n d s —

(a) every member of the company who-

( i) wa s en t i tl ed to vo te a t t he m ee t ing

The Insolvency Bill 2012 165 •

of the company (w hether present orrepresented at the m eeting or not);or

(ii) would have been so entitled if themem ber had received notice of thatmeeting; and



(b) every person (including a secured creditorand a preferential creditor) who-

(i) was entitled to vote at the meetingof creditors (whether present orrepresented at the m eeting or not);or

(ii) wo uld have been so en titled if theperson had received notice of thatmeeting,

as if the m emb er or person were a party to the arrangem ent.

(3) On the approved prop osal taking effect as avoluntary arrangemen t, the provisional supervisor becomesthe supervisor of the arrangemen t unless that supervisor hasbeen replaced in accordan ce w ith section 628(5).

(4) If, wh en a voluntary arrangem ent ceases to haveeffect—

(a ) any am ount payable under thearrangement to a person boun d because ofsubsection (2)(b)(ii) has not b een paid;and

(b ) the arrangemen t did not end prema turely,

the com pany becom es, at that time, liable to pay to that personthe amount payable under the arrangement.

(5) If the com pany is in liquidation or underadministration, the Court may make one or more orders doingone or both o f the following:

(a) halting all proceedings in the liquidation,

5166 to he Insolvency Bill, 2012

or terminating or suspending theappointmen t of the adm inistrator;

(b) giving such directions with respect to the

further conduct of the liquidation or theadm inistration as it considers w ill furtherthe implementation of the voluntaryarrangement.



g

(6) However, the Court may not make an orderunder subsection (5)(a)—

(a) a t any time within twenty-eight days af terthe first day on w hich a report required bysection 628(9) lias been m ade to theCo urt; or

(b) at any tim e—

(i) wh ile an application under section631, or an appea l in respect of an

order made under that section, ispending;

(ii) while an appeal against an ordermade under thatsection is pending;Or

(iii) during the period w ithin w hich suchan appeal may be m ade.

6 3 1 . (1) The following persons may make an applicationto the Cou rt for an order under this section:

(a ) a person wh o was en titled to vote at themeeting of the company or the meeting ofits creditors;

(b ) a person who would have been so entitledif the person had had notice of therelevant meeting;

(c ) the provisional supervisor or, thhe

Certain personsmay challengedecisionsrelating toapprovedvoluntaryarrangement bymakingapplication tothe Cou rt.


proposal has taken effect as a vo luntaryarrangement, thesupervisor of thearrangement;

(d) if the company is in liquidation or isunder adm inistration— the liquidator oradministrator.

(2) S h li ti b d ith



(2) Such an application m ay be m ade on either orboth of the following ground s:

(a ) that a voluntary arrangem ent approved

under section 629(2) detrimentally affectsthe interests of a creditor, mem ber orcontributory of the co mpany;

(b ) a m aterial irregularity has o ccurred at o rin relation to either of the meetings.

(3) An a pplication unde r subsection (1) m ay not bemade—

(a ) after the end of the twe nty-eight daysfrom and including the first day on w hicha report required by section 628(6) hasbeen m ade to the Court; or

(b ) in the case of a person who w as not givennotice of the creditors' meeting—after theend of the twenty-eight days from andincluding the day on wh ich the personbecame aware that the meeting had takenplace.

(4) However, an application m ade by a personreferred to in subsection (2)(b) on the g round that thevoluntary arrangem ent.detrimen tally affects the person'sinterests may be m ade after the arrangem ent has ceased tohave effect, unless it has ended prematurely.

(5) If, on hearing an application ma de und ersubsection (1), the C ourt is satisfied as to either of the groundsreferred to in subsection (2), it may make o rders doing one or

5 1 6 8 he Insolvency Bill, 20/2

both of the following:

(a) revoking or suspending-

(i ) any decision approving thevoluntary arrangement inaccordance w ith section 629(2); or

(ii) in a case to which subsection (2)(b)



applies—any decision taken by themeeting concerned;

(b) directing the supervisor to convene-

(i) further meetings to consider arevised proposal; or

(ii) if subsection (2)(b) applies— afurther company m eeting, or afurther creditors' meeting, toreconsider the original proposal.

(6) If, at any time after m aking an order un dersubsection (5)(b) directing meetings to be conven ed toconsider a revised proposal, the Co urt is satisfied that themaker of the original proposal does not intend to subm it arevised proposal, the C ourt shall, by further order—

(a ) revoke the order; and

(b ) any order revoking or suspending adecision approving the vo luntaryarrangement in accordance w ith section629.

(7) If the C ourt makes an o rder under subsec tion(5)or (6), it may make such an cillary orders as it considersappropriate and , in particular, orders w ith respect to actiontaken under the vo luntary arrangement since it took effect.

(8) Except as provided b y this section, a decisiontaken at a meeting held in accordance w ith section 628(decisions at meetings of com pany and its creditors) is notinvalidated by any irregularity occurring at or in relation to the


meeting.

6 3 2 . ( 1 ) A n o f fi c e r o f a c o m p a n y w h o —

(a ) m akes a false representat ion for thepurp ose of obtaining the appro val of the

b d f

Offencesinvolvingfalserepresentationsand f raudulentacts by



m emb ers or cred itors of a comp any to aproposal for a voluntary arrangemen t; or

(b ) fraudulent ly does, or om its to do, any act

I m that purpose,com m its an offence and o n con vic t ion i s l iab le to a f ine no texceeding tw o m i ll ion sh i l lings or to imp r isonm ent for a te rmnot exceeding f ive years , o r to both

(2) Subsec t ion (1) appl ies to a p ropo sa l even i f i t i snot approved by the m emb ers or c red itors of the compan yconcerned .

633. (1) When a prop osa l takes e ffec t as a voluntaryarrangem ent , the supervisor becomes respon sible forimplement ing the a r rangement in the in te rest s of the compan yand i t s c red i tors and m oni tor ing com pl iance by the com panywith the te rms of the a r rangement .

(2) If , in re la t ion to a voluntary a r ran gem ent tha t haseffec t under sec tion-630, any of the com pany ' s c red i tors orany o ther person i s d i ssa t is f ied w i th an ac t , omiss ion ordecis ion of the, superv isor, the c red i tor o r person m ay m ake anapplicat ion to the C ourt for an ord er und er subsect ion (2) .

(3 ) O n the h ea r ing o f an app l ica t ion m ade unde r

subsec t ion (1), the Cou r t—(a) if sa t is f ied tha t the grou nd on w hich the

app licat ion was m ade is substant iated,shall make-

( i) a n o r d e r q u a s h i n g o r m o d i fy i n g a n

c o m p a n yofficers.

Implementat ionof approvedvoluntaryarrangement .

5170 he Insolvency Bill, 2012 •

act or decision of the supervisor; or

(ii) an order giving the supervisordirections; but

(b) if not so satisfied, shall make an orderconfirming that act or decision,

and in either case may make such ancillary orders as it



considers a ppropriate.

(4 ) The Court may, on the application of thesupervisor, make an order giving directions in relation to anyparticular matter arising under the voluntary arrangement.

(5 ) The supe rvisor has standing to apply to theCourt for the liquidation of the company or for anadm inistrator to be appointed in relation to the com pany.

(6 ) If, at any time the Court is satisfied that—

(a ) it would be beneficial to appoint a

supervisor to replace airexistingsupervisor, to appoint an add itionalsupervisor or to fill a vacan cy; and

(b ) it would be inconvenient or impracticablefor such an appointment to be m adewithout the assistance of the C ourt,

the Court may make an order appointing a replacement oradditional authorised insolvency practitioner, or an authorisedinsolvency prac titioner to fill the vacancy .

Prosecution ofdelinquentofficers ofcompany.


(a ) a moratorium under has been obtained fora company under this Division; or

(b ) the approval of a voluntary arrangementin relation to a com pany has taken effectunder-

(i) section 630 (approved proposal to


take effect as voluntary arrangem entand to be binding on company and

creditors); or

(ii) section 666 (voluntary arrangementbinding on company and 'creditors).

(2) If it appears to the su pervisor that any pa st orffi f h h i d ff i



present officer of the compan y has com mitted an offence inconnection with the moratorium or a voluntary arrangementfor wh ich the person is criminally liable, the supervisor shall

immediately—(a ) report the hatter to the A ttorney Gen eral;

and

(b ) provide the Attorney General with—

(i) such inform ation relating to thatmatter; and

(ii) such access to and facilities forinspecting and taking copies ofdocum ents under the control of thesupervisor and relating to thatmatter concerned ),

as the A ttorney General requires.

(3) On receiving a report und er subsec tion (2), theAttorney G eneral may, for the purpose of investigating thematter to wh ich the report relates and such other ma ttersrelating to the affairs of the com pany'as appear to requireinvestigation, exercise any of thq pow ers that are exercisableby inspectors appointed under Part XXX of the Com paniesA ct, 2012 to investigate a com pany's affairs.

(4) For the purpose of such a n investigation, anobligation imposed on a person b y a provision of theCompanies Act to produce documents or give information to,OK otherwise to assist, inspectors so appointed is to be treatedas an o bligation sim ilarly to assist the Attorney G eneral in the


investigation.

(5) An answer given by a person to a question put to

the person in exercise of the powers conferred by subsection(3) may be u sed in evidence against the person.

(6) However, in criminal proceedings in which thatperson is charged with an offence to w hich this subsectionapplies



applies—

(a ) evidence relating to the answer m ay notbe adduced; and

(b ) questions relating to it may not be asked,

by or on behalf of the prosecution, unless evidence relating toit is adduced, or a question relating to it is asked, in theproceedings by or on behalf of that person.

Cap. 63(7) Subsection (6) applies to any offence other than

an offence und er section 108 (perjury and subornation of

perjury) or section 114 (false swearing) of the Penal Code.(8) If the Director of Pub lic Prosecutions begins

criminal proceedings following a report under subsection (2),the supervisor, and every officer and agent of the com panypast and present (other than the defendant o r defender), shallgive that Director such assistance in connection w ith theprosecution as the person is reasonably able to give.

(9) For the purposes o f subsection (8), "agent"includes-

(a ) any banker or solicitor of the company;and

(b ) any person employed by the com pany asauditor, whether that person is or is not anofficer of the com pany.

(10) The-COurt may, on the application of theprosecuting authority:d.irect any person referred to insubsection (9) to comply w ith that subsection if the person hasf a i le d t o d o s o .

T h e i r : s o l v e n c y 1 3 1 1 1 2 0 1 2 173

635. For the p urpo ses of this Division, a vo luntaryarrangemen t the approval of wh ich has taken effect under

sect ion 630(1) (approved proposal to tak e effect as voluntary.arrangem ent and to be binding on com pany an d its creditors)ends prem aturely i f, wh en i t ceases to have effect, it has notbeen ful ly im plemen ted in respect of all persons bound b y thearrangem ent because of sect ion 630(2).

Whenvoluntaryarrangement

comes to an'endprematurely.



g ( )

Divis ion 2— Morator ia oft deb t paymen ts when com pany ' s d irec to rs

p ropose vo lun ta ry a r rangem ent

Subdivision 1— Introductory provisions

Interpretation:Division 2.36. (1) In th is Divis ion —

agreem ent includes an agreem ent or undertalcingeffected by contract , deed or any other docum ent intendedto have effect in accordance w ith the law of Ken ya oranother jurisdiction;

beginning of the m oratorium has the m eaninggiven by sect ion 645(1);

lodgement date m eans the date on which thedocum ents and statem ents referred to in section 644(1) arelodged with the Court;

proposal m eans a proposal for a voluntaryarrangement;

moratorium means a mo ratorium that has takeneffect under sect ion 645 and h as not ended;

m oratorium comm ittee m eans a comm itteeestablished under sec tion 672;

person includes partnership and any other


unincorporated group of persons.

(2) For the purposes of this Division, a voluntary

arrangement the approval of which has taken effect undersection 673 (effect of decisions of meetings of com pany andcompany's creditors) ends prematurely if, when it ceases tohave effect, it has not been fully implemented in respect ofall persons bound by the arrangement because of section



666(2)(b)(ii).


637. This Division has effect with respect to—

(a) companies el ig ib le for a morator ium;

(b ) the procedure for obtaining such amoratorium;

(c ) the effects of such a moratorium; and

(d ) the procedure applicable (instead ofDivision 1) in relation to the approvaland implementation of a voluntaryarrangement when such-a m oratorium isor has been in force.

Eligiblecompanies.

638. A company is eligible to obtain a moratorium ifit—

(a ) complies with such requirements (ifany) as m ay be prescribed by theinsolvency regulations; and

(b) is not declared to be an ine lig ib lecompany by another provision of this

Subdivision.

Banking andinsurancecompanies

639. The following companies are ineligible companiesfor the purposes of section 638:


(a ) a com pany tha t ho lds a l icence grantedunder sec t ion 5 of the Banking A ct

authoris ing i t to carry on a bank ingbu siness, a f inancial business or thebus iness of a mor tgage f inancecompany;

(b ) a com pany that is regis tered under

5175

ineligible toobtainmoratorium.

Cap. 488



( ) p y gsect ion 19 of the Insur ance A ct .

640. (1) Th e fo llowing co m pan ies are a lso ine l ig ib lecom panies for the purpose o f sec tion 638:

(a ) a comp any tha t i s under adm inist ra t ion;

(b) a com pan y tha t i s in l iqu idat ion;

( c ) a c o m p a n y i n r e sp e c t o f w h i c h a

voluntary arrangem ent already haseffect;

(d ) a com pan y in r e spec t o f w h ich i s aprovisional l iquidator is appointed;

( e ) a c o m p a n y i n r e s p e c t o f w h i c h am orator ium has had e ffect a t any t im edur ing the twelve mon ths ending wi ththe lodgem ent da te and—

( i) a vo luntary a r rangement w as no tin e ffec t when the mo ra tor iumended; o r

(ii) a voluntary arrangem ent that hadeffect during that per iod endedprematurely;

( f) a c o m p a n y i n r e s p e c t o f w h i c h a nadm inistrator appointed under sect ion541 (administ ra tor m ay be appoin ted bycom pan y or i ts directors) held officedur ing the twelve m onths imm edia te ly

Cap. 487

Companies underadministration,etc. ineligible toobtainmoratorium.


preceding the lodgemen t date;

(g ) a compan y in respect of which a

voluntary arrangement had been ineffect ended prematurely and, duringthe twelve mon ths immediatelypreceding the lodgemen t date, an orderunder section 630(7)(a) has been mad e;



(h ) a compan y in respect of which anadm inistrative receiver is appointed

under the repealed Com panies Act.(2) Subsection (1)(b) does not apply to a com pany

that, because of a liquidation order m ade after the lodgmen tdate, is treated as in liquidation on that date

Certain projectcompaniesineligible.

6 4 1 . (1) A com pany is also an ineligible com pany for

the purposes of section 6 38 (eligible compan ies) if, on thelodgeme nt date, it is a project compan y of a project that is apublic-private partnership project and includes step-inrights.

(2) In subsec tion (1), "public-private partnershipproject" means a project—

(a ) the resources for which are providedpartly by one or m ore public bodies andpartly by o ne or m ore private persons;Or

(b ) that is designed w holly or mainly forthe purpose of assisting a public body toperform a function.

(3) For the purposes of this section, a compa ny isa project company for a project if—

(a ) it holds property for the purpose of theproject;

(b ) it has sole or principal responsibility

w eThe Insolvency Bill, 20 12 177

under an agreem ent for carrying out allor part of the project;

(c ) it is one of a num ber of compan ies thattogether carry out the project;

(d ) it has the purpose of su pplying financeto enable the project to be carried out;



or

(e ) it is the holding company o f a company

to wh ich any of paragraphs (a) to (d)applies.

(4) However, a com pany is not a project companyfor a project if, although it performs a fun ction to wh ichparagraphs (a) to (d) o f subsection (3) applies, or is aholding com pany to to wh ich any of those paragraphs apply,it also performs a fun ction that is not—

(a ) within paragraphs (4)(a) to (d) of thatsubsection;

(b ) related to a function within thoseparagraphs; or

(c ) related to the project.

(5) For the purpose s of subsec tion (1), a project

has step-in rights if a person wh o provides finance inconnection with the project has a conditional entitlementunder an agreement—

(a ) to assum e sole or principalresponsibility under an agreement forcarrying ou t all or part of the project; or

(b ) to make arrangem ents for carrying outall or part of the project.

(6) In subse ction (5), a referenc e to the provisionof finance includes a reference to the provision o f anindemnity.

(7) For the purposes of this section, a com pany

5 1 7 8 heInsolvency Bill 2012

carr ies out a l l or par t of a pro ject whether o r not i t actsw holly or par t ly through agents .

(8 ) In th i s s ec t ion—(a ) publ ic body m eans the Government ,

any S tate organ or governm ent agencyor any b ody con st ituted or establ ishedunder an A ct for a publ ic purpose; and



p p p

(b ) pr ivate person m eans any person thatis not a public body.

Comp anies withlarge outstandingliabilitiesineligible.

642 . (1 ) A com pany i s a lso an ine lig ib l e com pany fo rthe pu rposes of sec t ion .638 (e l ig ib le com pan ies) i f, on thelodgem ent date , i t has a l iabi l ity outs tanding un der anagreemen t of on e b i l lion sh i ll ings o r m ore .

(2 ) If the l iabi li ty in sub sect ion (1) is a conting entl iabi l ity under or b ecause of a guarantee or an indem nity orsecuri ty provided on behalf of another person, the am oun t ofthat l iability is the full amo un t of the liability in relation towh ich the guarantee, indem nity or securi ty is provided.

(3 ) In this section, a referen ce to a liabilityi nc ludes—

(a ) a present or future liabili ty w hether , inei ther case, i t is cer tain or co nt ingent ;and

(b ) a reference to a l iabi li ty to be paidwh olly or part ly in foreign cufrency ( inwh ich case the equiva len t in Ken yashi l lings is to be calculated as at the

t ime w hen the l iabi li ty is incurred ) .

Subdivision 2— Obtaining a moratorium

The inso lvency Bi l l 2012 179

643. (1) I f the d i rec tors of an e l ig ib le com pany w ish tom ake a prop osal for a voluntary arrangem ent, they shall takethe required steps to obtain a m oratorium for the comp any.

(2) If the directors of an el igible com pany w ish toobtain a moratorium, they shal l—

(a) prepare-

(i) a docum ent set ting out the term s

What s t epsc o m p a n y sd i r e c t o rs h a v e t ot ake to ob ta in a

m o r a t o r i u m .



of the proposal; and

(ii) a statem ent of the com pany'saffairs con taining such particularsof its creditors an d of its debts an dother liabilities and of its assets asm ay be prescribed by theinsolvency regulat ions for thepurp oses of this sect ion, and suchother information as may be so

prescribed; and(b) unless a provis ional supervisor has

already b een appointed in respect of theproposal— appoint as i ts provisionalsupervisor an authorised insolvencypract it ioner w ho h as consented tosuperv ise it .

(3) After prepar ing the propo sal and stateme ntand, if appropr iate, m aking the app ointmen t, the directorsshall subm it the propo sal and statem ent to the provisionalsupervisor for considerat ion and com m ent.

(4) If the pro visional supe rvisor requ ires them todo so, the directors shal l provide such o ther informationnecessary to enable thatsupervisor to com ply w ith

subsection (5) .(5) The pro visional supe rvisor shal l subm it to the

directors a statem ent indicating w hether or no t, in that


supervisor's opinion—

(a ) the proposal has a reasonable prospectof being approved and im plemented;

(b ) the company is likely to have sufficientfunds available to it during the proposedmoratorium to enable it to carry on itsbusiness; and

(c ) meetings of the company and its



What directorshave to do toobtainmoratorium.

creditors should be convened with aview to considering and approving the

proposal.(6 ) In forming an opinion on the m atters referred

to in subsection (5), the provisional supervisor is entitled torely on the information contained in the document andstatement submitted under subsection (2), and provided inaccordance with subsection (4), unless that supervisor hasreason to doubt its accuracy.

(7 ) The reference in subsection (5)(b)to thecompany's business is to that business as the companyproposes to carry it on during the proposed moratorium.

644. (1) To obtain a moratorium, the directors of acompany shall lodge with the Court—

(a ) the proposal and statement referred to insection 643(2)(a);

(b ) a statement to the effect that thecompany is eligible for a moratoriumand the basis of tha t eligibility;

(c ) a statement from the provisional

supervisor that that supervisor hasconsented to act as supervisor of theproposed arrangement if approved;

(d ) a statement from the provisional

The Insolvency Bill. 2012 1 8 1

supervisor that, in that su pervisor'sopinion-

(i) the proposal has a reasonableprospect of being approved andimplemented;

(ii) the com pany is likely to havesufficient funds ava ilable to itduring the proposed moratorium



g p pto enable it to carry on itsbusiness; and

(iii) meetings of the compan y and itscreditors should be conven ed toconsider the proposal; and

(e) a statement providing such o therinformation (if any) w ith respect to thecom pany's affairs as is specified in the

insolvency regulations for the purposesof this section.

(2) The refere nce in su bsection (1)(d)(ii) to thecompany's business is to the business as proposed to becarried on by the company du ring the proposed m oratorium.

645. (1) A m oratorium takes effect when thedocum ents specified in section 644(1) (what directors haveto do to obtain moratorium) are lodged with the Cou rt.

(2) A moratorium ends—

(a ) at the end of the day on which themeetings held in accordance withsection 664 (conduct of m eetings ofcom pany and its creditors) are firstheld; or

(b ) if the meetings are held on differentdays— at the end of the later of those

Duration ofmoratorium.

5 1 8 2 he Insolvency Bill, 20 12

days,

unless the moratorium period is extended in accordance w ithsection 669 (circumstances in which moratorium may beextended).

(3) If either of those m eetings has no t first beenheld within twenty-eight days from and including the day onwhich the moratorium takes effect, the moratorium ends—

(a ) at the end of the day on which those



(a ) at the end of the day on which thosemeetings w ere to be held; or

(b ) if those meetings were convened to beheld on different days—the later ofthose days,

unless the moratorium period is extended under section 669.

(4) If the p rovisional supervisor fails to conveneeither meeting within the required period, the m oratoriumends at the end of the last day of that period.

(5) A mo ratorium that is extend ed or furtherextended un der section 669 ends at the end of the day towhich it is extended or further extended.

(6) Subsections (2) to (5) do not apply if themo ratorium ends before the relevant time because of—

(a ) section 659(4)(withdrawal of

supervisor's consent to act);(b ) an order under-

(i ) section 660(3) (challenge ofsupervisor's actions, etc.);

(ii) section 661(3) (creditor m aypursue claim against provisional

supervisor for loss); or(iii) section 674 (mem ber or creditor

of company may challenge actionsof directors); or

The-lnsolvency Bill , 2012 183

(c) a decision of one or b oth of them eetings held in accord ance w ith 664(conduct of m eet ings of compan y and

its creditors):(7 ) A m oratorium that has not ended as provided

by sub sections (2) to (6) ends at the end of the day on w hicha decis ion under sec t ion 664 (conduct of m eet ings ofcom pany an d i ts creditors) to approve a voluntaryarrange m ent takes effect und er section 666 (voluntary



arrange m ent takes effect und er section 666 (voluntaryarrangement binding on company and creditors).

(8 ) The insolvency regulat ions may increase orreduce the period spe cif ied in subsection (3) .

646. (1) When a m oratorium takes effect in respect of acom pany , the directors of the com pany shal l im m ediatelygive notice of that fact to the pr ovisional sup ervisor.

(2 ) If subsection (1) is not com plied with, each ofthe directors w ho is in default com m its an offence and onconvict ion is liable to a f ine not exceed ing f ive hundr edthousan d shillings.

(3 ) If, af ter being convicted of an offence u ndersubsection (2) , the directors continue to fai l to given therequired n otice to the provisional supervisor, each of thedirectors who is in default com m its a further offence oneach day on wh ich the failure continues and on co nvict ion isl iable to a f ine not excee ding f if ty thousand shill ings foreach such o ffence.

W h a t h a p p e n sw h e n m o r a to r iu mt a k e s e f f e c t .

647. (1) As so on as p racticable after being n otif ied thata moratorium has taken.effect, the provisional supervisorshal l—

(a) publ ish in such p ubl ica t ions as areprescribed by the insolvency regulat ions

D u t y o fp r o v i s i o n a ls u p e r v i s o r t op u b l i s h a n d g i v en o t i c e t h a tm o r a to r i u m h a st a k e n e f f e c t .


for the purposes of this section a noticeto the effect that the mo ratoriuM hastaken effect;

(b ) give to the company and to any creditorof the company of w hose claim thatsupervisor is aware a notice that it hastaken effect; and

(c ) lodge a copy of the no tice with theRegistrar for registration.



Notification ofend ofmoratorium to be

given byprovisionalsupervisor.

Registrar for registration.

(2 ) A provisional supervisor wh o, withoutreasonable excuse, fails to com ply with a requiremen t ofsubsection (1) com mits an offence and on con viction isliable to a fine not exceeding tw o hund red thousandshillings.

(3 ) If, after being convicted of an offence u ndersubsection (2), a provisional supervisor continues to fail tocom ply with the relevant requirement, that supervisor

com mits a further offence on each day on w hich the failurecontinues and o n conviction is liable to a gnenot exceedingtwenty thousand shillings for each such offence.

648. (1) Within fourteen days after a moratorium hascom e to an end, the provisional supervisor shall—

(a ) publish in the prescribed pu blications anotice that it has ended;

(b ) send to the compan y and any creditor ofthe company of whose claim that •supervisor is aware a n otice to the effectthat the moratorium has ended; and

(c ) lodge a copy of the notice with theRegistrar for registration.

(2) A provisional supervisor wh o, withoutreasonable excuse, fails to com ply with a requiremen t of

The Insolvency Bill, 20 12 1 8 5

subsec t ion (1) com m its an offence and o n con vic t ion i sl iable to a fine not exceeding two hu ndred thou sandshillings.

(3) If , a fte r be ing co nvic ted of an offence und ersubsect ion (2) , a provisional sup ervisor continu es to fai l tocom ply with the relevant requirem ent , that supervisorcom m its a fur ther offence on each d ay on wh ich the fa ilurecont inues and on co nvic t ion i s l iab le to a f ine not exceedingtwenty thousand sh i ll ings for each such o ffence .



Subdivision 3—Effects of moratorium

(a) an app l ica t ion for l iqu idat ion the

, company m ay not be made;( b ) a m e e t in g o f t h e co m p a n y m a y b e

convened or requ is it ioned—

(i) only w i th the consent of theprovis iona l superv isor of w i th theleave of the Co urt ; and

(ii) i f the Cou r t g ives leave— subjec tto such term s ( if any) as the Cou rtimposes ;

(c) a resolu t ion for the l iquidat ion o f thecomp any has n o effec t;

(d ) t he Cour t may no t mak e an o rde r fo r thel iquidat ion of the comp any;

(e ) an appl ica t ion for an adm inis t ra tor to b eappoin ted in respec t of the comp anym ay no t be m ade and i f m ade is o f noeffect;

649. (1) Whi le a m ora tor ium has e ffec t in respe c t of ac o m p a n y —

Effect ofm o r a to r iu m o nc r e d i t o r s a n do t h e r s .

5 1 8 6 he Insolvency B ill, 2012

( f) an adm in is t r a to r o f the com pany m aynot be ap poin ted under sec tion 534 or541;

(g) a landlord or other person to whom renti s payable m ay exerc ise a r igh t offorfei ture in relat ion to prem ises le t tothe com pan y in respect of a failure bythe company to com ply wi th any te rmof i ts t enancy of the prem ises—



( i) only w ith the leave of the Cou rt ;

and(ii) i f the Cou r t g ives leave— subjec t

to such term s ( if any) as the Cou rtimposes;

(h ) st eps may b e t aken to en fo rce anysecuri ty over the company's property,or to repossess goods in the comp any ' s

possession under a-credi t purchasetransaction-

( i) on ly w i th the l eave o f the C our t ;and

( ii ) if t he C our t g ives leave— sub jec tto such term s ( if any) as the Cou rtimposes ; and

(i) other p roceedings ( inc luding execut ionor other legal process) may b ecom m enced or cont inued , and d is t ressm ay be lev ied , aga ins t the comp any ori t s p roper ty -

(i) only w ith the leave of the Cou rt ;

and(ii) i f the Cou r t g ives leave— subjec t

to such term s ( if any) as the Cou rtimposes .

The Insolvency B ill, 2012 1 8 7

(2 ) If an app lication (other than an exc eptedapplication), for the l iquidat ion of the com pany has beenm ade before the beginning of the m oratorium, sect ion 428(avoidance of pro perty disposi t ions, etc .) does no t apply inrelation to a disposition of proper ty, transfer of shares oralteration in status m ade during the m oratorium or at a tim ereferred to in section 666(5)(a).

(3 ) Subsection (1)(a) does not ap ply to anexcepted applicat ion an d if such an application has b een



excepted applicat ion an d, i f such an application has b eenm ade before the beginning of the m oratorium or is madeduring the m oratorium, subsect ions (1)(b) and (c) do notapply to or w ith respect to the hearing of the application.

(4 ) For the purposes of this sect ion, exceptedapplicat ion m eans an applicat ion under—

(a ) sect ion 424 (applicat ion for l iquidationon grou nds of pub lic interest); or

(b ) a provision of any other enactmentprescribed by the insolvency regulat ionsfor the pu rposes of this sect ion

Effect ofm o r a to r iu m o np r o p e r t y t h a t is

s u b j e c t t ou n c r y s t a l l i s e df lo a t i n g c h a r g e .

650. (1) This sec t ion app l ies to proper ty o f a com panyin respect of which a m oratorium has effect and that is

subject to an u ncry stallised floating charg e.(2 ) If the con ditions for the ho lder of the charge to

give a notice having the effect referred to in subsection (4)are sat isf ied at any t ime, the notice m ay no t be given at thatt im e but m ay instead be given as soon as pract icable af terthe m oratorium has ended.

(3 ) If any othe r event occurs at any time that

(apart from this subsection) w ould have the effect referred toin subsect ion (4)—

(a) the even t does not h ave that effec t a tthat t im e, but


(b) if notice of the event is given to thecompany by the h older of the charge assoon a s is practicable after themoratorium has com e to an end—theevent is to be treated as if it hadoccurred when the no tice was given.

(4) The effect referred to in subse ctions (2) and(3) is—

( ) i h lli i f h



(a ) causing the crystallisation o f thefloating charge; or

(b ) because of a provision in the docum entcreating the charge— causing theimposition of a restriction on thedisposal of property or specifiedproperty of the com pany.

(5) An application may not be m ade for leave

under section 649(1) with a view to obtaining—(a ) the crystallisation of the floating charge;

or

(b ) the imposition, because of a provisionin the docum ent creating the charge, ofany restriction on thedisposal of thecompany's property.

Security not to beenforced unless itwould benefit thecompany.

651. Security given by a com pany at a time wh en amo ratorium has effect in relation to the com pany can beenforced on ly if, at that time, reasonable ground s existed forbelieving that enforcement of the security wo uld benefit thecompany.

Application ofsections 653 to657 to companyin respect of

652. (1) Sections 653 to 657 apply to a com pany inrespect of which a m oratorium currently has effect.

(2) The fact that a com pany enters into a


which amoratorium haseffect .

t r a n s a c t io n i n c o n t r a v e n t io nof a pro vis ion o f sec t ions 653 to657 does n ot of it se l f—

(a ) render the t ransaction void; or(b ) m ake i t unen forceable against the

company.

653 . (1 ) A com pany in r e spec t o f w h ich a m ora to r iumC o m p a n yi i d th



has effect shal l ensu re that every invoice, order for goo ds or

services , business le tter or order form (whether in hard c opy,electronic or any o ther form ) issued by o r on beh alf of thecom pany , and a l l the com pany ' s w ebs i tes, spec i f ies—

(a ) the provisional supervisor 's nam e; and

(b ) a s tatem ent that the m oratorium haseffec t in respec t of the com pany.

(2) I f the com pany fa i ls to com ply w i th subsec t io t(1), the comp any, and each off icer of the com pany w ho i s indefaul t , com m it an offence and on co nvict ion are each Habitto a f ine no t exceeding f ive hun dred thou sand sh i ll ings.

invo ices and o therdocuments to

state provisionalsupervisor 's nameand thatmoratorium haseffect .

Restr ict ions onc o m p a n y

obtaining credi tduringmorator ium.

654 . (1 ) A com pany in r e spec t o f w h ich a m ora to r iumhas e ffec t may not ob ta in c red i t exceeding twen ty- f ivethousand sh i ll ings f rom a person w ho has no t been inform ectha t a m ora tor ium has e ffect in respec t of the comp any.

(2) The re ference to the com pan y obta in ing cred i tinc ludes (but i s no t l imi ted to) the fo l low ing cases :

(a ) i f goods a re ba i led to the com panyunder a credi t purchase t ransact ion;

(b ) i f the com pany i s pa id in advance(whether in m oney or o therwise) for thesupp ly of goods o r se rv ices .

(3) I f the com pan y obta ins c red i t in con t ravent ionof subse t t ion (1), the com pan y, and each off icer of the

5 1 9 0 he In solvency Bill, 2012

com pany w ho i s in defaul t , com m it an offence .

(4 ) A com pany tha t is found gu i lty of an offenceun der sub sect ion (3) is liable on conv ict ion to a f ine notexceeding tw o m i ll ion sh i ll ings .

(5 ) An off icer of a compan y w ho i s found g ui ltyof an offence un der sub sec t ion (3) is l iab le on convic t ion toa f ine not exceeding one m i ll ion sh i ll ings o r toimpr i sonment for a t e rm n ot exceeding tw o years , o r to bo th .

(6) The insolvency regulat ions may increase or



(6) The insolvency regulat ions may increase or

reduce the am oun t specif ied in subsect ion (1) .

Restr ict ions ondisposa l o fproperty andmak ing paymentsby company.

6 5 5 . (1) Subjec t to subsec t ion (2) , a com pan y inrespec t of which a m ora tor ium has e ffect may d ispose ofany o f i ts p roper ty on ly if—

(a ) there are reasonable grounds for

believing that the d isposal w ill benefi tthe company; and

(b ) the disposal is appro ved by them orator ium com m ittee or, if there i s nosuch com m ittee, by the provisionalsupervisor.

(2) Subsec t ion (1) does not app ly to a d isposa l—

(a ) m ade in the ord inary course of thecom pany ' s bus iness ; o r

(b ) m ade in accordance wi th an order of theCourt.

(3) If a com pany d isposes of any of i t s proper ty incontraven tion of subsect ion (1), the com pan y, and each

off icer of the com pany wh o i s in defaul t , comm it an offence .(4) A co m pany tha t is found gui l ty of an offence

und er subsect ion (3) is l iable on con vict ion to a f ine notexceeding tw o m i ll ion sh i ll ings .

The In.iolvency Bill. 2012 191

(5) An officer of a company who is found guiltyof an offence under subsection (3) is liable on conviction to

a fine not exceeding one million shillings or toimprisonment for a term not exceeding two years, or to both.

Restriction oncompany payingdebts and otherliabilities.

6 5 6 . (1) Subject to subsection (2), a company inrespect of which a moratorium has effect may make apayment in respect of a debt or other liability of the



liabilities.payment in respect of a debt or other liability of thecompany that was in existence before the beginning of themoratorium only if—

(a ) there are reasonable grounds forbelieving that the payment will benefitthe company; and

(b ) the payment is approved by themoratorium committee or, if there is no

such committee, by the provisionalsupervisor.

(2) Subsection (1) does not apply to a payment—

(a ) required by section 657(6); or

(b ) made in accordance with an order of theCourt.

(3) If a company makes a payment incontravention of subsection (1), the company, and eachofficer of the company who is in default, commit an offence.

(4) A company that is found guilty of an offenceunder subsection (3) is liable on conviction to a fine notexceeding one million shillings.

(5) An officer of a company who is found guiltyof an offence under subsection (3) is liable on conviction toa fine not exceeding five hundred thousand shillings or toimprisonment for a term not exceeding twelve months, or toboth.

5192 he In Bill. 2012

Circumstances inwhich companymay dispose of

property andgoods that aresubject to asecurity or heldunder creditpurchasetransaction.

657. (1) This section applies to—

(a ) property of the com pany that is subject

to a security; and(b) goods tha t a re in the possession of the

company under a credit purchasetransaction.

(2) If, in relation to property to which this sectionapplies—



(a) the holder of the securi ty consents; or(b ) the Co urt gives leave,

the com pany m ay.dispose of the property as if it were notsubject to the se curity.

(3) If, in relation to goods to which this sectionapplies—

(a ) the owner of the goods consents; or(b ) the Cour t g ives leave,

the com pany m ay dispose of the goods as if all rights of theow ner under the credit purchase transaction were vested inthe com pany.

(4) If property subject to a security that, as

created, was a floating charge. is disposed of in accordanc ewith subse ction (2), the holder of the security has the sam epriority in respect of property of the company directly orindirectly representing the property disposed of as the ho lderwo uld have h ad in respect of the property subject to thesecurity.

(5) Subsection (6) applies to—

(a) the disposal under subsection (2) ofproperty that is subject to a sec urityother than a se curity that, as created,was a floating charge; and

The hi.volrettcy Bill . 2012 193

(b) ' the disposal under subsection (3) ofgoods that are in the possession of the,company under a credit purChasetransaction.

(6) It is a condition of a consent or leave undersubsection (2) or (3) that—

(a ) the net proceeds of the disposal; and

(b ) if those proceeds are less than such



amount as may be agreed, ordetermined by the Court, to be the netamount that would be realised on a saleof the property or goods in the openmarket by a willing vendor—suchamounts as may be required to makegood the deficiency,

are to be applied towards discharging the amounts securedby the security or payable under the credit purchasetransaction.

(7) If a condition imposed by subsection (6)relates to two or more securities, that condition requires—

(a ) the net proceeds of the disposal; and

(b ) if paragraph (b) of subsection (6)

applies—the amounts referred to in thatparagraph,

to be applied towards discharging the amounts secured bythose securities in the order of their priorities.

(8) If the Court gives leave for a disposal undersubsection (2) or (3), the directors shall, within fourteendays after leave is given, lodge with the Registrar forregistration a copy of the order giving leave.

(9) If the directors fail to comply with subsection(8), each of them who is in default commits an offence andon conviction is liable to a fine not exceeding two hundred


thousand shillings.

(10) If, after any of the directors has b een

convicted of an offence u nder subsection (9), the directorscontinue to fail to lodge the required copy w ith the Registrarfor registration, each of the d irectors who is in defaultcom m its a further offence on each d ay On w hich the failurecontinues and on c onviction is liable to a fine not exceedingtwenty thousan d shillings for each such offence .



Subdivision 4— Provisional supervisors

Provisional

sup rvisor tomonitor activitiesof companyduringmoratorium.

658. (1) During the moratorium, the provisionalsupervisor is responsible for monitoring the company'saffairs in order to ascertain whether—

(a) the proposal or, if tha t supervisor hasreceived notice of proposedmodifications in accordance withsection 663(3), the proposal asmodified, has a reasonable prospect'ofbeing approved and implem ented; and

(b ) the com pany is likely to have sufficientfunds available to it during theremainder of the m oratorium to enableit to continue to carry on its business.

(2) On being requested to do so by the provisionalsupervisor, the directors of the com pany sha ll provide to thatsupervisor information necessa ry to enable that supervisor tocom ply with subsection (1).

(3 ) In ascertaining the m atters referred to insubsection (1), the prov isional supervisor is entitled to relyon the information provided by the directors undersubsection (2) unless that supervisor has reason to doubt itsaccuracy.

The Insolvency Bi l l . 2012

(4) The reference in subsection (I )(b) to thecompany's business is to that business as proposed to becarried on by the company during the remainder of the

moratorium.

5195

(5 ) If the directors fail to comply with a requestmade by the provisional supervisor under subsection (2),each of the directors who is in default commits an offenceand on conviction is liable to a fine not exceeding fivehundred thousand shillings.

(6 ) If after a director has been convicted of an



(6 ) If, after a director has been convicted of anoffence under subsection (5), the directors continue to failcomply with the request or another such request, each of thedirectors who is in default commits a further offence oneach day on which the failure continues and on conviction isliable to a fine not exceeding fifty thousand shillings foreach such offence.

659. (1) Except with the approval of the Court, aprovisional supervisor may withdraw consent to monitor amoratorium only if, during the moratorium—

(a) that supervisor concludes that-

(i) the proposal or, if that supervisorhas received notice of proposedmodifications under section663(3), the proposal as modifiedno longer has a reasonableprospect of being approved orimplemented; or

(ii) the company will not havesufficient funds available to itduring the remainder of themoratorium to enable it tocontinue to carry on its business;

(b) that supervisor becomes aware that the

Withdrawal ofprovisionalsupervisor'sconsent to act.

5196 he Incolven•y Bi l l , 2012

company w as not, on the lodgementdate, eligible for a moratorium; or

(c) the directors fail to comply with their

duty und er section 658(2) (provisionalsupervisor to monitor activities ofcompany during moratorium).

(2) The reference in subsection (1)(a)(ii) to thecompany's business is to the business that the companyproposes to carry on during the remainder of themoratorium.



(4) If the provisional supervisor's consent iswithdrawn, the m oratorium ends.

(5) Within seven days after withdrawing consent,the provisional supervisor shall—

(a ) give to the company and any creditor ofwhose claim that supervisor is aware a

notice of withdrawal of consent togetherwith a statement of reasons for thewithdrawal; and

(b) lodge a copy of tha t notice with theRegistrar for registration.

(6) A provisional supervisor who withdrawsconsent to monitor a moratorium without reasonable excuse

commits an offence and on conviction is liable to a fine notexcee ding one m illion shillings.

(7) A provisional supervisor who, withoutreasonable excuse, fails to comply with a requirement ofsubsection (5) commits an offence and on conviction isliable to a fine not exceeding two hundred thousandshillings.

(8) If, after being convicted of an offence undersubsection (7), a provisional supervisor con tinues to fail tocomply with the relevant requirement, that supervisorcomm its a further offence on each day on which the failure

51971• Insolvency Bi l l . 2012

continues and on conviction is liable to a fine not exceedingtwenty thousan d shillings for each such offence .

660 . 1 ) Any creditor, director or member of thecompany, or any other person affected by a moratorium,who is dissatisfied with an act, omission or decision of theprovisional supervisor during the moratorium may apply tothe Co urt for an order under subsection (3).

(2) An application may be made during the

Creditors andothers maychallengeprovisionalsupervisor sconduct duringmoratorium byapplication madeto the Court.



m oratorium or after it has ended .(3) On the hearing of an application under

subsection (1). the Court may m ake—

(a) an order confirming, reversing ormodifying the act or decisioncomplained of;

(h) an order giving directions to theprovisional supervisor with respect tothe conduct of the moratorium; or

(c ) such other order as it considersappropriate.

(4) An order under subsection (3) may (amongother things) end the moratorium and, if it does, make such

consequential provision as the Court considers necessary.

661. 1 ) If there are reasonable grounds for believingthat—

(a) as a result of any act, omission ordecisidn of the provisional supervisor

during the moratorium, the companyhas sustained loss; and

(b ) the company does not intend to pursueany claim it may have against that

Creditor maypursue claimagainstprovisionalsupervisor tb•

loss

5198 he Insolvency Bi l l , 2012

supervisor,

any creditor of the com pany m ay m ake an application to theCou rt for an order under subsection (3).

(2) Such an application may be made during them oratorium or after it has ended .

(3) On the hearing of such an application, theCourt may m ake—

(a) an orde r dir ec ting the company topursue any claim against the provisionalsupervisor;



supervisor;

(b ) an order autho rising any creditor topursup such a claim in the name of thecompany; or

(c ) such other order with respect to such aclaim a s it considers appropriate,

unless the Court is satisfied that the act, omission ordecision of that supervisor was reasonable in thecircumstances.

(4) An order under subsection (3) may (amongother things) do all or any of the following:

(a ) impose co nditions on any authoritygiven to pursue a claim;

(b) direc t the company to assist in pursuinga claim;

(c ) give directions with respect to thedistribution of mone y.or other propertyreceived as a result of pursuing a claim;

(d) end the moratorium and, i f i t does ,make such consequential provisions asthe Court considers necessary.

(5) When hearing the application, the Court shallhave regard to the interests of the members and creditors of


the company as a wh ole.

662. (1) An application m ay be m ade to the C ourt foran order under subsection (3)-

(a ) if the provisional supervisor has failedto comply with any duty imposed onthat supervisor under this Division o rhas died— by the directors of thecompany; or

Replacement ofprovisionalsupervisor by theCourt.



(b ) if it is impracticable or inappropriate forthat supervisor to continue as such—bythose d irectors or that supervisor.'

(2 ) On the hearing of an application made un dersubsection (1), the Cou rt may m ake an order directing theprovisional supervisor to be replaced as such by anotherauthorised insolvency practitioner.

(3 ) An au thorised insolvency practitioner ma y beappointed as a replacem ent provisional supervisor under thissection only if the practitioner has lodged w ith the Cou rt awritten consent to act as such .

Subdivision 5— Considerat ion o f proposalfor and implemen tation ofvoluntary arrangem ent

Provisionalsupervisor toconvene meetingsof the companyand its creditors.

663. (1) When a m oratorium h as effect, the provisionalsupervisor shall convene—

(a ) a m eeting of the com pany; and

(b ) a meeting of the company's creditors,to be held on such dates (w ithin the period specified insection 645(3)), and at such times and places, as thatsupervisor considers appropriate.


1`, The persons to be summoned to a creditors'm eeting under this section are all those creditors of thecompany of whose claims the provisional supervisor isaware.

(3 ) The directors of the compa ny m ay, not laterthan seven days before the dates on w hich the m eetings are,or either of those m eetings is, to be held, give notice to theprovisional supervisor of any mo difications of the proposalfor which the directors intend to seek the approval at thosemeetings.

(4 ) The provisional supervisor m ay convene as



Conduct ofmeetings ofcompany and itscreditors.

(4 ) The provisional supervisor m ay convene asm any m eetings of the compi ny and of its creditors as appearto be ne cessary for the purpc ;es of this section.

664. (1) The main pu pose of the first meetingconven ed under section 663 pi Dvisional supervisor toconvene m eetings of compan y and of its creditors) is todecide w hether to approve the proposal or that proposal withmodifications.

(2) At the beginning of a creditors' meeting, theme eting shall elect one of their num ber to be chairperson ofthe meeting.

(3 ) At the first creditors' meeting, the chairperson

shall divide the mee ting into three groups for votingpurposes, with the first group com prising; secured creditors(if any), the second group com prising preferential creditors(if any) and the third group com prising unsecured creditors.

(4 ) A modification to the proposal may beapproved only if the com pany con sents to it.

(5 ) A modification to the proposal may provide

for the replaceme nt of the provisional supervisor by anotherauthorised insolvency practitioner who w ill act as thesupervisor of the proposal if it takes effect as a voluntaryarrangement.


(6) If the proposal or a modification to it affectsthe right of a secured creditor of the company to enforce thecreditor's security, it may not be approved unless—

(a ) the creditor consents to it; or(b ) if the creditor does not consent to it-

(i) would be in a position no worsethan if the company was inliquidation;

(ii) would receive no less from the



assets to which the creditor'ssecurity relates, or from theirproceeds of sale, than any othersecured creditor having a securityinterest in those assets that has thesame priority as the creditor's; and

(iii) would be paid in full from those

assets, or their proceeds of sale,before any payment from them ortheir proceeds is made to anyother creditor whose securityinterest in them is ranked belowthat of the creditor, or who has nosecurity interest in them.

(7) Subject to this section, the meetings of thecompany and of the creditors A re to be conducted inaccordance with the rules (if any) prescribed by theinsolvency regu lations.

(8) Either meeting may at any time resolve that itbe adjourned, or further adjourned.

(9) As soon as practicable after the conclusion of

the meeting, the chairperson—(a ) shall report the result of of the meeting

to the Court; and

(b ) immediately after doing so, shall give


notice of the result of the m eeting to allpersons to w hom the notice conveningthe meeting wa s sent.

Approval ofproposal forvoluntaryarrangement.

665. (1) This section applies to the decisions taken atthe meeting of the company and the m eeting of thecompany's creditors held in accordance with section 664(conduct of me etings of company a nd its creditors) toconsider a proposal for a voluntary arrangement (with orwithout m odifications).



(2) The proposal (including any modifications) isapproved if—

(a) it is a approved—

(i) by a m ajority the mem bers of thecom pany present (either in personor by proxy) at the m eeting of the

company; and(ii) by a ma jo rity (in number and

value) of the m embers of eachgroup of creditors present (eitherin person or by proxy) at themeeting of creditors; or

(b) if, despite not being not approved by a

m ajority of the m em bers referred to inparagraph (a)(i), it is approved by am ajority (in number and va lue) of themembers of each of the groups ofcreditors referred to in paragraph (a)(ii).

(3) For the purposes only of deciding whether therequisite majority by value has voted in favour of a

resolution to approve the proposal—(a) the chairperson of the meeting may-

(i) admit or reject proofs of debt; and


(ii) adjourn the meeting in order toadmit or reject proofs of debt; and

(b) a person whose debt has been admittedis a creditor.

(4) At any time before the deadline for making anapplication under this subsection, any member of thecompany, or any creditor, who attended or was entitled toattend the meetings may make an application to the Courtfor an order und er subsection (7).



(5) The deadline for making an application undersubsection (4) is—

(a ) the expiry of twenty-eight days after theholding of the meetings of the companyand its creditors (or if the meetings wereheld on different days, the later. of themeetings); or


(6) Any member of the company, and anycreditor, who attended or was entitled to attend the meetingsis entitled to appear and be heard at the hearing of theapplication even if the member or creditor is not theapplicant. The right conferred by this subsection may beexercised by such a member or creditor irrespective ofwhether the member or creditor supports or has an interestin the implementation of the proposal.

(7) On the hearing of an application made undersubsection (4), the Court may—

(a ) make an order approving the proposal(with or without the modifications (ifany) put to the meetings in accordancewith section 664); or

(b ) make such other order as it considersappropriate.

5204 he insolvency Bill 2012

(8) The Court may make an order undersubsection (7)(a) even if the proposal (or a m odification toit)—

(a ) was not approved at the companymeeting; or

(b ) was not approved at the creditors'meeting by a majority of thepreferential creditors' group or theunsecured creditors' group, but only ifthe proposed arangement (or

difi i )



modification)--

(i) has been approved by a majorityof the secured creditors' group;

(ii) does not discriminate am ong themembers of the dissenting groupor groups of creditors and ensuresthat they will be no worse off thanthey would have been if thecompany had been liquidated; and

(iii) respects the priorities ofpreferential creditors overunsecured c reditors.

Voluntaryarrangementbinding oncompany andcreditors.

666. 1) A proposal (with or without m odifications)takes effect as a voluntary arrangement by the company onthe day after the date on which it is approved by the Courtby order made under section 665(7)(a) or on such later dateas m ay be specified in the order.

(2) On taking effect, a voluntary arrangementbinds—

(a) every member of the company who-

(i) was entitled to vote at the meetingof the company (whether present


or represented at the meet ing ornot); or

(ii) would have been so entit, ed if themember had received notice ofthat meeting; and

(b) every person (including a securedcreditor and a preferential creditor)who

(i) wa s entitled to vote at the me eting

f dit ( h th t



of creditors (whether present orrepresented at the m eeting or not);or

(ii) would have been so entitled if theperson had received notice of thatmeeting,

as if the mem ber or person were a party to the arrangement.

(3) If—

(a ) when the arrangement ends—an amountpayable under the arrangement to aperson bound because of subsection(2)(b)(ii) has not been paid; and

(b ) the arrangement did not end

prematurely,the company immediately becomes liable to pay the amountto that person.

(4) If an application for the liquidation of thecompany, other than an excepted application, was madebdore the beginning of the moratorium, the Court shalldismiss the application.

(5) The Court may not dismiss such anapplication—

(a) before the expiry of twenty-eight daysfrom and including the first day on


wh ich each of the reports of them eetings required by section 664(9)was m ade to the Court;

(b) whi le an applica tion under sec tion 667is pending; or

(c ) while an appeal against an order madeunder that section is pending; or

(d) during the period wi th in which such anappeal may be made.

(5) In this section excepted application has the



(5) In this section, excepted application has them eaning given by section 649(4) (effect of moratorium o ncreditors and othe rs).

Right to challengedecisions relatingto approved

voluntaryarrangement.

667. (1) The following persons may m ake anapplication to the C ourt for an order und er subsection (5):

(a) a person enti tled to vote a t the companymeeting or the creditors' meeting;

(b) a person who would have been enti tledto vote at the creditors' meeting if theperson had h ad notice of it;

(c) the provis ional supervisor or, if theproposal has taken effect as a voluntaryarrangement, the supervisor of thearrangement.

(2) Such an application may be made on one orboth of the follow ing grounds:

(a ) that a voluntary arrangement approvedat the meetings held in accordance with

section 664 and that has taken effectdetrimentally affects the interests of acreditor, m em ber or contributory of thecompany;

(b) that there has been some material


irregularity at or in relation to either ofthose meetings.

(3) An application under subsection (1) isineffective unless it is made—

(a ) within twenty-eight days from andincluding the first day on which both ofthe reports required by section 664(10)(conduct of meetings of company andits creditors) have been made to theCou rt; or



(b ) in the case of a person who was notgiven notice of the creditors' meeting—within twenty-eight days from andincluding the day on w hich the personfirst became aware that the m eeting hadtaken place.

(4) However, an application made by a personreferred to in subsection (1)(b) on the ground that thearrangement detrimentally affects the person's interests maybe made after the arrangement has ceased to have effect,unless it ended prem aturely.

( s ) If, on the hearing of an application made underthis section, the Court is satisfied as to either of the grounds

referred to in subsection (2), it may do any of thefollowing—

(a) make an order revoking orsuspending—

(i) any decision approving thevoluntary arrangement inaccordance with section 664,

(conduct of meetings of companyand its creditors); or

(ii) in a case in which paragraph (b) ofsubsection (2) is relevant—anydecision taken at a meeting


referred to in that paragraph;

(b) give a direction to the provisionalsupervisor or the supervisor—

(i) to convene further meetings toconsider a revised proposal for avoluntary arrangement that thedirectors may make; or

(ii) in a case in which paragraph (b) ofsubsection (2) is relevant—toconvene a further meeting, or afurther creditors' meeting, to



g,reconsider the original proposal.

(6) If, at any time after giving a direction undersubsection (5)(b)(i), the Court is satisfied that the directorsdo not intend to submit a revised proposal, the Court shallrevoke the direction and revoke or suspend any decisionapproving the voluntary arrangement that has effect undersection 666 (voluntary arrangement binding on companyand creditors).

(7) If the Court gives a direction under subsection(5)(b), it may also give a direction continuing or, renewing,for such period as may be specified in the direction, theeffect of the m oratorium.

(8) Subsection (9) applies if the Court, on thehearing of an application made under this section—

(a) gives a direction under subsection(5)(b); or

(b ) revokes or suspends a decision undersubsection (5)(a) or (6).

(9) In such a case, the Court may give suchancillary directions as it considers appropriate and, inparticular, directions with respect to—

(a) acts done or omitted to be done underthe voluntary arrangement sinceit took


effect; and

(b) such acts done or omitted to be donesince that time as co uld not have beendone if a moratorium had b een in effectin relation to the company w hen theywere done o r omitted to be done.

(10) Except a provided by this section, a decisiontaken at a meeting held in accordance w ith section 664 is notinvalidated by an irregularity arising at or in relation to themeeting.



668. (1) W hen a voluntary arrangem ent has taken mplementation

effect, the provisional supervisor who w as appointed in f voluntary

respect of the m oratorium becom es the supervisor of therrangement.

voluntary arrangement, unless another insolvencypractitioner is nom inated to replace that supervisor in

`accordance with a modification made to the arrangementunder section 664(5), in wh ich case that practitionerbecom es the supervisor of the arrangeme nt.

(2 ) W hile the voluntary arrangem ent has effect,the supervisor is responsible for implementing thearrangemen t in the interests of the com pany and its creditorsand m onitoring its com pliance by the com pany inaccordance w ith its terms.

(3 ) A creditor the com pany, or any other person,wh o is dissatisfied with any act, omission or decision of thesupervisor of the voluntary arrangemen t may apply to theCou rt for an order under subsection (4).

(4 ) On the hearing of an application made u nder

subsection (3), the Co urt may—(a) make an order confirming, reversing or

mo difying the act or decision of thesupervisor of the voluntaryarrangement;


(b ) make an order giving the supervisordirections as to how to proceed with thesupervision; or

(c ) make such other order as it considersappropriate.

5) The supervisor—

(a ) ma y apply to the Court for directions inrelation to any particular matter arisingunder that arrangement; and

(b ) is included among the persons who m ayl t th C t f li id ti



apply to the Court for a liquidationorder or adm inistration order to bem ade in respect of it.

(6) A creditor of a company in respect of which a •voluntary arrangement has effect, or any other person whoclaims to have a legitimate interest in the matter, may make •

an application to the Court for an order appointing anauthorised insolvency practitioner—

(a) to replace an exis ting supervisor of thearrangement;

(b ) as an additional supervisor of thearrangement; or

(c ) to fill a vacancy in the position ofsupervisor of the arrangement.

(7) If, on the hearing of such an application theCourt considers—

(a ) that it be in the best interests of thecom pany and its creditors to make theappointment; and

(b ) that it would be difficult orimpracticable for the appointment to bemade without the assistance of theCourt


it shall make an order appointing the authorised insolvencypractitioner specified in the application, or nominated by theapplicant, to be a supervisor of the voluntary arrangement,but otherwise it shall refuse the application.

Subdivision xtension of mo ratorium

669. (1) Subject to subsection (2), a meeting heldunder section 664 (conduct of meetings of company and itscreditors.) that resolves that the meeting be adjourned (or

Circumstances inwhich

moratorium maybe extended



) g j (further adjourned) may resolve that the moratorium beextended (or further extended), with or without conditions.

(2) The moratorium may not be extended (orfurther extended) to a day later than the end of the period oftwo months from and including—

(a ) if both meetings convened under section663 are first held on the same date—that date; or

(b ) in any other case—on the date on whichthe later of those meetings is first held.

(3) At any meeting at which it is proposed toextend (or further extend) the moratorium, before a decisionis taken with respect to that proposal, the provisionalsupervisor shall inform the meeting of—

(a ) the action (if any) taken by thatsupervisor to comply with the dutyimposed by section 658 (provisionalsupervisor to monitor activities ofcompany during moratorium) and thecost involved in taking that action; and

(b ) the action that that supervisor intends totake to continue to comply with thatduty should the moratorium be extended


(or further extended ) and the expectedcost of taking that action.

(4 ) If, in accordance with subsection (3)(b), theprovisional supervisor informs a m eeting of the expectedcost of that supervisor's intended action, the mee ting shallresolve whether or no t to approve that expected cost.

(5 ) If a decision not to approve the ex pected costof the provisional supervisor's intended action has effectunder section 673 (effect of decisions of me etings ofcom pany and com pany's creditors), the moratorium en ds.

(6 ) A m eeting may resolve that a mo ratorium thathas been extend ed (or further extended) be ended before the



Conditions forextension ofmoratorium.

has been extend ed (or further extended) be ended before theend of the period o f the extension (or further extension).

(7 ) The insolvency regulations may provide forthe period specified in subsection (2) to be increased orreduced.

670. (1) The conditions that may be imposed w hen amo ratorium is extended (or further extended) include arequirement that the provisional supervisor be replaced assuch by another authorised insolvency practitioner.

(2 ) An a uthorised insolvency practitioner may beappointed as a replacem ent provisional supervisor as

provided by subsection (1) only if the practitioner haslodged with the C ourt a written consent to act as such.

(3 ) At any m eeting at which it is proposed toappoint a replacement provisional supervisor as a conditionof extending (or further extending) the moratorium—

(a ) the duty imposedby section 66 9(3)(b)on that supervisor is instead imposed'onthe person proposed as the replacementprovisional supervisor; and

(b ) sections 669 (4) and (5) and 673(2)(e)

5213he Insolvency Bill. 2012

apply as if the references to theprovisional supervisor were to thatperson.

671. (1) If a decision to extend, or further extend, themoratorium takes effect under section 673 (effect ofdecisions of meetings of company and company's creditors),the provisional supervisor shall give notice of the decision tothe Court and, within seven days of having done so, lodge acopy of the notice with the Registrar for registration.

(2) If the moratorium is extended, or further

Decisions toextend or furtherextendmoratorium.



extended, because of an order under section 673(6), theprovisional supervisor shall lodge a copy of the order withthe Registrar for registration.

(3 ) A provisional supervisor who, withoutreasonable excuse, fails to comply with a requirement of this

section commits an offence and on conviction is liable to afine not exceeding two hundred thousand shillings.

(4 ) If, after being convicted of an offence undersubsection (3), a provisional supervisor continues to fail tocomply with the relevant requirement, that supervisorcommits a further offence on each day on which the failurecontinues and on conviction is liable to a fine not exceedingtwenty thousand shillings for each such offence.

672. (1) A meeting convened in accordance withsection 663 (provisional supervisor to convene meetings ofcompany and its creditors) that resolves that the moratoriumbe extended (or further extended) may, with the consent ofthe provisional supervisor, resolve that a committee beestablished to perform the functions imposed on it by themeeting.

(2) The meeting may not so resolve unless it hasapproved an estimate of the expenses to be incurred by the

Meeting ofcompany orcreditors mayestablishmoratoriumcommittee.


committee in the performance of the proposed functions.

(3 ) Any expenses, not exceeding the amount ofthe estimate, incurred by the committee in the performance

of its functions are reimbursable by the provisionalsupervisor or, if the proposal has taken effect as a voluntaryarrangement, the supervisor of the arrangement.

(4 ) A moratorium committee ceases to exist whenthe m oratorium ends.

Subdivision 7=Supplementary provisions



Effect of certaindecisions ofmeetings ofcompany andcompany'screditors.

673. (1) If a decision is made under this Division withrespect to a matter to which this section applies, the decisionhas effect if—

(a) i t has been taken by both meetings held

in accordance with section 664 (conductof meetings of company and itscreditors); or

(b ) subject to any order made undersubsection (6)—it has been taken by thecreditors' meeting held in accordancew ith that section.

(2) This section applies to the following matters:

(a ) the extension (or further extension) of amoratorium;

(b ) the ending of a mora to rium;

(c ) the establishment of a moratoriumcommittee;

(d ) the approval of the expected cost'of aprovisional supervisor's intendedactions.


(3) If a decision taken by a creditors' meetingunder this Division with respect to any of the matters towhich this section applies differs from one so taken by the

company meeting with respect to that matter, the decisiontaken at the creditors' meeting prevails.(4) However, a member of the company who is

dissatisfied with the decision taken by the creditors' meetingand the resultant effect of subsection (3) may apply to theCourt for an order under' subsection (6).

(5) An application under subsection (4) has noeffect unless it is made within twenty-eight days from andincluding—



g(a) the date on which the decision was

taken by the creditors' meeting; or(b) if the decision of the company meeting

was taken on a later date— that date.

(6) On the hearing of an application made undersubsection (4), the Court may—(a) make an order directing the decision of

the company meeting to have effectinstead of the decision of the creditors'meeting; or

(b) make such other order as it considersapprqpriate,

but only if it is satisfied that the order would be in the bestinterests of the company and its creditors.

674. (1) This section applies to and in relation to actsor omissions of the directors of a company during amoratorium.

(2) A creditor or member of the company mayapply to.the Court for an order under this section on theground—

Member orcreditor ofcompany may

challenge actionsof directors.


(a ) that the company's affairs and propertyare being or have been m anaged by thedirectors in a manne r that is detrimentalto the interests of its creditors orm em bers generally, or of a specificclass of its creditors or me m bers(including at least the applicant); or

(b ) that any actual or proposed act orom ission of the directors is or wou ld bedetrimental.

(3) An application for an order under this sectionmay be m ade during or after the moratorium.



(4) On the hearing of an application for an ordermade under this section, the Court may—

(a ) make such order as it considersappropriate for giving relief in respectof the matters complained of

(b ) adjourn the hearing conditionally oruncond itionally; or

(c ) make an interim order or such otherorder as it considers a ppropriate.

(5) In particular, an order under this sectionmay—

(a ) regulate the managem ent by thedirectors of the company's affairs andproperty during the remainder of themoratorium;

(b ) require the directors—

(i) to refrain from doing orcontinuing an act complained ofby the applicant; or

(ii) to do an act that the applicant hascomplained they have omitted to

The insolvency Bill, 2012 217

do;

(c ) require a meeting of creditors ormem bers to be convened for thepurpose of considering such m atters asthe Cou rt may specify;

(d ) end the moratorium and make suchconsequen tial provision as the Courtconsiders appropriate.

(6 ) In making an o rder under this section, theCou rt shall have regard to the n eed to safeguard the interestsof persons who hav e dealt with the com pany in good faithand for value.



and for value.

(7 ) If—

(a) the appointment of an administrator haseffect in relation to the com pany andthat appointment was made in

accordance with—(i) an application for adm inistration

of the company; or

(ii) a notice of intention to make suchan appointment,

mad e before the moratorium took effect;

or(b) the company is in liquidation in

accordance with an application madebefore the mo ratorium took effect.

an application for an order und er this section may b e mad eonly by the a dm inistrator or, if there is one., the liquidator.-

675. (1) This section applies to a com pany in respect ofwh ich a moratorium ha s or had effect.

(2) A person wh o, at any time during the twelve

Offences underthis Division.


months im mediately preceding the date on w hich themoratorium took effect was an officer of the company—

(a ) did an a ct specified in subsection (4); or

(b ) wa s privy to the doing by others of anact specified in su bsection (4)(c), (d) or(e),

the person is taken to have committed an offence at thattime.

(3) A person who, during the moratorium, is anofficer of the company, commits an offence if the person—

(a ) does an act specified in subsection (4);or



or

(b ) is privy to the doing by othe rs of an actspecified in subsection (4)(c), (d) or (e).

(4) The following acts are specified for thepurpose of su bsections (2) and (3):

(a ) concealing any part of the company'sproperty to the value of fifty thousandshillings or m ore, or concealing anydebt due to or from the company;

(b ) fraudulently removing any pa rt of thecompany's property to the value of fiftythousand shillings or more;

(c ) concealing, destroying, mutilating orfalsifying any record affecting orrelating to the company's property oraffairs;

(d) making a fa lse entry in any recordaffecting or relating to the company's

property or affairs;(e) fraudulently part ing with, al tering or

making any om ission from a docum entthat affects or relates to the compan y's


property or affairs; or

(f) pawning, pledging or disposing ofproperty of the com pany that has been

obtained on credit and has not been paidfor (unless the paw ning, pledging ordisposal was in the ordinary course ofthe company's business).

(5) In a prosecu tion for an offence unde rsubsection (2) or (3) in relation to an act specified insubsection (4)(a) or (f), it is a defence to prove that the

defendant had n o intention to defraud.(6) In a prosecution for an offence u nder



subsection (2) or (3) in relation to an act specified insubsection (4)(c) or (d), it is a defence to prove that thedefendan t had no intention to conceal the state of affairs ofthe company or to defeat the law.

(7) If a person paw ns, pledges or disposes of anyproperty of a com pany in circumstances that wouldconstitute ah offence u nder subsection (2) or (3), eachperson wh o takes in pawn or pledge, or otherwise receives,the property knowing it to be pawned , pledged or disposedof in circumstances that—

(a ) would, if a moratorium were obtainedfor the company within the twelvemonths beginning with the day onwh ich the pawning, pledging ordisposal took place, constitute anoffence un der-subsection (2); or

(b ) constitute an offence under subsection(3),

comm its an offence.

(8) A person foun d guilty of an offence u nder thissection is liable to a fine n ot exceeding five million shillingsor to imprisonmen t for a term no t exceeding five years, or to


Certain provisionsin floating chargedocuments to bevoid.

both.

(9) The insolven cy regulations may increase orreduce the amoun ts specified in subsection (4).

676. A provision in a docu men t creating a floatingcharge is void if it provides for—

(a ) obtaining a moratorium; or

(b ) any action taken with a view toobtaining a moratorium (including anypreliminary decision o r investigation),

to be an event that wo uld cause the floating charge to



to be an event that wo uld cause the floating charge tocrystallise or wo uld result in restriction that w ould no totherwise apply being impo sed on the disposal of propertyby the company.

PA R T X — P R O V I SI O N S A P P L IC A B L E TO C O M PA N I ES I NL IQ U ID AT I O N O R U ND ER A D M I NI ST R AT I O N

Interpretation: 77. In this Part—Part X.

"deliver", in relation to doc um ents or otherproperty, includes surrender and transfer;

"office-holder", in relation to a com pany, mea ns theadm inistrator, the liquidator or the provisional liquidator, asthe case requires.

Realisingproperty ofcompany that is inliquidation orunder

687. (1) This section applies to a com pany—(a ) that enters administration;

(b ) in respect of which a liquidator is


administration.appointed; or

(c ) in respect'of w hich a provisionalliquidator is appointed;

(2) If a person h as control over money, docu mentsor other property to wh ich the com pany appears to beentitled, the Cou rt may require that person imm ediately, orwithin such period as the C ourt may d irect, to pay themo ney or deliver the docum ents or other propertydocum ents to the office-holder.

(3) Subsection (4) applies if an office-holder-

(a ) seizes or disposes of property that is notproperty of the com pany; and



p p y p y;

(b ) at the time o f seizure or disposalbelieves on reasonable grounds that theoffice-holder is entitled (whether u nderan order of the Co urt or otherwise) to

seize or dispose o f that property.(4) Wh en this subsection applies, the office

holder—

(a ) is not liable to any person in respect ofany loss or damag e resulting from theseizure or disposal except in so far asthat loss or damage is caused by the

office-holder's own negligence; and(b ) has a lien o n the property, or the

proceeds of its sale, for such expensesas were incurred in connection w ith theseizure or disposal.

Duty of certainpersons to co-operate withoffice-holder.

679. (1) In this section, "office holder", in relation to acom pany, also includes the Official Receiver even if not theliquidator.

(2) Subsection (3) applies to the follow ing



The Insolvency B i l l, 2012 5223

as that holder may reason ably require.

(4) For the purposes of subsections (2) and (3),the effective date , in relation to a company, is whichever

of the following da tes is applicable:

(a ) the date on which the company en te redadministration;

(b ) the da te on which a prov is iona lliquidator was appointed in respect ofthe company;

(c ) the date on which the liquidation of the

company com menced.(5) A person who, without reasonable excuse,

fails to comply with a requirement imposed by this section



fails to comply with a requirement imposed by this sectioncommits an offence and on conviction is liable to a fine notexceeding five hundred thousand shillings.

(6) If, after being convicted of an offence undersubsection (5), the person continues to fail to comply withthe relevant requirement, the person commits a furtheroffence on each day on which the failure continues and onconviction is to fine not exceeding fifty thousand shilling foreach such offence.

680. (1) In this section, office holder , in relation to a

company, includes the Official Receiver even if not theliquidator.

(2) On the application of an office-holder, theCourt may summon to appear before it—

(a ) any officer of the company;

(b ) any person who is known or suspected

to have control over any property of thecompany or believed to be indebted tothe company; or

(c ) any person whom the Court believes

Power of theCourt to conductinquiry intoinsolventcompany'sdealings, etc. onapplication m adeby office-holder.

5224 he Insolvency Bill. 20 12

capable of giving informationcramm ing the prom otion, formation,affairs or property of the company.

(3) The C ourt may requ ire a person referred to in

subsection (2)(a) to (c) to submit an affidavit to the C ourtcontaining an accou nt of the person's dealings with thecompany or to produce any docum ents under the person'scontrol relating to the com pany or the prom otion, formation,affairs or property of the company.

(4) Subsection (5) applies if—

(a ) after being sum mon ed to appear beforethe Co urt under subsection (2), a personwithou t reasonable excuse fails toappear before the Cou rt; or



appear before the Cou rt; or

(b ) there are reasonable grounds forbelieving that a person h as absconded,or is about to abscond, with a view toavoiding having to appear before the

Court und er that subsection.(5) When this subsection applies, the Court may,

for the purpose of bringing the person and an ything underthe person's control before the Court, issue a warrant to apolice officer or an officer of the Cou rt—

(a ) for the arrest of the person; and

(b ) for the seizure of any m oney,docum ents or other property that isund er the person's control.

(6) If the Cou rt has issued a wa rrant undersubsection (5), it may authorise—

(a ) a person arrested under the w arrant tobe kept in custody; and

(b ) anything seized under the warrant to beheld, until the person is brought beforethe Cou rt under the warrant or until

The Imelreircy Bill. 2012 225

such other time as the Court may order

681. 1,) If it appears to the Court, on consideration of

evidence obtained under section680 or this section, that aperson has control over property of the company, the Courtmay, on the application of the office-holder, order theperson to deliver the whole or any part of the property to theoffice-holder at such time, in such manner and on suchterms as the Court considers appropriate.

(2) If it appears to the Court, on consideration of

evidence so obtained; that a person is indebted to thecompany, the Court may, on the application of the office-holder, order the person to pay to the office holder, at suchtime and in such manner as the Court may direct the whole

Court'sentbrcementpowers undersection 680.



time and in such manner as the Court . may direct, the wholeor any part of the amount due. whether in full discharge ofthe debt or otherwise, as the Court considers appropriate.

(3 ) A person who appears or is brought before theCourt under section 680 or this section can be examined onoath about matters concerning the company or thepromotion. Ibrmation, affairs or property of the company.

Pow er of theCourt to set asidetransaction that isunder value.

682 . 1 ) This section applies to a company that is—

(a ) under administration: or

(b ) in liquidation.(2) In this section, relevant time has the

meaning given by section 684,

(3 ) If an office-holder reasonably believes that thecompany has at a relevant time entered into a transactionwith a person at an undervalue, the office-holder may applyto the Court for an order under subsection (4).

(4 ) It on the hearing of an application made undersubsection (3), the Court finds that the transaction wasundervalue, it shall make an order setting aside the

5226 he hoolvency Bill 2012

transaction and restoring the position to that which wouldhave existed if the company had not entered into thetransaction.

(5) For the purposes of this section and section685, a company enters into a transaction with a person at

undervalue if—(a ) the company makes a gift to the person

or otherwise enters into a transactionwith the person on terms that providefor the company to receive noconsideration; or

(b ) the company enters into a transactionwith the person for a consideration thevalue of which, in money or money'sworth, is significantly less than the



worth, is significantly less than thevalue, in money or money's worth, ofthe consideration provided by thecompany.

(6) The Court may not make an order undersubsection (4) in respect of a transaction at an undervalue ifit is satisfied—.

(a ) that the company that entered into thetransaction did so in good faith and forthe purpose of ca rrying on its business;and

(b ) that at the time it did so there werereasonable grounds for believing thatthe transaction would benefit thecompany.

Power of theCourt to voidpreference.

683. (1) In this section, relevant time has themeaning given by section 684.

(2) If of the view that a company has at a relevanttime given a preference to a person, the office-holder may

The Insolvency Bill 20/2 227

apply to the Court for an order under subsection (3).

(3) If on the hearing of an application made under

subsection (2), the Court is satisfied that the company has ata relevant time given a preference to a person, it shall makean order voiding the act constituted by giving the preferenceand restoring the position that which would have existed ifthe preference had not been given.

(4) For the purposes of this section and section685, a company gives a preference to a person if—

(a ) the person is one of the company'screditors or a surety or guarantor forany of the company's debts or other



any of the company s debts or otherliabilities; and

(b ) the company does any act or allows anact to be done that (in either case).hasthe effect of placing the person in aposition that, if the company were ininsolvent liquidation, is better than theposition the person would have been inhad that act not been done.

(5) The Court may not make an order undersubsection (3) in respect of a preference given to a personunless it is satisfied that the company that gave thepreference was influenced in deciding to give it by a wish toproduce in relation to that person the effect referred to insubsection(4)(b).

(6) A company that has given a preference to aperson connected with the company(otherwise than by beingits employee) at the time when the preference was given ispresumed, in the absence of evidence to the contrary, tohave been influenced in deciding to give it by such a wish asis referred to in subsection (5).

(7) The fact that action has been taken inaccordance with the order of a Court does not, withoutmore, prevent the doing or suffering of that action thing

5228 he hisolvemiv Bill. 2012

from c onstituting the giving of a preference.

What - relevanttime means insections 682 and683.

684. (1) Subject to subsection (2), the tim e at which acom pany enters into a transaction at an undervalue or givesa preference is a relevan t tim e if the transaction is enteredinto, or the preference is given—

(a ) in the case of a transaction at anundervalue or of a preference w hich isgiven to a person who is connected withthe company (otherwise than because ofbeing its employee)—at a time duringthe two years immediately preceding



y y p gthe onset of insolvency;

(b ) in the case of a preference w hich is notsuch a transaction and is not so given—at a time during the six monthsimmediately preceding the onset ofinsolvency;

(c ) in either case— at a time between them aking of an adm inistration applicationin respect of the com pany and them aking of an adm inistration order onthe application; and

(d ) in either case— at a time betweenlodgement with the Court of a copy ofnotice of intention to appoint anadministrator under-

(i) section 534 (holder o f floatingcharge may appointadministrator); or

(ii) section 541 (compa ny or itsdirectors may appointadministrator),


and the mak ing of an appoin tment underthat section.

(2) I f a com pany enters in to a t ransac t ion a t anunderva lue or gives a preference at a t ime referred to insubsect ion (1)(a) or (b) , that t ime is a relevant t ime for thepurposes o f s ec tion 682 o r 683 on ly i f the com pany—

(a ) is a t that time unab le to pay i ts debts ; or

(b ) becom es unable to pay i t s debts inconsequ ence of the t ransact ion or

preference.(3) How ever, the condi t ions in sub sec t ion (2) a re ,

in the absence of ev idence to the cont rary, p resum ed to ex is ti l i i d l h i d i



in relation to a transaction at unde rvalue that is entered intoby the com pany w i th a person w ho i s connected wi th it .

(4) For the pu rposes o f subsec t ion (1) , the onse t ofin so lvency i s—

(a ) i f sec tion 682 or 683 appl ies because anadm inis t rator of a comp any has beenappointed by an adm inistrat ion order—the date on which the adm inistrat ionapp licat ion is m ade;

(b ) i f e ither of those sect ion a pp lies becau sean adm inistrator of a com pany isapp ointed under sect ion 534 or 541fo l low ing lodging wi th the Cou r t of acopy o f a no t ice of in ten t ion to app oin tunder tha t sec t ion— the da te on w hichthe copy of the not ice i s lodged;

(c ) i f sec tion 682 or 683 appl ies because anadm inis t rator of a com pany i s appoin tedotherw ise than a s referred to inparagraph (a ) o r (b)— the da te on w hichthe appointm ent takes effect ;

(d ) i f sec tion 682 or 683 appl ies because a

5230 he hisolvenc y Bill, 2012

liquidator is appointed in respect of thecompany, either following conversionof adm inistration into liquidation or a t

the time when the appointment of anadministrator ends—the date on w hichthe company entered administration (or,if relevant, the date on w hich theapplication for the adm inistration orderwas made or a copy of the notice ofintention to appoint was lodg ed); and

(e) if section 682 or 683 applies because aliquidator is appointed in respect of thecompAny— the date of thecomm encement of the liquidation



comm encement of the liquidation.

Orders undersections 682 an d683: ancillaryprovisions.

685. (1) An order under section 682 (power of the

Cou rt to set aside transaction that is undervalue) or sec tion683 (pow er of the Court to void preference) with respect to atransaction or preference entered into or given by a com panym ay, subject to subsection (2)—

(a) require property transferred as part ofthe transaction, or in connec tion withthe giving of the preference , to be

vested in the com pany;(b ) require the property to be so ve sted if it

represents the application either of theproceeds of sale of property so

transferred or of m oney so transferre

(c ) release or discharge (in wh ole or inpart) any security given by the

company;(d ) require any person to pay, in respect of

benefits received from the com pany,such am ounts to the office-holder as the


Co urt may specify;

(e) provide for any surety or guarantor

whose obligations to a person werereleased or discharged (in whole or inpart) under the transaction, or by the •giving of the preference, to be su bject tosuch new or revived obligations to theperson as the Court considersappropriate;

0 provide—0 for security to be provided for the

discharge of an obligationimpose d by or arising under the



impose d by or arising under theorder;

(ii) for such an obligation to becharged on specified property; and

(iii) for the security or charge to havethe,sarne priority as a security orcharge released or discharged (inwhole or in part) under thetransaction or by the giving of thepreference; and

(g

provide for the extent to which a personwhose property is vested by the order inthe company, or on whom obligationsare imposed by the order, is to be ableto prove in the liquidation of thecompany for debts or other liabilitiesthat arose from, or were released ordischarged (in whole or in part) under

or by, the transaction or the giving ofthe preference.

(3) An order under section 682 or 683 may affectthe property of, or impose an obligation on, a personwhether or not the person is the one with whom the relevant


com pany entered into the transaction, or the person to whomthe preference was given.

(4) How ever, such an order—

(a ) may not detrimen tally affect an interestin property that—

(1) was acquired from a person otherthan the company; and

(ii) was acquired in good faith and forvalue, or detrimentally affect any

interest that is derived from suchan interest; and

(b ) may n ot require a person who receiveda benefit from the transaction or



a benefit from the transaction orpreference in good faith and for value topay an am ount to the office-holder,unless-

(i) the person was a party to thetransaction; or

(ii) the payme nt is to be in respect of apreference given to that person ata time when the person was acreditor of the com pany.

(5) If a person h as acqu ired an interest in propertyfrom a person other than the relevant com pany, or hasreceived a benefit from the transaction or preference and, atthe time of the acqu isition or receipt, the person—

(a ) had no tice of the relevant surroundingcircumstances and o f the relevantproceedings; or

(b ) was conn ected with, or was an associateof, either the relevant compan y or theperson with whom that companyenteredinto the transaction or to whom


that company gave the preference,

then, for the purposes of paragraph (a) or paragraph (b) of

subsection (4), the interest is presumed to have beenacquired, or the benefit to have been received, otherwisethan in good faith.

(6) For the purposes of subsection (5)(a), therelevant surrounding circumstances, in relation to acompany, are—

(a ) the fact that the company entered intothe transaction at an undervalue; or

(b ) the circumstances that amounted to thegiving of the preference by thatcompany



company,

and subsections (7) to (9) have effect to determine whether,for those purposes, a person has notice of the relevantproceedings.

(7) If section 682 or 683 applies because acompany has entered administration, a person has notice ofthe relevant proceedings if the person has notice that—

(a ) an administration application has beenmade;

(b ) an administration order has been made;

(c ) a copy of a notice of intention toappoint an administrator under section534 or 541 has been lodged; or

(d ) notice of the appointment of anadministrator has been lodged undersection 537 (notice of appointment to begiven to the Court) or section 548(powers of the Court on hearing ofapplication).

(8) If section 683 or 684 applies because aliquidator had been appointed in respect of the company at


the time when the appointment of an administrator of thecompany ended, a person has notice of the relevantproceedings if the person has notice that—

(a) an adm inistration application has bee nmade;

(b ) an adm inistration order has been m ade;

(c ) a copy of a notice of intention toappoint an adm inistrator under section534 has been lodged;

(d ) notice of the appointment of anadministrator has been lodged undersection 537 or 548; or



(e ) the com pany is in liquidation.

(9) If section 682 or 683 applies because aliquidator has been appointed in respect of the com pany at

any other time, a person has notice of the releV antproceedings if the person has -notice—

(a) in a case where a liquidation order hasbeen made in respect of the company—

(i) of the fact that an application forthe appointment of the liquidatorwas m ade; or

(i i) of the fac t tha t the company is inliquidation; an d

(b) in any other case—of the fact that thecom pany is in liquidation.

(10) Nothing in this section or sections 682 to 684affects the availability of any o ther rem edy, even in relation

to a transaction or preference that the compan y had nopow er to enter into or give.

(11) Nothing in subsection (1) limits the Court'spowersunder sections 682(4) and 68 3(3).


686. (1) This section applies to a transaction to which acompany is, or has been, a party to a transaction for, orinvolving, the provision of credit to the company.

(2) An office-holder may apply to the Court for anorder under subsection (3) if the office-holder believes thatsuch a transaction—

(a) is or was extortionate; and(b) was entered into during the three years

immediately preceding the date onwhich the company enteredadministration or on which a liquidator

was appointed in respect of thecompany.(3) If, on the hearing of an application of an

office-holder made under subsection (2), the Court is

Pow er of theCourt to set asidecertainextortionate credittransactions.



satisfied that the transaction is or was extortionate and wasentered into within the period referred to in paragraph (b) ofthat subsection, it shall make one or more of the following

orders:(a) an order setting aside the whole or part

of an obligation created by thetransaction;

(b) an order otherwise varying the terms ofthe transaction or varying the terms onwhich any security for the purposes of

the transaction is held;(c) an order requiring a person who is or

was a party to the tran saction to pay tothe office-holder any amounts paid tothat person by the company inaccordance with the transaction;

(d) an order requiring a person to surrenderto the office-holder property held by theperson as security for the purposes of

The Imolvency Bill 2012

the transaction;

(e) an order directing accounts to be takenbetween the specified persons.

(4) For the purposes of this section, a transactionis extortionate if, having regard to the risk accepted by theperson providing the credit—

(a) the terms of it a re or were such as torequire grossly exorbitant payments tobe made (whether unconditionally or incertain contingencies) in respect of theprovision of the credit; or

(b ) it otherw ise grossly contravenedordinary principles of fair de aling.

(5) A transaction with respect to which anapplication is made under subsection (2) is, in the absence of

5236



evidence to the contrary, presumed to be or to have beenextortionate..

(6) The powers conferred by this section are

exercisable in relation to a transaction concurrently w ith anypow ers exercisable in relation to the transaction as one at anundervalue.

Circumstances inwhich floatingcharge on

company'sundertaking orproperty to beinvalid.

687. (1) Except as otherw ise provided by this section. afloating charge on the company's undertaking or property

created at a relevant time is invalid except to the extent ofthe aggregate of—

(a) an amount equal to the value of som uch of the consideration for thecreation of the charge as consists ofmoney paid, or goods or servicessupplied, to the com pany at the same

time as, or after, the creation of thecharge;


an am ount equal to the value of som uch o f that consideration as consistsof the discharge or redu ction, at thesam e t ime as, or af ter, the creat ion ofthe charge, of any debt of the com pany;and

(c) the am oun t of such in teres t ( i f any) as i spayable on the am ount referred to inparagraph (a) or (b) in accordance w ithan agreement under which the moneywa s so paid, the goods or services wereso supplied or the debt was sodischarged or reduced.

(2) Subject to sub section (3) , the t im e at w hich af loating charge is created by a com pany is a relevant t im efor the purp oses of this section if the charg e is created—

(b)



for the purp oses of this section if the charg e is created

(a ) • in the case of a charge w hich is createdin favour of a person w ho is connected

wi th the com pany— within the twoyears imm ediately preceding the onsetof insolvency;

(b ) in the case of a ch arge that is created infavour of any other person— at a t im e inthe period of twelve m onths endingw ith the on set of insolvency;

(c ) in ei ther case— at a time betw een them aking o f an adm inistration applicationin respect of the com pany and them aking of an administration order onthat app lication; or

(d ) in ei ther case— at a time betw eenlodging with the Cou rt of a copy o f

notice of intention•to appoint anadm inistrator under section 534 or 541and the mak ing of an appointment


under that section.

(3) If a company creates a floating charge at atime referred to in subsec tion (2)(b)and the person in favou rof wh om the charge is created is not connected w ith thecompany, that time is not a relevant time for the purposes of

this section unless the company—(a) is a t tha t t ime unable to pay it s debts; or

(b) becomes unable to pay i ts debts inconsequence of the transaction underwhich the charge is created.

(4) For the purposes of subsection (3), the onset of

insolvency is—(a ) if this section applies becau se an

adm inistrator of a company is appointedby an administration order—the date on

h i h th d i i t ti li ti i



wh ich the adm inistration application ismade;

(b ) if this section applies because an

adm inistrator of a company is appointedunder section 534 or 541 followinglodgement with the Court of a copy ofnotice of intention to appoint unde r thatsection—the date on which the copy ofthe notice is lodged;

(c ) if this section applies because an

adm inistrator of a company is appointedotherw ise than as referred to inparagraph (a) or (b)—the date on whichthe appointme nt takes effect; and

(d ) if this section applies becau se aliquidator has been appo inted in respectof a company— the date of the

comm encement of the liquidation.5 ) For the purposes of subsection (2)(a), the

The Insolvency Bill. 20/2 239

value of any goo ds or services supplied as considerat ion fora f loating charge is the am ount in m oney that , a t the t imethey w ere supplied, could reasonably have been expected tobe obtained for supplying the goo ds or services in theordinary course of business and on the same term s (apartfrom the considerat ion) as those on which they w eresupplied to the com pany.

6 8 8 . (1) This sec t ion app l ies to a compan y—

(a ) that enters adm inistration; or

(b ) in respect of w hich a l iquidatororprovisional liquidator is appointed.

(2 ) A lien or other r ight to retain possession ofany of the docum ents of the com pany is unenforceable toh h i f ld d i f

L i e n i n r e s p e c t o fc o m p a n y sd o c u m e n t su n e n f o r c e a b l e i f i tw o u l d d e n y t h e i rposses s ion tooff i ce -ho lde r.



the extent that i ts enforcem ent wo uld deny po ssession of anyof the docum ents to an off ice-holder.

(3 ) Subsection (2) does not apply to a l ien ondocum ents that confer a tit le to property and are h eld assuch.

6 8 9 . (1) This sec t ion app l ies to a compan y—

(a ) that enters adm inistration;

(b ) in respect of which a m oratorium underPart IX has effect;

(d ) in respect of which a voluntaryarrangem ent under that Part has effect;

(e ) that is in liquidation; or

(f) in respec t of a provisional liquidator is

appointed;(2) I f a reques t is m ade by or w i th the consent of

an office-holder of the com pany for the giving, after the

S u p p l y o f u t i li t yse rv i ces t oc o m p a n i e s inl i q u i d a t io n o r

u n d e radmin i s t r a t ion .etc.


effective date, of any of the supplies specified in su bsection(4), the supplier—

(a ) may m ake it a condition of the giving ofthe supply that the office-holderpersonally guarantees the paym ent ofany ch arges in respect of the supply; but

(b ) may n ot make it a condition forproviding the supply, or take any actionthat has the effect of making it acondition for providing the supply, thatany outstanding ch arges are to be paidin respect of a supply provided to thecompany before the effective date.

(3) The su pplies referred to in subsection (2)are—

(a ) a supply of gas by a g as supplier;



(a ) a supply of gas by a g as supplier;

(b ) a supply of electricity by an electricitysupplier ;

(b) a supply of water by a water supplier;and

(d ) a supply of com mu nications services bya provider of a publictelecommunication or electroniccomm unications service.

(4) For the purposes o f this section, "the effectivedate" for the purposes of this section is w hichever of thefollowing dates

(a ) the date on w hich the company enteredadministration;

(b ) the date on w hich the moratorium tookeffect;

(c ) the date on which the voluntaryarrangement took effect;

The Ins olrency Bill, 2012 241

(d ) the date on wh ich the liquidation of thecompany commenced;

(e ) the date orwhich the provisional-1i 6idator was appointed.

690 . (1) In this section, "adm inistrative rece iver", inrelation to a company, means—

(a ) a receiver or manager of the w hole (orsubstantially the w hole) of thecompany's property appointed by or o nbehalf of the holders of any deb enturesof the company secured by a chargewh ich, as created, was a floating charge,or by such a charge and one or m ore

th iti

Appointment ofadministrativereceiver in respectof companyprohibited.



other securities; or

(b ) a person who wo uld be such a receiveror man ager but for the appointment ofsome other person as the receiver ofpart of the compa ny's property:

(2 ) The ho lder of a floating charge in respect of acom pany's property may not appoint an administrativereceiver of the com pany.

(3 ) An appointment made in contravention of

subsection (2) is void.(4 ) This section does n ot apply to the holder of a

floating charge that was created before the comm encem entof this section or to an appointm ent of an adm inistrativereceiver made before that commencement.

(5 ) This section applies despite any provision ofan agreement or document that purports to empower a

person to appoint an adm inistrative receiver (by w hatevername).

(6 ) This section is subject to the ex ceptions (if


any) prescribed by the insolvency regulations for thepurposes of this section.

PART XI—LEGAL PROCEEDINGS UNDER THIS ACT

Division 1—Provisions against debt avoidance by natural persons

Interpretation andapplication ofDivision I.

691. (1) In this Division—

"debtor", in relation to a transaction at anundervalue, mean s a natural person w ho enters into atransaction t which this Division applies;

"victim" in relation to a transaction at an



victim , in relation to a transaction at anundervalue, means a person w ho is, or could be,detrimentally affected by it.

(2 ) This Division applies to transactions enteredinto at an undervalue by natural persons.

(3 ) For the pu rpose of subsection (2), a personenters into a transaction w ith another person at anundervalue if—

(a ) the person m akes a gift to another

person or otherw ise enters into atransaction w ith another person onterms that provide for the person toreceive no con sideration; •

(b ) the person enters into a transaction withthe other for a consideration the value ofwhich, in mon ey or mon ey's worth, issignificantly less than the value, inmon ey or mo ney's worth, of theconsideration that is provided by the


person; or

(c) the person enters into a transaction withthe other in consideration of marriage

692. (1) If a person h as entered into a transac tion at anundervalue, the Co urt may, if satisfied as provided bysubsection (2), make such order as it considers appropriatefor—

(a ) restoring the position to w hat it wou ldhave been if the transaction had notbeen entered into; and

(b ) protecting the-interests of persons whoare victims of the transaction.

Power of theCourt to makeorders relating totransactionsentered into at anundervalue bynatural persons.



(2) The C ourt may m ake an order undersubsection (1) only if it is satisfied that the transaction w as

entered into by the person for the purpose—(a ) of placing assets beyond the reach of

another person who is making, or mayat sometim e make, a claim against theperson; or

(b ) of otherw ise detrimentally affecting theinterests of that other person in relationto the claim that that o ther person ismaking or may make.

693. (1) An application for an order under section 692may be m ade in relation to a transaction only—

(a) if the debtor has been adjudgedbankrupt-

(i) by the Official Receiver—

(ii) by the bankruptcy trustee of the

Who can applyfor an order undersection 692.


bankrupt's estate; or

(iii) with the leave of the C ourt—by avictim of the transaction;

(b ) if a victim o f the transaction is boun d bya voluntary arrangem ent approvedunder Division 1 of Part IV— by thesupervisor of the voluntary arrangementor by any person who (w hether or not sobound ) is such a victim; or

(c ) in any other case—by a victim of thetransaction.

(2) An a pplication m ade und er subsection (1) istaken to have been m ade on be half of every victim of thetransaction.



Provisions thatmay be includedin order madeunder section692.

6 9 4 .(1) Without limiting section 692, an order m adeunder that section w ith respect to a transaction m ay do all or

any of the following:

(a ) require any property transferred as partof the transaction to be vested in anyspecified person, either absolutely or forthe benefit of all the persons on w hosebehalf the application for the orde r istreated as m ade;

(b ) require any property to be so vested if itrepresents, in the han ds of an y specifiedperson, the application either of theproceeds of sale of property sotransferred or of the mon ey sotransferred;

(c ) release or discharge (in wh ole or in part)any security given by the d ebtor;

(d ) require any specified person to pay to

The Insolvency bill, 2012 245

anothe r specified person in respect ofbenefits received from the d ebtor suchamo unts as the Court may direct;

(e ) provide for any surety or guarantorwh ose obligations to any person werereleased or discharged (in who le or inpart) under the transaction to besubjected to such new or revivedobligations as the Court con sidersappropriate;

(f ) provide—

(i) for security to be provided for thedischarge of an obligationimposed by o r arising under the



order;

(ii) for such an obligation to be

charged on specified property; and(iii) for the security or charge to have

the sam e priority as a security orcharge released or discharged (inwhole or in part) under thetransaction.

(2) An order unde r section 692 m ay affect theproperty of, or impose any obligation on, any personwh ether or not the person is the person with w hom thedebtor entered into the transaction; but such an order—

(a) does not affect-

(i) an interest in property that wa sacquired from a person other than

the debtor and w as acquired ingood faith, for value and w ithoutnotice of the relevantcircumstances; or

(ii) an interest deriving from such an

5 46 he hlsolvencv Bill. 2012

interest; and

(b ) does no t r equ i r e a pe r son wh o r ece iveda benefi t from the t ransact ion in goodfai th, for value and w ithout not ice of therelevant c ircumstances, to pay anamo unt un less the person w as a par ty tothe transaction.

(3) For the pu rposes of th i s sec t ion , the re levantcircumstances in relat ion to a t ransact ion are thecircum stances as a result of which an orde r under sect ion692 may b e ma de in respect of the t ransact ion.

Div is ion 2— Genera l p rov i s ions r e l a t ing to l ega l p roceed ings un der the



Act

E n f o r c e m e n t o fc o m p a n y so b l i g a t i o n s t ol o d g e d o c u m e n t sw i t h , o r g i v en o t i c e t o , t h eR e g i s t r a r o fC o m p a n i e s .

695 . (1 ) If a com pany has f a il ed to com ply wi th arequi rement under th i s Act—

(a ) to lodge a docum ent wi th the Regis t rarfor registration; or

(b ) to give not ice to the Reg istrar of any

matter,the Regis tra r, o r any m em ber or c red i tor o f the com pany,m ay g ive not ice to the com pany requ i r ing i t to com ply wi ththe requiremen t .

(2 ) I f the com pany fa il s to com ply wi th therequirem ent w ithin fou rteen days af ter service of the not ice,the Regis tra r, o r any m em ber or c red i tor o f the com pany,

m ay apply to the Cou rt for an order under sub sect ion (3) .(3 ) On the hear ing of an appl ica t ion m ade under

subsection (2), the Court shall, if satisfied the company hasfa iled to com ply wi th the requi rement , mak e an orderdirect ing i t do so w ithin such p eriod as is specif ied in the


order.

(4 ) The com pany is ent i tled to be served w ith a

copy o f the application and to appear and be h eard at thehearing of the application as responden t.

(5 ) The C ourt 's order m ay provide that al l costs ofor incidental to the application are to be b orne b y thecom pany or by any off icers of it responsible for the failure.

(6) This sect ion does no t affect the oper at ion ofany other en actm ent that provides for penalties to be

impo sed on a com pany or i ts off icers for such a fai lure.

696. (1) Th e Official R eceiver, or a person w ho claimsto have been , to be or to be about to be adv ersely affected-

P o w e r o f t h eC o u r t t o g r a n ti n ju n c t i o n s i n



a) by the pas t or cont inuing condu ct of , orby a threat to engage in conduct madeby, a person referred to in subsection(2); pr

(b) by the pas t or co nt inuing refusa l orfailure, or by a threatened refusal orfailure, of a person do an act or thingthat the person is required by this Act todo,

m ay apply to the Court to grant an injunction undersubsection (2) or (3) .

(2) If , on the h earing of an a pplicat ion und ersubsection (1); the Cou rt is satisfied that a person h asengaged, is engaging or has threatened to engage in con ductthat const i tuted, const i tutes or w ould const i tute—

(a ) p con travention of, or a failure tocom ply with, this Act;

(b ) attemp ting to contravene, or fail tocom ply w ith, this Act;

(c ) aiding, abetting, counselling or

i n ju n c t i o n s i nc e r t a i n c a s e s .

5 4 8 he Insolvency Bill, 20 12

procuring a person to contravene, or failto com ply with, this Act;

(d ) inducing or attempting to induce,wh ether by threats, promises orotherwise, a person to contravene or failto com ply with this Act;

(e ) being in any way (directly or indirectly)know ingly concerned in, or party to, acontravention of, or a failure to com plywith, this Act by an other person; or

(f ) conspiring with other persons tocontravene or fail to com ply with thisAct,

the Cou rt may grant an injunction, on such terms as itconsiders just restraining the person from engaging in the



considers just, restraining the person from engaging in theconduct and , if in the opinion of the C Qurt it is desirable todo so, requiring the person to do any specified act or thing.

(3 ) If a person has refused or failed, is refusing orfailing, or is proposing to refuse or fail, to do an act or thingthat the person is required by this Act to do , the Court m ay,on he aring of an application un der subsection (1), grant aninjunction, on such term s as the Co urt considers appropriate,requiring the person to do that act or thing.

(4 ) If, it seems to the Cou rt desirable to do so, itmay grant an interim injunction pending determination of anapplication m ade u nder subsection (1).

(5 ) The Co urt may at any time discharge or varyan injun ction granted u nder subsection (2), (3) or (4).

(6 ) The pow er of the Co urt to grant an injunctionrestraining a person from engaging in condu ct may beexercised—

(a) whether or not it appears to the Courtthat the person intends to engage aga in,or to continue to engage, in conduct of

The Insolvency N O 1 2 2 4 9

that kind;

(b ) wh ether or not the person haspreviously engaged in condu ct of thatkind; and

(c ) wh ether or not there is an imm inent •danger of substant ial damage to anyperson if the f i rs t-m entioned personengages in condu ct of that kind.

(7) The pow er of the Cou r t to grant an in junct ion

requir ing a person to do an act or thing may b e exercised—(a ) wh ether or not it appears to the Court

that the person intends to refitse or failagain, pr to continue to refuse or fail , todo that act or thing;

(b )



(b ) wh ether or not the person haspreviously refused or failed to do that

act or thing; and(c ) wh ether or not there is an im m inent

dange r of substantial loss or dam age toany other person if the person refuses orfails to do that act or thing.

(8) The Court m ay not require an applicant underthis section or anyother person to givean undertak ing as todam ages as a condition of granting an interim injun ction.

(9) In dealing w ith an applicat ion unde r thissection for the grant of an injunction restraining a perso nfrom engaging in part icular conduct , or requ ir ing a person todo a particular act or thing, the Court m ay, either in additionto or instead of, granting an injunction, order that p erson topay dam ages to the applicant or to any other person.

(10) Subsect ion (9) app lies to an application m adeby the O fficial Receiver on ly if, and to the extent that , theO fficial R eceiver has m ade the app licat ion for the benefi t ofanother person w ho has sustained loss or damag e in


consequ ence of the con duct , or the refusal or fai lure, of theperson to do the part icular act or thing concern ed.

Liabil ity ofoff ice rs who a rein default.

697. (1) If a pro vis ion o f th i s Act prov ides tha t anoff icer of a comp any w ho i s in defaul t comm its an offence ,the off icer com m its the offence only i f the off icer—

(a ) authorises or perm its ;

(b ) participates in; or

(c ) fai ls to tak e al l reasonable s teps toprevent,

the contravent ion of the act or con duct , or the fai lure tocom ply with the requirem ent , that const i tutes the offence.

(2 ) I f a company i s an off icer of another comp any,h f d ff



the f ir s t -m ent ioned com pany comm its an offence as anoff icer in defau l t only i f a t least one of i ts off icers is in

default .(3 ) If a comp any that is an off icer of another

com pan y com m its an offence because of subsec t ion (2) , theoff icer in defau l t a lso com m its the offence an d is liable to beproceed ed against and punished accordingly.

Offences bybodies corporate . 698. (1) If—

(a ) a body corpo ra te com m its an offence tow hich this sect ion ap plies; and

(b ) the offence is proved to h ave beencom m itted wi th the consent orconnivance of , or to be at t r ibutable to

neglect on the p art of , an off icer of thebody corporate or any person purp ort ingto act as such,

the off icer or person also com m itsan o ffence and is liable tobe pro secuted for that offence and, i f found g ui l ty, to be


pun ished for it to the same extent as the body co rporate.

(2 ) An officer of a body co rporate, or a personpurport ing to act as such an off icer, m ay be p rosecuted foran offence un der subsection (1) even if the bo dy corp orate isnot prosecuted for the offence from wh ich that offence isderived.

(3 ) If the affairs of a body corpo rate are man agedby i ts m em bers, subsect ion (1) applies in relat ion to the actsand om iss ions of a m emb er in connection wi th the mem ber ' sm anagem ent funct ions as i f the m emb er were an officer ofthe body corpo rate.

699. (1) In any proceedings (wh ether or no t under th isAct )—

(a ) a statement of affairs prepared for thepurpo se of any provision of this Act;

Admissibility inevidence ofstatementprepared forpurpose ofprovision of this



and

(b ) any other statement m ade for thepurpose of com plying w i th arequirement im posed by or under anysuch provision or by or under theinsolvency re gulat ions,

m ay be used in ev idence agains t any person m aking orconcurring in making the statement.

(2) However, in cr iminal proceedings in w hichany such p erson is charged with an offenoe to which thissubsection applies—

(a ) evidence relating to the s tatem ent m aynot be adduced, and

(b ) quest ions relat ing to i t m ay no t beasked,

by o r on b ehalf of the pro secution, unless evidence relat ingto it is adduc ed, or a qu estion relating to it is asked, in thu

p ov s o o t sAct or theinsolvency

regulations.


proceedings by o r on behalf of that person.

Cap 63han— (3) Subsection (2) applies to all offences other

(a) an offence under—


(ii) section 114 of that Code (falseswe aring); or

(b) an offence designated by the insolvencyregulations for the purposes of thissection.

Legal proceedingunde r this Act notto be invalidated

b f

700. (1) A proceeding under this Act may not beinvalidated or set aside for a defect (including amisdescription misnomer or omission) in a step that is



or set because ofa de fect unless

persondetrimentallyaffected

misdescription, misnomer or omission) in a step that isrequired to be taken as part of, or in connection with, theproceeding, unless a person is detrimentally affected by thedefect

(2) The Court may order the defect to becorrected, and may order the proceeding to continue, onsuch terms as it considers appropriate in the interests ofeveryone w ho has an interest in the proceeding.

Power to makeinsolvencyproced ure rules

701. (1) The Rules Committee, with the addition of theOfficial Receiver, may make rules—

(a ) relating to the procedure of the Courtunder this Ac t;

(b ) relating to appeals to the Court of

Appeal under this Act.(2) Matters that may be dealt with by the rules


include the fol low ing:

(a ) how p roceed ings may b e comm enced ;

(b ) where p roceed ings m ay be commenced ;

(c ) the form s to be used in proceeding s; .

(d ) the serv ice or i s sue of docu m entsrelat ing to proceed ings;

(e ) the amen dm ent of defects and er rors inproceedings;

(f) how ev idence m ay be g iven inproceedings;

(g ) how the ident i ty of persons wh o arepart ies to , or invo lved in, proceedingsm ust be proved;

(h ) how wi tnesses in the p roceedings a resum m oned and documents served ori ssued in the proceedings may be



i ssued in the proceedings may bediscovered;

(i) the r ight of credi tors and other personsto appear in proceed ings, and theprocedure to b e fo l low ed in the absenceof credi tors or other persons;

0 ) t h e n o t i c es t h a t m u s t b e g i v e n i nconnect ion wi th proceedings , and wh om us t g ive t hem and to whom ;

(k ) t he m anner o f adve r t is ing p roceed ings ;

(1 ) the conso l ida t ion o f p roc eed ings ;

(m ) the sub st itut ion of p ar t ies toproceedings;

(n ) authoris ing the continuat ion of

proceedings af ter the death of a deb torwh o is a party to proceedings;

(o ) author i sing proceedings to be begun

5254 The Insolvency Bill. 2012

against one or more p artners of abusiness partnership w ithout includingthe others, and providing for thedisclosure of the other partners;

(p ) the scale of costs of advocates and

others in proceedings;(q ) the award of costs and w hen securi ty for

costs mu st be given;

(r ) the execution of processes and theenforcement of orders un der this Act;

(s ) the deadline for appealing to the Courtof Appeal and how the appeal must bebrought.

Div i sion 3— Ap pea l s and r ev iew s , e tc .



Power of the

Court to review,rescind or varyorder made underthis Act.

Right of appeal toCourt of Appeal.

702. The Co urt may review, rescind, or vary any orderof the Court under this Act.

703. (1) Any p erson dissat isf ied w ith a decision of theCourt und er this Act m ay appeal to the Court of Appeal

against the decision.(2) Except as otherw ise expressly pro vided by this

Act, a notice of appeal does not hal t proceedings un der thedecision under app eal unless the Court or the Court ofAppeal m akes an order hal t ing the proceedings.

Suspension ofbankruptcy,liquidation or

704. (1) If an app eal has been lodged against abank ruptcy order or an order for the liquidation or

The Ithsolrencv Bill , 20/2xr*i 4 j f

administration of a colitpany, any interested person mayapply to the Court or the Court of Appeal for an ordersuspending the order until the appeal is decided.

(2) The Court or Court of Appeal may suspend the

order on such terms as it considers appropriate, includingterms as to anything done or decided, or that ought to havebeen done or decided, by any person in the period betweenthe order and the orde r suspending it.

(3 ) The Court or the Court of Appeal may, at anytime, make such order as it considers appropriate to dealwith anything done, or any matter decided, or that ought to

have been done or decided, by any person in the periodbetween the commencement of the bankruptcy, liquidationor administration and the date when the appeal is decidedif—

5255

administrationpendingdetermination ofappeal.

(a ) the bankruptcy, liquidation oradministration order has been

d d d th l f il



suspended and the appeal fails; or

(b ) the bankruptcy order has not beensuspended and the appeal succeeds.

PART XII—ADMINISTRATION OF THIS ACT

Division 1—Official Receiver and Deputy Official Receivers

705 . (1) The Cabinet Secretary shall, as and when ppointment of

necessary, appoint suitably qualified persons to the positions Official Receiverand others.

of—

(a) Official Receiver; and

(1) one or more Deputy Official Receivers.


(2) The Official Receiver and the Deputy OfficialRece ivers are officers of the C ourt.

(3) In performing their duties and exercising theirpow ers, the Deputy Official Receivers are subject to the

control and direction of the O fficial Rece iver.(4) Subject to this Act, the Official Receiver holds

office for such period,,_not exceeding seven years, as isspecified in the docum ent of his or her appointme nt and iseligible for re-appointment.

(5) A person is not qualified for appointment asOfficial Receiver or Depu ty Official Rece iver unless theperson is an advoca te, a registered accou ntant or a charteredpublic ,secretary.

(6) A person is not eligible for appointment asOfficial Receiver or Deputy Official Receiver if—

(a) the person-



(i) is an undischarged bankrupt;

( ii ) has entered into a voluntaryarrangement under Part IV thathas not ended;

(ii) is subject to a summary instalmentorder imposed u nder that Part;

( iv) is subject to the no-assets

procedure under that Part; or(v) is subjec t to an order disqual ifying

the person from being a director ofa company;

(b) is convicted of offence punishable byimprisonment for a term of two years ormore;

(c) is a member of the Parliament.

(7) The Official Receiver and a Deputy OfficialReceiver areentitled to such rem uneration and ben efits as

The Insolvency Bill. 2012

may be determined by the Salaries and RemunerationCom mission from time to time.

(8) A person holding office as Official Receiveror Deputy Official Receiver immediately before the

commencement of this Division continues to hold that officeunder this Act on the same terms as those subject to whichthe person held the office immediately before thatcommencement.

5257

706. A Deputy Official Receiver may act for, or in theplace of, the Official Receiver or another Deputy OfficialReceiver, and in that capacity has all the authority andpowers of the Official Receiver or Deputy Official Receiverfor whom, or in whose place, he or she acts.

Deputy OfficialReceiver may ac t

on behalf ofOfficial Receiver.

707. (1) The Official Receiver is, for the purpose of Incorporation of



( ) , p pperforming the functions imposed and exercising the powersto be conferred on the Official Receiver by or under this orany other Act, incorporated as a corporation sole with thecorporate name Official Receiver in Insolvency .

(2) As a corporation sole, the Official Receiver—

(a ) has perpetual succession;

(b ) is required to have an official seal;

(c ) may bring proceedings, and heproceeded against in the OfficialReceiver's corporate name;

subject to this Act, may acquire, holdand dispose of and otherwise deal withreal and person prop erty;

M ay do and be subjected to all otherthings that a body corporate may, bylaw, do and be subjected to and that arenecessary for or incidental to the

Official Receiver

as a corporationsole.

5 2 5 8 he insolvency Bill, 2012

performance of the Official Receiver'sfunctions.

(3) The Official Receiver may not employ staff,but the Cab inet Secretary may, subject to the approval of theNational Treasury as to numbers and remuneration, appointpublic officers to assist the O fficial Rece iver and D eputyOfficial Receiver in perform ing their functions.

(4) All courts and persons acting judicially:

(a ) shall take judicial notice of the seal ofthe corporation sole that has beenaffixed to any instrument or document;

and(b ) shall, in the absence of evidence to the

contrary, presume that the seal wasproperly affixed.

(5) The Official Receiver may—

(a) adminis ter oaths and take statutory



Vacation of o fficeby Official

Receiver andDeputy OfficialReceiver.

(a) adminis ter oa ths and take statutorydeclarations; and

(b) appear in re levant legal proceedings andconduct examinations of persons in thecourse of those proceedings.

708. (1) The office of Official Receiver or Deputy

Official Receiver becomes vacant if—(a ) the person d ies;

(b ) the person's term of office expireswithout the person being reappointed;

(c ) the person resigns the office by letter inwriting addressed to the CabinetSecretary and the Cab inet Secretaryaccepts the resignation; or

(d ) a bankruptcy order is ma de in respect of

The Insolvency Bill. 20/2 59

•

the person, the person enters into avoluntary arrangement under Part IV. orthe person becomes subject to a

summary instalment order or the no-assets procedure, under that Part, orbecomes subject to an orderdisqualifying the person from holdingoffice as a director of a company:

(e) the person is convicted of offencepunishable by imprisonment for a term

of two years or more(0 the person is nominated for election as a

member of the Parliament:

(g ) the person engages in any paidemployment outside the duties of theoffice: or



(h ) the person is removed from office undersubsection (2).

(2) The Cabinet Secretary may remove fromoffice a person holding the office of Official Receiver orDeputy Official Receiver if satisfied on reasonable groundsthat the person is not or is no longer competent to performthe functions of that Office or is guilty of m isconduct in

performing those func tions.(3 ) The Cabinet Secretary may exercise the power

conferredby subsection (2) only after giving the person anopportunity to be heard and to make representations on thematter.

(4 ) As soon as practicable after a vacancy occursin the office of Official Receiver or Deputy Official

Receiver, the Cabinet Secretary shall appoint a suitablequalified person tot i l l the vacancy.

709. Neither the Official Receiver nor a Deputy Official rotection of


Official Receiverand DeputyOfficial Receivers.from liability.

Official Receiverand DeputyOfficial Receivers

may charge fees.

Receiver is liable in civil proceedings for any act that theOfficial Receiver or Deputy Official Receiver has done oromitted to do for the purpose of performing or exercising in

good faith any function or power imposed or conferred onthe Official Receiver or a Deputy Official Receiver by orunder this Ac t or any other written law.

710. (1) The Official Receiver and Deputy OfficialRece ivers may ch arge fees for performing their official

functions, and exercising their official powers, at the rates(if any) prescribed by the insolvency regulations.

(2) The Official Receiver shall ensure that all feescharged under subsection (1) that are paid to or recovered bythe Official Receiver or a Deputy Official Receiver are paidinto the Insolvency Services A ccount.



Rates of OfficialReceiver's fees.

711. (1) The insolvency regulations may fix orprescribe the amount or rates of fees chargeable undersection 710.

(2) Those regulations may, for example,prescribe—

(a ) hourly or other rates;

(b ) different rates for work done in thebankruptcy by different classes ofpersons;

(c ) rates by reference to the net value of theassets realised by the Official Receivertogether with other amounts as may bespecified;

(d ) rates for the performance of particularfunctions or the exercise of particularpowers;

(e ) rates by reference to any other criteria


that may be spec ified.

712. (1) The Official Receiver shall establish in theCentral Bank of Kenya an account, to be called theInsolvency Services Account .

(2) The Official Receiver shall pay into theInsolvency Services Account all money received orrecovered by the Official Receiver in the performance andexercise of the Official Receiver's functions and powers

under this Ac t.(3 ) There is payable from the Insolvency Services

Account any money due to creditors and contributoriesunder this Act that the Official Receiver has received orrecovered in the course of performing or exercising theOfficial Receiver's functions and powers under this Act.

(4 ) Any money held in the Insolvency Services

InsolvencyServices Accountto be establishedand maintained.



(4 ) Any money held in the Insolvency ServicesAccount that is not immediately required for•e purposes ofmaking payments under subsection (3) may be invested inany investments in which a trustee can invest money inaccordance with the Trustee Act

Cap. 167

713. The Official Receiver shall from time to time pay

into the Consolidated Fund out of the Insolvency ServicesAccount so much of the amounts standing to the credit ofthat Account as represents—

(a ) dividends which were declared beforesuch date as the National Treasury mayfrom time to time determine and havenot been claimed; and

(b ) balances ascertained before that datethat are too small to be divided amongthe persons that may otherwise beentitled to them .

Official Receiverto pay certainunclaimeddividends andundistributedbalances intoInsolvencyServices Account.


Division 2—Public registers relating to bankrupts and others


Official Receiverto ensure access topublic registers.

714. This D ivision applies to a public registerestablished under sec tion 47, 336 or 349.

715. (1) The Official Receiver shall ensure that allpublic registers are available for access and inspec tion bymembers of the public during the Official Receiver'sordinary business hours.

(2) However, the Official Receiver may refuseaccess to a public register or suspend the operation of apublic register, wh olly or partly—

(a ) if the O fficial Re ceiver ,,onsiders that itis not practical to provide acce ss to the



register; or(b) for any other reason tha t i s prescr ibed

by the insolvency regu lations.

Purposes of public 16. (1) The public register kept under section 47registers. has—

(a) the purpose of providing informat ionabout bankrupts and dischargedbankrupts; and

(b ) the further purposes specified insubsection (4).

(2) The public register kept under section 336has—

(a) the purpose of providing informationabout persons subject to a current


summary instalment order; and

(b) the further purposes set out insubsection (4).

(3) The public register kept under section 349has—

(a ) the purpose of providing informationabout persons currently admitted to theno asset procedure and personsdischarged from that procedure undersection 358; and

(b ) the further purposes set out insubsection (4).

(4) The further purposes of the public registers are

(a ) to facilitate the compliance, audit, andother supporting and administrative

to—



other supporting and administrativefunctions of the Official Receiver, theCabinet Secretary, the Court or anyother person under this Act or any otherwritten law;

(b ) to facilitate the enforcement functionsand the exercise of the powers of theOfficial Receiver, the CabinetSecretary, the Court, or any otherperson under this Act or any otherenactment; and

(c ) to provide statistical information andinformation for research purposes inrelation to bankruptcy, summaryinstalment orders, the no assetprocedure, and of companies that are inliquidation or u nder ad m inistration.


Generalinformation to beincluded in publicregisters.

717. (1) The Official Receiver shall ensure that thepublic registers contain the prescribed information in respectof the following persons:

(a) a person who is or has been bankrupt;(b) a person who is subjec t to a current

summ ary instalment order;

(c) a person who is currently admit ted tothe no asset procedure, or wh o has beendischarged from that procedure undersection 358.

(2) The prescribed information for the purposes ofsubsection (1) is the following:

(a) the person's full name;

(b) whether the person-

(i) is currently bankrupt, or has beendischarged from bankruptcy;



discharged from bankruptcy;

( ii ) i s subjec t to a current summaryinstalment order; or

(iii) is currently admitted to the noasset procedure, or has beendischarged from the no assetprocedure unde r section 358;

(c) the bankruptcy, summary instalmentorder, or no asset procedure number (ifany);

(d) the person's address as contained in-

(i) the person's statement of affairs;

(ii) application for a bankruptcy orde r;

(iii) application for a summ aryinstalment order; or

(iv ) app licationfor admission to the no

5265-The Insolvency Bill, 2012

asset procedure; or

(e ) if the person has notified the OfficialReceiver of a change of address, thataddress, or in the case of a bankruptcyorder made on a creditor'sapplication—the person's address ascontained in the application;

(f) the person's occupation and currentemployment status, if known;

(g ) if a bankruptcy order has been made inrespect of the person—the time and dateof the on which the order was made;

(h ) if the person is admitted to the no assetprocedure—the date of that admission;

(i) if the person is discharged from the noasset procedure under section 358—the



date when the person was sodischarged;

(j) if the person is.a discharged bankrupt—the date, type, and conditions (if any) ofdischarge;

(k) if the bankruptcy has been annulled—the provision of this Act under which itwas annulled;

(I) if the Court has refused to discharge theperson from bankruptcy—details of therefusal;

(m ) if the Court has suspended the person'sdischarge from bankruptcy—details ofthe suspension;

(n ) in the case of a person subject to acurrent summary instalment order—thefull name and business postal address of


the supervisor;

(o) any other information or documentsprescribed by the insolvency regu lations

for the purposes of this section.(2) Subject to sections 715(2) and 720(1), the

Official Receiver shall ensure that information kept in apublic register is readily available for inspection bymembers of the public during the Official Receiver'sordinary business hours.

(3) The Official Receiver shall ensure that a

public register does not contain information relating to aperson whose bankruptcy was annulled under section271(2)(a) or 272(2)(a), and the b ankruptcy that w as soannulled does no t count for the purposes of section 718.

(4) The Official Receiver shall ensure that allinformation relating to a person who has been adjudgedbankrupt and discharged from bankruptcy is removed from



the public register kept under section 47 as soon aspracticable after—

(a ) the expiry of four years after the date ofdischarge; but

(b) in the case of a condit ional discharge—the expiry of four ye ars after thedischarge becomes unconditional.

(5) The Official Receiver shall ensure that allinformation relating to a person wh o has been adm itted tothe no-asset procedure is remov ed from the public registerkept under section 349 as soon as practicable after—

(a) the expiry of four years after the date ofdischarge under section 358; or

(b ) the person's participation in theprocedure is terminated in accordancewith se ction 353(a), (c)or (d).

(6) The Official Receiver shall ensure that all


information relating to a person who has been adjudgedbankrupt but whose bankruptcy has been annulled undersection 271(2)(b) or (c) or section 272(2)(b) or (c) isremoved from the public register kept under section 47 assoon as practicable after the expiry of seven years from the

comm encement of the bankruptcy.

718. (1) If a person—

(a ) is or has been bankrupt on two or moreoccasions; or

(b ) is or has been both bankrupt anddischarged from the no asset procedureunder section 358.

the Official Receiver shall ensure that information about theperson is not removed from a public register kept under thisAct.

(2) Section 717(4), (5), and (6) do not apply to

Information keptindefinitely onpublic register aftermultiple insolvencyevents.



such a person.(3 ) The Official Receiver shall ensure that the

relevant public register contains all of the informationrequired by this Act about such a person and eachinsolvency event.

(4 ) A bankruptcy under the repealed BankruptcyAct counts for the purposes of subsections (1) and (3).

Cap. 53

719. (1) The public register kept under section 47 maycontain any or all of the documents set out in section 101(creditors' right to inspect documents) in respect of abankrupt or former bankrupt.

(2) The Official Receiver shall ensure that a

person only has access to the documents contained in thepublic register under subsection (1) in respect of a bankruptor former bankrupt if the person is entitled to inspect those

Restrictedinformation thatmay be included inpublic registerrelating tobankruptcies.


documents under section 101.

When OfficialReceiver may om it,remove, restrict

access to, oramend, informationcontained in apublic register.

720. (1) The Official Receiver may omit, remove, orrestrict access to inform ation contained in a public register

in respect of a person if the O fficial Rece iver considers thatthe disclosure of the information via the public registerwould be prejudicial to the person's safety or welfare or thesafety or welfare of the person's family.

(2) The Official Receiver may amend theinformation con tained in a public register in order to updatethe information or correct any error in, or omission from, the

information.(3) The Official Receiver may refuse to provide

access to any information in a public register if in theOfficial Receiver's opinion, it is impractical to provide thevolume of information requested.



Right of membersof public to inspectregisters.

721. (1) A person may inspect the public registers onlyin accordance w ith this Ac t and the insolvency regulations.

(2) The public registers relating to bankruptcies,summ ary instalment orders or the no-asset procedure maybe searche d only by reference to the follow ing criteria:

(a) the bankruptcy number, summaryinstalment order or no asset procedurenumber;

(h) the name, or any part of the name of aperson;

(c ) insolvency status;

(d ) the date of the relevant bankruptcyorder, summary instalment order,

admission to the no asset procedure, ordischarge;


(e ) any com bination of the criteria inparagraphs (a) to (e);

(f ) any other c riteria prescribed by theinsolvency regulations.

(3) In subse ction (2)(c), insolvency s tatus mea nsthat a person—

(a ) is currently bankrupt;

(b ) is subject to a current summinstalment order;

(c ) is currently adm itted to the no assetprocedure;

(d ) is a discharged bankrupt;

(e ) is discharged from the no assetprocedure in accordance w ith section358;

(f ) is a discharged bankrupt who is subjectto conditions of discharge;



•

(g ) has been subject to a bankruptcy orderbut the order has been annulled undersection 271(2)(a) or 272(2)(a);

(h ) has been subject to a bankruptcy orderbut the order has been annulled undersection 271(2)(b) or (c) or 272(2)(b) or(c); or

(i) is subject to section 718 (which relatesto permanen t retention of informationon the register after multiple insolvencyevents).

(4) The public registers m ay be inspected—

(a) by a person, or by another person with

the consent of that person, for thepurpose of searching for information


about that person;

(b) by a person for the purpose ofascertaining whether another person isbankrupt, is a discharged bankrupt, issubject to a current summary instalment

order, is currently admitted to the noasset procedure, or is discharged fromthat procedure unde r section 358;

(c) by a person for any purpose related to-

(i) the bankruptcy of a person;

(ii) the making o f a cu rren t summaryinstalment order in respect of aperson; or t

(iii) the adm ission of a person to theno asset procedure;

(d) by a person for any of the purposesspecified in section 7 16(4)(a) or (b);

(e) by a person for the purpose of



ascertaining whether section 718applies to another person

Informationcontained in publicregisters may beused fo r statistical

or researchpurposes.

722. Nothing in this Division prevents the use ofinformation co ntained in the pu blic registers for statistical orresearch purposes if the information—

(a) does no t iden tify anyone; and

(b ) is not published in any fornithat couldreasonably be ex pected to identifyanyone.

Government andOfficial Receivernot liable forcertain acts and

723. Neither the Government nor the Official Receiverm ay be sued for an y act or om ission in relation to them aintenance of a public register.under this Division done o r

The Insolvency Bill, 20/2 271

om itted to be done in good faith and w ith reasonable care.missions.

PA R T X II I U P P L EM EN TA R Y P R O V I SI O N S

724. The United Nations Commission on InternationalTrade Law (Model Law on Cross-Border Insolvency) has theforce of law in K enya in the form set out in the Fifth'Schedule.

Cross borderinsolvency:

725. (1) A bo dy corporate that is a creditor ordebenture-holder m ay by resolution of its directors or othergoverning bo dy authorise a person o r persons to act as itsrepresentative o r representatives—

(a ) at any m eeting of the creditors of a

h ld i d i h hi

Representation ofbodies corporateat meetings.



company held in accordance with thisAct or o f the insolvency regulations; or

(b ) at any meeting of a compan y held inaccordance w ith the provisionscontained in a deben ture or trust deed.

(2 ) If the bod y corporate authorises only oneperson, that person is entitled to exercise the sam e pow ers on

behalf of the body corporate as the body corporate couldexercise if it we re a creditor or debenture-holder w ho is anatural person.

(3 ) If the body corporate authorises more than oneperson, any one of them is entitled to exercise the samepow ers on behalf of the body corporate as the body corporatecould exercise if it were a. creditor or debenture-holder who

is a natural person.(4 ) If the body c orporate authorises more than one

person and m ore than one o f them purport to exercise a


power under subsection (3)-

(a) i f they purport to exercise the power inthe same way, the pow er is treated asexercised in that way;

(b) i f they do not purport to exercise thepower in the same way, the power istaken to have not been exercised.

Courts, OfficialReceiver andothers to publishorders andnotices on theirrespectivewebsites.

726. (1) As soon as practicable after the Court hasmade an order under a provision of this Act, the Registrar ofthe Court shall publish on the Court's website a copy of theorder or a sum m ary of its contents sufficient to informcreditors and other interested persons of the e ffect of theorder.

(2) If the Official Receiver, an interim trustee or abankruptcy trustee is required to publish a notice under aprovision of this Act or takes•a prescribed step in thebankruptcy process relating a bankrupt, the Official Receiverinterim trustee or bankruptcy trustee shall publish a copy of



, interim trustee or bankruptcy trustee shall publish a copy ofthe notice, or the prescribed details of the step taken, on thewebsite of the Official Receiver, interim trustee orbankruptcy trustee.

(3 ) If a liquidattor or provisional liquidator isrequired to publish a notice under a provision of this Act ortakes a prescribed step in the liquidatiOn process relating acom pany that is in liquidation, the liquidator or provisionalliquidator shall publish a co py of the notice, or the prescribeddetails of the step taken, on the website of the liquidator orprovisional liquidator.

(4) If an administrator is required to publish anotice under a prov ision of this Act or takes a prescribed stepin the adm inistration process relating a com pany that isunder administration, the administrator shall publish a copyof the notice, or the prescribed details of the step taken, on

The Insolvency Bill. 2012

the we bsite of the administrator.

(5) In this section, prescribed step means a stepprescribed by the insolvency regulations for the purposes of

this section.

72 7 . (1 ) If an interim trustee or bankruptcy trustee takesa prescribed step in the bankruptcy process relating abankrupt, that trustee shall, by notice, give to all creditors ofthe bankrupt of whom that trustee is aware'the prescribeddetails of the step taken.

(2) If a liquidator or provisional liquidator takes aprescribed step in the liquidation process relating a companythat is in liquidation, the liquidator or provisional liquidatorshall, by notice; give to all creditors of the company ofwhom the liquidator or provisional liquidator is aware theprescribed details of the step taken.

(3 ) If an administrator takes a prescribed step in

5273

OfficialReceiver.bankruptcytrustees.liquidators andadministrators to

notify creditorsof prescribedsteps in theinsolvencyprocess.



(3 ) If an administrator takes a prescribed step inthe administration process relating a company that is underadministration, the administrator shall give, by notice, giveto all creditors of the company of whom the administrator isaware the prescribed details of the step taken.

(5 ) A bankruptcy trustee, liquidator, provisionalliquidator or administrator who, without reasonable excuse,

fails to comply with a requirement of this section commits anoffence and on conviction is liable to a fine not exceedingtwo hundred thousand shillings.

(6 ) In this section. prescribed step andprescribed details means a step or details prescribed by the

insolvency regulations for the purposes of this section.

728. Stamp duty is not payable in respect of—

(a) any tranSfer or other document relatingsolely to property that is comprised in a

Certaintransactionsrelating to

bankrupt's est ateexempt from


stamp duty.

Re-direction ofbankrupt'scorrespondence.

bankrupt's estate and that, after theexecution of that document, is orrem ains at law or in equity the propertyof the bankrupt or of the bankruptcy

trustee in respect of that estate; or(b) any writ, order, certificate or other

instrument relating solely to the propertyof a bankrupt or to any bankruptcyproceedings.

729. (1) If a bankruptcy order has been made, the Courtmay, from time to time, on the application of the OfficialReceiver or of the bankruptcy trustee in respect of thebankrupt's estate, order Posta Kenya to re-direct and send ordeliver to the Official Receiver or bankruptcy trustee orotherwise any letter or postal packet that would otherwise besent or delivered by Posta Kenya to the bankrupt at suchplace or places as m ay be specified in the order.

(2) d d hi i h ff f h



(2) An order under this section has effect for suchperiod, not exceeding three months, as maybe specified inthe order.

Supply-of utilityservices to

bankrupts andothers.


"com m unications services" do not include, electroniccommunications services to the extent that they are used tobroadcast or otherwise transmit programme services;

the office-holder means the Official Receiver, thebankruptcy trustee, the interim trustee or the supervisor ofthe voluntary arrangement, whichever is applicable;

the relevant day is the day referred to insubsection (2).

(2) This section applies if—

(a) on a day that a bankruptcy order is made

The insolvency Bill, 2012 275

against a person, or an interim trustee ofa person's property is appointed; or

(b) on a day that a voluntary arrangementproposed by a person is approved under

Division 1 of Part IV.(3) If a request to which subsection (4) applies is

made for the giving after the relevant day of any of thesupplies specified in subsection (5), the supplier—

(a ) may make it a condition of the giving ofthe supply that the office-holderpersonally guarantees the payment of

any charges in respect of the supply; but(b ) may not make it a condition of

providing the supply, or do anything thathas the effect of making it a condition ofproviding the supply, that anyoutstanding charges in respect of asupply provided to the person before the

relevant day are pa id.



relevant day are pa id.(4) This subsection applies to a request if the

request is made—

(a ) by or with the agreement of the office-holder; and

(b ) for the purposes of a business that is or

has been carried on by the person. by apartnership of which the person is orwas a member, or by an agent ormanager for the person or for such apartnership.

(5) The supplies referred to in subsection (3) are—

(a ) a supply of electricity by an electricitysupplier;

(b ) a supply of water by a water supplier;

5 76 he Insolvency Bi l l , 2012

(c) a supply of communications services bya provider of a pub lic electroniccomm unications service.

Order forproduction ofdocuments byKenya RevenueAuthority.

731. (1) For the purposes of any proceedings against adebtor or bankrupt under Part III (include a publicexamination of a bankrupt), the Court may, on theapplication of the Official Receiver or the bankruptcy trusteein respect of the bankrupt's estate, order the Kenya RevenueAuthority to produce to the Court—

(a) any return, accoun t or financialstatement submitted (whether before orafter the commencement of thebankruptcy) by the bankrupt to thatAuthority;

(b) any assessment or de terminat ion made(whe ther before or after thecomm encement of the bankruptcy) inrelation to the ba nkrupt by that



p yAu thority; or

(c ) any correspondence (whether before orafter the commencement of thebankruptcy) between the bankrupt andthat A uthority.

(2) If the Court has made an order undersubsection (1) for the purposes of any examination orproceedings, the Court may, at any time after the documentto which the order relates is produced to it, make an orderauthorising the disclosure of the document, or of any part ofits contents.

CabinetSecretary toprepare annual

732. Not later than three months after the end of 2012and each subsequent calendar year, the Cabinet Secretaryshall prepare a report about the operation of this Act during


report.that year and arrange for a copy of the report to be laidbefore each Ho use of P arliament.

733. (1) A document that is required or permitted by orunder this Act to be served on, or given to, a natural personmay be served on, or given to, the person personally or bymeans of a letter addressed to the person at the person'saddress last known to the server or giver of the document.

(2) A document that is required or permitted by orunder this Act to be served on, or given to, a partnership,trust or other unincorporated body of natural persons may beserved on, or given to, any member of the partnership, trustor group personally or by means of a letter addressed to thepartnership, trust or body at its address last known to theserver or giver of the docum ent.

(3 ) Part XL of the Companies Act, 2102 applies toa document that is required or permitted by or under this Actto be served on or by, or given to or by a company or other

Service ofdocuments etc.for the purposesof this Act.



body co rporate.•

734. (1) The Cabinet Secretary may make insolvencyregulations prescribing matters—

(a ) required or permitted by this Act to beprescribed by insolvency regulations; or

(b ) necessary or convenient to be soprescribed for carrying ou t or givin'g fulleffect to this Act.

(2) In particular, the Cabinet Secretary may makeinsolvency regulations that specifically relate to—

(a) natural persons who are insolvent;(b ) companies and other bodies corporate

that are insolvent;

Power of Cab inetSecretary tomake insolvencyregulations for

the purposes ofthis Act.


(c ) partnerships and other unincorporatedbodies that are insolvent;

(d ) the adm inistration of the insolventestates of deceased persons;

(e ) the functions of authorised insolvencypractitioners and the manner in wh ichthey are required to condu ct theirpractices;

(3) Withou t lim iting sub sections (1) and (2), theinsolvency regulations may m ake provision for all or any of

the following matters:(a ) prescribing forms for the purposes of

this Act and the method o f verifying anyinformation required by or in thoseforms;

(b ) prescribing the man ner in which, thepersons by who m, and the directions or

requirements in accordance with which,the forms prescribed for the purposes o f



the forms prescribed for the purposes o fthis Act, or any of them , are required orpermitted to be signed , prepared orcom pleted, and generally regulating thesigning, preparation and co mpletion ofthose forms, or any of them;

(c ) prescribing fees payable under thfs Act;(d ) prescribing how and w hen the debts and

claims of creditors must be made andproved, and w hen a d ebt or claim m aybe allowed or disallowed;

(e ) providing for the public examination ofbankrupts;

(1) prescribing the expenses that may bepaid to a ban krupt, or any other person,wh o is required to attend any


exam ination by the Official Receiver ora bankruptcy trustee;

(g) prescribing the steps that anundischarged ban krupt has to follow toobtain consent to leaving Kenya and thecircumstances in which, and theconditions on which, that consent maybe given;

(h) for or in relation to the convening of,condu ct of, and procedure and vo tingat—

i) meetings of creditors and membersof com panies that are inliquidation or underadministration;

(ii) meetings of eligible employeecreditors;

(iii) meetings of contributories andmeetings of holders of debentures;



meetings of holders of debentures;and

(iv) joint meetings of creditors andmem bers of companies;

(i prescribing the num ber of personsrequired to constitute a quorum at anysuch m eeting, providing for the sendingof notices of meetings to personsentitled to attend those m eetings, thelodging of copies of no tices of, and o fresolutions passed at, those mee tings,and gen erally regulating the conduct d f,procedure at, those meetings;

(j) providing for the appointment,retiremen t, remo val, discharge andcontrol of bankruptcy trustees and forthe accoun ts that they are required to


keep; and for the audit of thoseaccounts;

(k) prescribing the form of a statement ofaffairs that is required und er this Act;

(1) prescribing how instalments under asumm ary instalment order have to bepaid;

(m ) prescribing the accounts that are to bekept by the Official Receiver and theaudit of those accounts;

(n ) providing for the giving to the O fficialRece iver or the Reg istrar informationrelating to matters arising in connectionwith an insolvency event;

(o ) prescribing offences for failing tocomply with a requirement of aspecified regulation, or for contravening

a prohibition imposed by a specifiedregulation, and prescribing fines that



egu at o , a d p esc b g es t atmay be imposed on persons convicted ofthose offences not exceeding fivehundred thousand shillings.

(4) The insolvency'regulations may—

(a) i f documents required by or under th isAc t to be lodged in accordanc e with thisAct are required to be verified orcertified and no m anner of verificationor certification is prescribed by or underthis Act—require that the documents orany of them be verified or certified bystatement in w riting made by such

persons as are prescribed by theregulations; and

(b) if no express provision is made inthisAct for verification or certification of

The Insolvency Bill, ,20I2 281

documents—require that the documentsbe verified or certified by statement inwriting by such persons as are soprescribed.

(5) Except as otherwise expressly provided in thisAct, the insolvency regulations may be of general applicationor of a specifically limited application (for example, tocompanies) or may differ according to differences in time,locality, place or circum stance.

735. This Act binds the Government.

Act to bind the

Government.

736. (1) The Bankruptcy Act (Cap. 53) is repealed.

(2) Section 89 of the Law of Sucession Act is alsorepealed.

(3 ) The following rules are revoked:(a ) the Bankruptcy (Fees) Rules;

Repeal ofBankruptcy Actand revocation ofsubsidiarylegislation.

Cap. 160



(a ) the Bankruptcy (Fees) Rules;

(b ) the Bankruptcy (Reciprocity) Rules;

(c ) th e B an kru ptc y Ru le s;

(d ) the Companies (Winding-up Fees)Rules;

(e ) the Companies (Winding up Rules).

Cap. 53, sub leg.

Transitionalprovisions:insolvency ofnatural persons

737. (1) In this section=

the commencement means the commencement ofParts III to V;

past event means any of the following that hasoccurred before the commencement:


(4') issuing a bankruptcy notice;

(b ) making an application for a bankruptcyorder; either by a creditor or the debtor;

(c ) entering into a voluntary arrangem ent;

(d ) making an application for a grant ofprobate or letters of administration inrespect of an insolvent deceased's estateunder section 89 of the Law of

Cap. 160. uccession Act

(2) Despite their repeal, the Bankruptcy A ct andsection 89 of the Law of Succe ssion Act continue to apply,

Cap. 53. o the exclusion of this Act, to any past event and to any stepor proceeding preceding, following, or relating to that pastevent, even if it is a step or proceeding that is taken after thecommencement.

(3 ) Subsection (2) has effect subject to anytransitional regulations made under section 739 that relate tothe insolvency of natural persons.



Transitionalprovisions:Winding up andinsolvency ofcompanies.


the commencement means the commencement ofParts VI to X;

past event means any of the following that has

occurred before the com mencem ent:

(a ) the passing by the company of a specialresolution resolving that the companybe wound u p;

(b ) the making of an application to theCou rt for a winding up order in respect

of the com pany;(c ) the appointment of a liquidator or

provisional liquidator in respect of the

The Insolvency. Bill, 2012 283

company(d) a failure by the company to deliver the

statutory report to the Registrar or tohold the statutory meeting required

under the repealed Companies Act;(e) failure by the company to commence its

business within a year from itsincorporation or, if the company hassuspended carrying on business, theelapse of a whole year since thebusiness was suspended;

(f) a reduction of the number of membersof the company, in the case of a privatecompany, below two, or, in the case ofany other company, below seven;

(g) the inability of the company is to pay itsdebts;

(h)in the case of a company incorporatedoutside Kenya and carrying on businessin Kenya the commencement of



in Kenya— the commencement ofwinding-up proceedings in respect of itin the country or territory of itsincorporation or in any other country orterritory in

(i)the appointment of a receiver of inrespect of the company by the holdersof the company's debentures;

(j) the appointment of a receiver andmanager in respect of the property of thecompany.

(2) Despite its repeal, the Parts VI to IX of the

repealed Companies Act, and any other provisions of thatAct necessary for the operation of those Parts, continue toapply, to the exclusion of this Act, to any past event and toany step or proceeding preceding, following, or relating to

5284 he Insolvency Bi l l . 2012

Pow er of CabinetSecretary tomake savings andtransitionalregulations.

that past event, even if it is a step or proceeding tha t is takenafter the comm encement.

(3) Subsection (2) has effect subject to anytransitional regulations m ade und er section 739 that relate to

the insolvency of com panies and other bodies corporate.

739. (1) The Cabinet Secretary may make regulationscontaining provisions of a savings or transitional naturerelating to the transition from the application of the repealedBan kruptcy Act and the relevant provisions of the repealedCom panies Act to the application of this Act.

(2) Any such provision may, if those regulationsso provide, take effect from the date of the passing o f thisAct o r a later date.

(3) To the extent to which any such provisiontakes effect from a date that is earlier than the date of itspublication in the Gazette, the provision does not operate so

as—(a) to affec t, in a manner prejudic ia l to any



person (other than the State or an agencyof the State), the rights of that personexisting before the date of itspublication; or

(b ) to impose liabilities on any person (other

than the State or an authority of theState) in respect of anything done orom itted to be done b efore the date of itspublication.

(4) Without limiting subsection (1), the savingsand transitional regulations may provide for a matter to bedealt with, who lly or partly, in any of the following w ays:

(a) by applying (with or withoutmodification) to the matter provisions of


a w ritten law of K enya;

(b ) by otherwise specifying rules for dealingwith the m atter;

(c ) by specifying a particular consequence

of the matter, or of an outcome of thematter.

(5) In this section, matters of a savings ortransitional nature include, but are not limited to, mattersrelated to any of the following:

(a ) how a matter that arose or existed underthe repealed Act is to be dealt withunder this Act;

(b ) the significance for the purposes of thisAct of a matter that arose or existedunder the repealed Act;

(c ) how a process started but not completedunder the repealed Act is to be dealt

with;(d ) the preservation of concessions or



exemptions (however des'cribed) thatexisted under the repealed A ct;

(e ) any other matters that are prescribed byregulations made for the purposes of thissubsection.

(6) In this section, relevant provisions , inrelation to the repealed Companies Act, means Parts VI to IXof that Act, and any other provisions of that Act necessary '

for the operation of those P arts,

740. (1) The enactments specified in the Sixth Schedule

are amended in the manner indicated in that Schedule.(2) On being satisfied that enactments other

than those amended by the Sixth Schedule do not conform to

Consequential

amendments toother enactmen ts.,

5286 he Insolv,ency Bill, 20 12

this Act, the Cabinet Secretary may, by order pub lished inthe Gazette, make such am endm ents as are necessary toensure that those enactments so conform.

(3) Am endm ents made in accordance withsubsection (2) do not take effect until they have beenapproved by a resolution passed by both Houses o fParliament.

SCHEDULES

FIR ST SCH EDULE SS. 63 & 65 )

P O W E R S O F B A N K R U P T C Y T R U ST E ES

PAR T 1— POW ERS EXERC ISABLE WITH APPR OVA L



1 . Power to car ry on any b us iness of the bankrupt so far as may benecessary for w inding i t up be neficial ly and so far as the bank ruptcy trustee is ableto do so wi thout cont ravening any requ i rement imposed by or under any enactment .

2 . Pow er to bring or defend legal proceedings relat ing to the proper ty

comprised in the bankrupt 's estate.

3 . Pow er to accept as the consideration for the sale of any propertycomp rised in the bankrup t 's es ta te an am ount of m oney payab le a t a fu ture t imesubjec t to such s t ipula t ions as to secur i ty or o therwise as the credi tors ' comm itteeor the Co urt thinks f i t .

4 . (1 ) Power to bor row m oney fo r the benef ic ia l r ea li sa tion o f thebankrup t ' s esta te and to g ive secur ity for the borrowing over the whole or an y par tof the property c om prised in that estate those assets .

(2) This power may be exercised without the consent of secured


creditors or preferential creditors of the bankrupt so long as—

(a) approval for the exercise of the power is supported by amajority of the creditors (in number and value) holding atleast seventy-five percent in value of the total amount that isowed by the bankrupt to its creditors; and

(b ) the priorities of the secured and preferential creditors arepreserved in relation to the property of the bankrupt so thatthose creditors would be in no worse position than would bethe case when the distribution of the estate is completed.

5. If any right, option or other power forms part of the bankrupt's estate,power to make payments or incur liabilities with a view to obtaining, for the benefitof the creditors, any property that is the subject of the right, option or power.

6. Power to refer to arbitration, or to compromise on such terms as may beagreed, any debts, claims or liabilities subsisting or supposed to subsist between thebankrupt and any person who may have incurred a liability to the bankrupt.

7. Power to make such compromise or other arrangement as may beconsidered beneficial with creditors, or persons claiming to be creditors, in respectof the bankrupt's debts.

8 Power to make such compromise or other arrangement as may be



8. Power to make such compromise or other arrangement as may beconsidered beneficial with respect to any claim arising out of or incidental to thebankrupt's estate made or capable of being made on the bankruptcy trustee by anyperson or by the bankruptcy trustee on any person.

PART 2—GENERAL POWERS

5 2 8 8 he Insolvency Bill, 20/2

9. Power to sell any part of the property for the time being comprised in thebankrupt's estate, including the goodwill and book debts of any business carried onor formerly carried on by the bankrupt.

10. Power to give receipts for any money received by bankruptcy trustee,being receipts that effectually discharge the person paying the money from allresponsibility in respect of its application.

11. Power to prove, rank, claim and draw a dividend in respect of such debtsdue to the bankrupt as are comprised in the bankrupt's estate.

12. Power to exercise in relation to any property comprised in the bankrupt'sestate any powers the exercise of which is conferred on the bankruptcy trusteeunder Part III of this Act.

13. Power to deal with any property comprised in the bankrupt's estate towhich the bankrupt is beneficially entitled as tenant in tail in the same manner asthe bankrupt might have dealt with it.

PART 3—ANCILLARY POWERS

14. For the purposes of, or idconnection with, the exercise of any of thebankruptcy trustee's powers under Parts III of this Act, that trustee may as such—



p y p , y

(a ) h old an y k in d o f p ro pe rty ;

(b ) e nte r in to co ntr ac ts ;

(c) sue and be sued ;

(d ) enter into engagements binding on that trustee and, inrespect of the bankrupt's estate, on that trustee's successorsin office;

(e ) employ agents;

(f ) execute powers of attorney, deeds and other documents; and

(g) do any other acts necessary or desirable for the purposes of,or in connection with, the exercise of the powers referred to

in paragraph s (a) to (f).

5 89The Insolvency B ill, 2012

SECO ND SCHEDULE

(SS. 108, 174, 245, 278 , 246, 278, 374 & 4 71)

PR EFER ENTIAL DEBTS

1. The debts of a person who is adjudged bankrupt, or ofa company that is in liquidation, are payable in the order ofpriority in which they are listed in paragraphs 2, 3 and 4.

2. ( 1) The expenses of the bankruptcy or liquidationhave first priority and are payable in the order in which they arelisted in subparag raph (2)(a) to (c).

(2) For the purposes of subparagraph (1), thoseexpenses are as follows:

(a ) the remuneration of the bankruptcytrustee or liquidator, and the fees and

expenses properly incurred by that trusteeor liquidator in performing out the dutiesimposed, and exercising the powers

Priority of

payments topreferentialcreditors.

First priorityclaims.



p , g pconferred, by or under this Act:

(b ) the reasonable costs of the person whoapplied to the Court for the orderadjudging the person bankrupt or placingthe company in liquidation:

(c ) to any creditor who protects or preservesassets of the bankrupt or company or thebenefit of the creditors of the bankrupt orcompany by the payment of money or thegiving of an indemnity-

(i) the amount received by thebankruptcy trustee or liquidator by

the realisation of those assets, upto the value of that creditor's


Second priorityclaims.

unsecured debt; and

(ii) the amount of the costs incurredby that creditor in protecting orpreserving those assets.

(3) In subparagraph (1), reasonable costs includethe reasonable costs incurred between advocate and client inprocuring the order concerned.

3 . 1 ) After the claims referred to in paragraph 2 havebeen paid, claims in respect of the following debts have secondpriority to the extent that they rem ain unpaid:

(a ) all wages or salaries payable toemployees in respect of services providedto the bankrupt or company during thefour months before the commencementof the bankruptcy or liquidation;

(b ) any holiday pay payable to employees onthe termination of their employmentbefore, or because of, the commencement

of the b ankruptcy or liquidation;(c ) any compensation for redundancy owed

to employees that accrues before or



Cap. 470

No.12 of 2007

to employees that accrues before, orbecause of, the comm encement of thebankruptcy or liquidation;

(d ) amounts deducted by the bankrupt orcompany from the wages or salaries of

employees in order to satisfy theirobligations to other persons (includingamou nts payable to the Kenya Reven ueAuthority in accordance with Income TaxAct);

(e ) any reimbursement or payment providedfor, or ordered by the Industrial Courtunder the Labour Institutions A ct, 2007

to the extent that the reimbursement orpayment does not relate to any matterspecified in the Labour Relations Act,


2007 in respect of wages or other. moneyor remuneration lost during the fourmon ths before the commencem ent of thebankruptcy or liquidation;

(f )amounts that are preferential claimsunder se ction 174(2) and (3).

(g ) all amounts that are by a ny other w rittenlaw required to be paid in accordan cew ith the priority established by thissubclause paid by the buyer to a seller onaccoun t of the purchaseprice of goods.

(2) The total amount to which priority is to be givenunde r any, or all, of subparagraphs (1)(a) to (e) ma y not, in thecase of any one employee, exceed two hund red thousandshillings as at the comm encemen t of the bankruptcy orliquidation.

(3) The amount specified in subparagraph (2) issubject to adjustment as follows:

‘(a) subject to subclause (d)—the CabinetSecretary shall, by order published in theGazette, make an ad justment that has

No.14 of 2007



effect for the three-year period from andinclUding 1 July 2012 and for eachsubsequent three-year period;

(b ) subject to subclause (d)—the C abinetSecretary shall make such an order w ithinthree months after the end of anadjustmen t period;

(c ) each adjustment is required to reflect anyoverall percentage increase, over therelevant adjustment period, in averagewe ekly earnings (total, private sector),calculated by referenc e to the lastEmploymen t Survey or similaremploymen t index published by KenyaBu reau of Statistics (or, if that surveyceases tobe published, a survey certif


by the G overnmen t Statistician as anequivalent to that survey) within therelevant adjustment period;

(d ) if, in an adjustment period, there is nochange, or an overall decrease, in thepercentage movement in average weeklyearnings (total, private sector), as socalculated, the Cabinet Secretary may notmake an adjustment for that adjustmentperiod;

(e ) if, in accordance with subclause (d), noadjustment is made, the CabinetSecretary shall ensure that the nextadjustment mad e for any later adjustmentperiod reflects any overall percentageincrease in average w eekly earnings(total, private sector) between the date ofthe last adjustment and the end of theadjustment period for which thesubsequent adjustment is to be made;

(f ) all adjustments are cumulative and are tobe round ed to the nearest shilling (w ithfifty cents being rounded to one shilling);and



and

(g ) any correction to the QuarterlyEmployment Survey on which anadjustment is based is to be disregardeduntil the adjustment that takes effect in

the subsequent adjustment period, whichmust reflect the corrected information inthe calculation of that adjustment andmust otherwise be made in accordancewith this subparagraph.

(4) The amount specified in subparagraph (2), orthat amount as adjusted under subparagraph (3), on the date of

commencement of the bankruptcy or liquidation, continues toapply to that bankruptcy or bankruptcy or liquidation regardlessof any change to that amou nt that is prescribed after the date of


commencement of the bankruptcy or bankruptcy or liquidation.

(5) In this paragraph—

adjustment period means the three-year period

beginning on 1s tJuly 2012 and each subsequent three-yearperiod.

employee means a person employed by an employer forwages or a salary under a contract of service; and includes ahome worker specified in of the Employment Act, 2007, butdoes not include a person who is, or was at any time during thetwelve months before the commencement of the relevantbankruptcy or liquidation, a director of the company in

bankruptcy or bankruptcy or liquidation, or a nominee or relativeof, or a trustee for, a director of the company;

wages or salaries , in relation to an employee, includes—

(a ) remuneration in the form of commissionor payable for time or for piece work; and

(b) remuneration payable to an employee asholiday or sickness pay or in respect of

absence from work for any other goodreason.

No. H of 2007



4. fter the claims referred to in paragraphs 2 and 3 havebeen paid, the claims in respect of the following debts have thirdpriority to the extent that they remain unpaid:

(a ) tax deductions made by the bankrupt orcompany under the pay as you earn rulesof the Income Tax A ct;

(b ) non-resident withholding tax deducted bythe company under the Income Tax Act;

(c ) resident withholding tax deducted by thecompany under the Income Tax Act;

(d ) duty payable within the meaning ofsection 2( ) of the Customs and ExciseAct.

Third priorityclaims.

Cap. 470

Cap.110

5. laims having the same priority rank equally amongthemselves and, subject to any maximum payment levelprescribed by or under any written law, arc payable in full,unless the property of the bankrupt or company is insufficient to

meet them, in which case they abate in equal proportions.

Insatistied claimsof the same priorityto abate.equally.


T H I R D S C H E D U LE SS. 461, 463)

PO WERS OF LIQUIDATO R IN A LIQUIDATIO N

PA RT 1 — P O W E R S EX ER C I SA B L E W I T HA P P R O VA L

1 . ower to pay any class of creditors in full.

2. ower to make any com promise or arrangemen t withcreditors or persons claiming to be creditors, or having oralleging to have any claim (present or future, certain orcontingent, ascertained or sound ing only in damages) against thecompany, or by which'the company may be become liable.

3. Power

(a) to compromise, on such terms as may beagreed—

(i) all calls and liabilities to calls, alldebts and liabilities capable ofresulting in debts, and all claims(present or future certain or



(present or future, certain orcontingent, ascertained orsounding on ly in damages)subsisting or supposed to subsistbetween the company and a

contributory or allegedcontributory or other debtor orperson apprehending liability tothe company, and

(ii) all questions in any way relatingto or affecting the assets or theliquidation of the com pany; and

(b) to take any security for the discharge ofany su ch call, debt, liability or claim andgive a complete discharge in respect of it.

4. 1) Pow er to borrow mo ney for the beneficialrealisation of the company's assets and to give security overthose assets for the borrowing.


(2) This power may be exercised without theconsent of secured creditors of the company so long as—

(a ) approval for the exercise of the pow er issupported by a m ajority of the creditors(in nu mber and value) holding at leastseventy-five percent in value o f the totalamount that is owed by the company toits creditors; and

(b ) the priorities of the sec uredcreditors arepreserved in relation to the assets of thecompany so that those creditors would bein no wo rse position than w ould be thecase when the liquidation of the companycompleted.

5. Pow er to bring legal proceedings und er section 505, 506,682, 683 or 701.

PA R T 2 — P O W E R S E XE R C I SA B L E W IT H O U TA P P R O VA L IN V O L UN TA R Y L IQ U ID AT I O N O R W I T HA P P R O VA L I N L IQ U ID AT I O N B Y T H E C O U RT

6. Pow er to bring or defend any action or other legalproceeding in the name and on behalf of the company.



7. Power to carry on the business of the com pany so faras m ay be ne cessary for its beneficial liquidation.

PA R T 3 — P O W E R S E XE R C I SA B L E W IT H O U T A P P R O VA L I N EV ERYKIND OF LIQUIDAT ION

1 8 . ow er to sell any of the co mpa ny's property by public auction or privatecontract with pow er to transfer the wh ole of it to any person o r to sell the same in


parcels.

9. Pow er to do all acts and execute, in the name and o n behalf of thecompany, all deeds, receipts and other docu ments and for that purpose to use, whennecessary, the company's seal.

10. Power to prove, rank and claim in the bankruptcy, insolvency orsequestration of any contributory for any balance against the contributory's estate,and to receive dividends in the bankruptcy, insolvency or sequestration in respectof that balance, as a separate debt due from the bankrupt or insolvent, and rateablywith the other separate creditors.

11. Power to draw, accept, make and indorse any bill of exchange orpromissory note in the name an d on beh alf of the com pany, with the same effectwith respect to the company's liability as if the bill or note had been drawn,accepted, made o r indorsed by or on beh alf of the com pany in the course of itsbusiness.

12. (1) Power to obtain in the administrator's official name letters ofd i i i d d ib d d i h d i i '



administration to any deceased contributory, and to do in the administrator'sofficial name any other act necessary for obtaining paymen t of any mo ney duefrom a contributory or the contributory's estate that cannot conveniently be done inthe name of the company .

(2) In all such cases the money due is to be treated, for the purpose ofenabling the liquidator to obtain letters of administration or recover the money, asbeing be due to the liquidator personally.

13. Pow er to appoint an agent to do any business that the liquidator is unableto do personally.

14. Pow er to take all other action that m ay be n ecessary for the beneficialliquidation of the com pany.


F O U RT H S C H E D UL E SS. 576 & 5 83)

P O W E R S O F A D M IN IS T R ATO R S

1. ow er to take possession of, collect and get in the property of thecompany and, for that purpose, to take such proceedings as the adm inistratorconsiders necessary.

2. ow er to sell or otherwise dispose o f the property of the com pany bypublic auction o r private contract.

3. 1) Power to borrow money for the beneficial realisation of thecompany's assets and to give security over those assets for the bo rrowing.

(2) This pow er may be4ex ercised without the consent of securedcreditors of the company so long as—

(a ) approval for the exercise of the pow er is supported bycreditors holding at least seventy-five percent in value ofthe total amou nt that is ow ed by the co mpany to its

creditors; and(b ) the priorities of the secured cred itors are preserved in

relation to the assets of the com pany so that those creditorswo uld be in no worse position than wo uld be the case if the



wo uld be in no worse position than wo uld be the case if thecompany were liquidated.

4. ower to appoint an advocate solicitor or accoun tant or otherprofessionally qualified person to assist the adm inistrator in the performan ce of theadm inistrator's functions.

5. ow er tu bring or defend any action or other legal proceedings in thename and on behalf of the company.

6. ow er to refer to arbitration any question affecting the com pany.

7.. Power to effect and maintain insurance policies in respect of the business

and property of the com pany.


8. Pow er to use the company's seal.

9. Pow er to do all acts and to execute in the name an d on behalf of thecompany any deed, receipt or other document.

10. Pow er to draw, accept, make an d endorse any bill of exchange orpromissory note in the name an d on behalf of the company.

11. Pow er to appoint any agent to do any business that the adm inistrator isunable to do himself or that can more conven iently be done by an agent and pow erto employ and dismiss employees.

12. Pow er to do all such things (including carrying out wo rks) as may benecessary for the realisation of the property of the com pany.

13. Pow er to make any paym ent which is necessary or incidental to theperformance of the administrator's functions.

14. Pow er to carry on the business of the compan y.

15. Pow er to establish subsidiaries of the company;

16. Pow er to transfer to subsidiaries of the company the who le or any part ofthe business and property of the com pany.

17. Pow er to grant or accept a surrender of a lease or tenancy of any of theproperty of the com pany and to take a lease or tenancy of any property required or



property of the com pany, and to take a lease or tenancy of any property required orconven ient for the business of the company .

18. Pow er to make any arrangement or com promise on behalf of thecompany.

19. Pow er to call up any uncalled capital of the compan y.

20. Pow er to rank and claim in the bankruptcy, insolvency, sequestration orliquidation of any person ind ebted to the com pany and to receive dividend s, and toaccede to trust deeds for the creditors of any such person.

21. Pow er to make or defend an application for the liquidation of the

company.

The InsolvencY Bill, 201 2 299

22 . Pow er to change the location o f the com pany's registered office.

23 . Pow er to do all other things incidental to the exercise of the other powersconferred by this Schedule.

FIFTH SCHEDULE S. 724)

C R O S S B O R D ER I N SO LV EN C Y

PA RT 1 — G EN ER A L P R O V I S IO N S

1. (1) The provisions of this Schedule generallycorrespond to the provisions of the M odel Law on Cross-BorderInsolvency adopted by the United Nations Com mission onInternational Trade Law on 30 M ay 1997, and approved by theGeneral Assembly of the United Nations on 15 December 1997(General Assem bly Resolution 52).

Rules applying 1cross-border

insolvency.



( y )

(2) However, certain modifications have been madeto the Mod el Law in its application to Ken ya.

2. The pu rpose of this Schedule is to provide effectivemechan isms for dealing with cases of cross-border insolvency soas to promote the objectives of attaining—

(a ) co-operation between the courts and o ther

competent authorities of Kenya an dforeign States involved in cases of cross-border insolvency;

(b ) greater legal certainty for trade and

Purpose of thisSchedule.


investment;

(c) fai r and efficient administ ra tion of cross-border insolvencies that protects theinterests of all creditors and otherinterested persons, including the debtor;

(d ) pro tect ion and maximisation o f the valueof the debtor's assets; and

(e ) facilitation of the rescue of financiallytroubled businesses with a view toprotecting investment and preservingemployment.

Scope ofapplication of thisSchedule.

3 . 1) Except as provided in subparagraph (2) thisSchedule applies when—

(a) 'assistance is sought in Kenya by a foreigncourt or a foreign representative inconnection w ith a foreign proceeding;

(b) assistance is sought in a foreign Sta te inconnection with a proceeding under thisAct and any other written law relating toinsolvency in Kenya;



(c ) a fo re ign proceed ing and a proceed ingunder this Act and any other written lawrelating to Insolvency in Kenya in respectof the same debtor are taking placeconcurrently; or

(d ) creditors or other interested persons in aforeign State have an interest in requestingthe 6pmmencementof, or participation in,a proceeding under this Act or any otherwritten law relating to insolvency inKenya.

(2) This Schedule does not apply to a company thatholds a licence granted under section 5 of the Banking Act if-


(a ) the Central Bank of Kenya has intervened ap 488in the management of the com pany, inaccordance w ith section 34 of that Act andthat intervention has not ceased; or

(b ) the licence of the com pany is suspended

as a result of the operation of section 47 ofthat Act..

4. or the purposes of this Schedule—

"business establishment" m eans an y place of operations if

the debtor carries out a non-transitory economic activity withhuman means and goods or services;

"foreign proceeding" means a collective judicial oradm inistrative proceeding in a foreign State, including an interimproceeding; under to a law relating to insolvency in whichproceed ing the assets and affairs of the debtor are subject tocontrol or supervisioni3y a foreign cou rt, either for the purpose ofreorganisation or liquidation;

"foreign m ain proceeding" means a foreign proceedingtaking place in a foreign State if the debtor has the centre of itsmain interests in that State;

"f i i di " f i

Definitions forpurposes of thisSchedule



"foreign non-m ain proceeding" means a foreignproceeding, other than a foreign main proceeding, taking place ina foreign State if the debtor has a bu siness establishm ent in thatState;

"foreign representative" means a person or body, includingone appointed on an interim basis, authorised in a foreignproceeding to administer the re-organisation or the liquidation ofthe debtor's assets or affairs or to act as a represe ntative in theforeign proceeding;

"foreign court", in relation to a foreign State, mean s ajudicial or other authority authorised by a law of that State tocontrol or supervise a foreign proceeding in that State;

"insolvency adm inistrator means—


Internationalobligations ofKenya.

(a ) th e O ff ic ia l R e ce iv er;

(b ) a bankruptcy trustee appointed under PartIII of this Act;

(c ) a liquidator appointed under Part VI orVII of this Act or,under any o ther writtenlaw;

(d ) an adm inistrator appointed un der Part V IIIof this Act; or

(e ) a supervisor appointed in respect of avoluntary arrangement under Part IX orDivision 1 of Part IV of this Act;

Kenya insolvency proceeding , in relation to a debtor,means a collective judicial or administrative proceedingconducted under the law in Kenya relating to insolvency underwh ich the assets and affairs of the debtor are adm inistered, or theassets of the debtor are or will be realised for the benefit ofsecured or unsecured creditors.

5. o the ex tent that this Schedule conflicts with anobligation of Kenya arising out of any treaty or other form ofagreement to w hich it is a party w ith pne or mo re other States, theprovisions of the treaty or agreement prevail



provisions of the treaty or agreement prevail.

Court to havejurisdiction.

6. The C ourt shall perform the functions specified in thisSchedule relating to recognition of foreign proceedings an d co-operation with foreign courts.

Authorization ofinsolvency

administrator.

7. An insolvency administrator is authorised to act in aforeign State on behalf of a Kenya insolvency proceeding underthis Act or an y other law relating to insolvency, as permitted bythe applicable foreign law.


8 . (1) Nothing in this Schedule prevents the Court fromrefusing to take an action governed by this Schedule if the actionis man ifestly contrary to the public policy of Ken ya.

(2) Before refusing to take an action undersubparagraph (1), the Court shall consider whether it is necessaryfor the Attorney-General to appear and be heard o n the qu estionof the public policy of Kenya .

Public policyexception.

9. Nothing in this Schedule limits the power of a court or

an insolvency administrator to provide additional assistance to aforeign representative under other laws o f Ke nya.

Additional

assistance underother laws.

10. In the interpretation o f this Schedule, regard is to be nterpretation:had to its international origin and to the need to promote ixth Schedule.

uniform ity in its application and the o bservanc e of good faith.

PA R T 2 A C C E SS O F F O R E IG N R E P R E SE NTAT I V ES A N D



PA R T 2 — A C C E SS O F F O R E IG N R E P R E SE NTAT I V ES A N DC R E DI TO R S TO C O U RT S IN K E NYA

A l . A foreign repres entative is entitled to apply directly to ight of directthe Court. ccess.

12. The so le fact that an application und er this Schedule ismade to the Cou rt by a foreign representative does not subject theforeign representative or the foreign assets and a ffairs of the debtorto the jurisdiction of the C ourt for any purpose o ther than theapplication.

Limitedjurisdiction.


Access offoreign creditorsto a Proceedingrelating toinsolvency.

Notification toforeign creditorsof a proceedingrelating toinsolvency.

13. A foreign representative is entitled to apply tocommence a proceeding under this Act or any other written lawrelating to insolvency if the conditions for commencing such aproceeding are otherwise satisfied.

14. On recognition by the C ourt of a foreign proceeding, theforeign representative is entitled to participate in a proceedingregarding the debtor under this Act or any other written lawrelating to insolvency.

15. 1) ubject to subparagraph (2), foreign creditors havethe same rights regarding the commencement of, and participation

in, a proceeding under this Act or any other written law relating toinsolvency, as creditors in Kenya.

(2) Subparagraph (1) does not affect the ranking ofclaims in a proceeding under this Act or the exclusion of foreigntax and social security claims from such a proceeding.

16. (1) Whenever, in a proceeding under this Act,notification is to be given to creditors in Kenya, the notification isalso to be given to the know n creditors that do not have add ressesin Kenya.

Application by aforeignrepresentative tocommence aproceeding inKenya.

Participation of aforeignrepresentative ina proceeding.



(2 ) The Co urt may, in accordance with subparagraph(1), order that appropriate steps be taken with a view to notifyingany creditor whose address is not yet know n.

(3) The person ordered to give the noti fication shallensure that it is given to the foreign creditors individually, unlessthe Cou rt considers that, under the circumstances, some other formof notification w ould be more appropriate.

(4 ) When a notification of commencement of aproceeding is to be given to foreign creditors, the person orderordered to give the notification shall ensure that the notification—

(a) indicates a reasonable time period for


lodging claims and specify the place fortheir lodgem ent;

(b ) indicate w hether secured creditors need tomake their claims;

(c ) includes any other informa tion required tobe included in such a notification tocreditors under the law of Ken ya and inaccordance w ith orders of the Co urt; and

(d ) is advertised in a local newspaper w ithwide n ational circulation.

PA R T 3 — R E C O G NI T IO N O F A F O R E IG N P R O C E ED IN G A N D R E L IE F

Application forrecognition of aforeignproceeding.

17. (1) A foreign representative may apply to the Courtfor recognition of the foreign proceeding in which the foreignrepresentative has be en appointed.

(2) An application for recognition may be rejected if

it is not accompanied by—(a ) a certified copy o f the decision

comm encing the foreign proceeding andappointing the foreign representative;



(b ) a certificate from the foreign c ourtaffirming the existence of the foreignproceeding and of the appointment of the

foreign representative;- or(c ) in the absence of evidenc e referred to in

sub-paragraphs (a) and (b)—any otherevidence acc eptable to the Co urt of theexistence of the foreign proceeding and ofthe appointment of the foreignrepresentative.

(3) An application for recognition may also berejected if it not accom panied by a statem ent identifying allforeign proceedings in respect of the debtor that are know n to the


foreign representative.

(4) The Court may require a translation of documentssupplied in support of the application for recognition into En glishas the official language of K enya.

Presumptionsconcerningrecognition.

Decision torecognise aforeignproceeding.

18. (1) If the decision or certificate referred to inparagraph 17(2) indicates that the foreign proceeding is aproceeding w ithin the m eaning of paragraph 2(a) and that theforeign representative is a person or bo dy w ithin the m eaning ofparagraph 2 (d), the Cou rt is entitled to presum e that that is thecase.

(2) The Co urt is entitled to presume that docum entssubm itted in su pport of the application for recognition areauthentic.

(3 ) In the absence of proof to the contrary, thedebtor's registered office in the case of a body co rporate, or theperson's usua l residence in the case of a na tural person, ispresumed to be the centre of the debtor's main interests.

19. Subject to paragraph 8, the Cou rt shall recognise aforeign proceeding if—

(a ) the foreign proceeding is a proceeding



( ) g p g p gwithin the mean ing ofparagraph 4;

(b ) the foreign representative applying forrecognition is a person or body w ithin themea ning of that paragraph;

(c ) the application meets the requirements ofparagraph 17(2); and

(d ) the application has bee n subm itted to theCourt.

(2) The Court shall recognise the foreign

proceeding—(a) as a foreign main proceeding if it is taking

place in the State if the debtor h as the


centre of its main interests; or

(b) as a foreign non-main proceeding if thedebtor has an establishment w ithin themea ning of paragraph 4 (f) in the foreignState.

(3) The Court shall hear and determine an applicationfor recognition of a foreign proceed ing at the earliest possibletime.

(4 ) As soon as practicable after the Court hasrecognised the foreign proceeding under subparagraph (1), theforeign representative shall notify the deb tor that the application

has been recognised.

(5 ) This paragraph and paragraphs 17, 18 and 20 donot prevent m odification or termination of reoo gnition if it isshow n that the ground s for granting it we re fully or partiallylacking or have ceased to ex ist.

2 0 . After lodgement of the application for recognition of theforeign proceeding, the foreign representative shall inform theCourt promptly of—

(a ) any substantial change in the status of therecognised foreign proceeding or the status

Subsequent

information.



g g p gof the foreign representative's appointmen t;and

(b ) any other foreign proceeding regarding thesame debtor that becomes known to theforeign representative.

2 1 . If, at any time from the time of lodgem ent of anapplication for recognition un til the application is determine d, the

Cou rt, at the reques t of the foreign representative, is satisfied thatrelief is urgently need ed to protect the assets of the debtor or theinterests of the creditors, it may grant relief of a provisional nature,including-

Relief that maybe granted onapplication for

recognition of aforeignproceeding.


(a ) halting execution against the debtor'sassets;

(b ) entrusting the adm inistration or realisationof all or part of the debtor's assets locatedin Ken ya to the foreign representative oranother person de signated by the Cou rt, inorder to protect and preserve the value o fassets that, by their nature or because ofother circumstanc es, are perishable,susceptible to devaluation or otherwise injeopardy; and

(c ) any relief men tioned in paragraph 23(1)(c)and (d).

(2) As so on as practicable, after the Court grants reliefunder subparagraph (1) the foreign representative shall notify thedebtor, in the prescribed form, of the relief that has been granted.

(3) Unless ex tended u nder paragraph 23(1)(f) therelief granted under this paragraph terminates w hen the a pplicationfor recognition is determined.

(4) The C ourt may refuse to grant relief underparagraph if it would interfere with the adm inistration of a foreignmain proceeding.



Effects ofrecognition of aforeign main

proceeding.

•

22. 1) On recogn ition by the cou rt of a foreignproceeding that is a foreign main proceeding—

(a ) comm encemen t or continuation ofindividual actions or individualproceedings concerning the debtor's assets,rights, obligations, or liabilities is stayed;

(b ) execution against the debtor's assets ishalted; and

(c ) the right to transfer, encum ber, orotherwise dispose of any assets of thedebtor is suspended.


(2 ) Subparagraph (1) does not prevent the Court, onthe application of any creditor or interested person, from makingan order, subject to such conditions as the Court thinks fit, that thestay or suspension does not apply in respect of any particularaction or proceeding, execution, or disposal of assets.

(3) Subparagraph (1Xa) does not affect the r ight tocommence individual actions or proceedings to the extentnecessary to preserve a claim against the debtor.

(4 ) Subparagraph (1) does not affect the right torequest the commencement of a proceeding under this Act or anyother written law relating to insolvency or the right to make claimsin such a proceeding.

23. (1) On recognition by the Court of a foreignproceeding, whether main or non-main, if necessary to protect theassets of the debtor or the interests of the creditors, the Court may,at the request of the foreign representative, grant any appropriate

relief, including—

(a) halting the commencement or continuationof individual actions or individualproceedings concerning the debtor's assets,rights, obligations, or liabilities, to the

Relief that maybe granted onrecognition of aforeignproceeding.



rights, obligations, or liabilities, to theextent they have not been stayed underparagraph 22(1)(a);

(b ) halting execution against the debtor's assetsto the extent it has not been stayed underparagraph 22(l)(b);

(c ) suspending the right to transfer, encumber,or otherwise dispose of any assets of thedebtor to the extent this right has not beensuspended under paragraph 22 (l)( c);

(d ) providing for the examination of witnesses,the taking of evidence, or the delivery ofinformation concerning the debtor's assets,


affairs, rights, obligations or liabilities;

(e) entrusting the administration or realisationof all or part of the debtor's assets locatedin Ken ya to the foreign representative oranother person designated by the Co urt;and

(0 extending relief granted under paragraph21(1).

(2) On recogn ition by the cou rt of a foreignproceeding, whe ther main or non-m ain, the Co urt may, at therequest of the foreign representative, entrust the distribution of allor part of the deb tor's assets located in K enya to the foreign

representative or another person designated by the Co urt, providedthat the Cou rt is satisfied that the interests of creditors in Kenyaare adequa tely protected.

(3 ) In granting relief under this paragraph to arepresentative of a foreign non-m ain proceeding, the Cou rt shallsatisfied itself that the relief relates to asse ts that, under the law ofKenya, should be administered in the foreign non-main proceedingcr concerns inform ation required in that proceeding.

24. (1) In granting or den ying relief under paragraph 21or 23, or in mod ifying or terminating relief under su bparagraph

Protection ofc r e d i to r s a n d



or 23, or in mod ifying or terminating relief under su bparagraph(3), the Co urt shall ensure that the interests of the creditors andother interested persons, including the debtor, are adequa telyprotected.

(2) In granting relief under paragraph 21 o r 23, theCou rt may impose such co nditionwas it considers appropriate.

(3 ) The Court may—

(a ) at the request of the foreign representative;

(b ) a person affectedbyrelief granted underparagraph 21 or 23; or

o t h e r i n te r e s t e dp e r s o n s .

The Insolvency B ill, 2012 3 1 1

(c ) a t i t s ow n in i t ia t ive ,

inodify or term inate the relief.

(4) The Cou rt shal l, on app l icat ion of the s ta tutory

m anager (if any) or the O fficial Receiver, terminate the reliefgranted under paragraph 21 or 23 if—

(a ) an app licatioi for recogn ition has be enm ade in respect of a debtor is a bank;

(b ) the Cou rt has granted that application ortheCourt has granted rel ief under paragraph21; and

(c ) an insolvency even t occurs in relation tothe deb tor after that application or relief hasbeen granted.

(5 ) The fo l lowing a re inso lvency even ts fo r thepurposes of sub paragraph (4) :

(a ) i f the debtor is a natural person— themak ing of a bankrup tcy order in respect ofthe person; or

(b ) if the debtor is a comp any or other bodycorporate—the m aking of a l iquidationorder in respect of the comp any or thepass ing of a voluntary resoluti thfor the



l iquidation of the compan y.

25. (1 ) On recogni t ion by the C our t o f a fo re ignproceeding,the foreign representative has standing to init iate an yaction that an insolvency administrator may take in respect of aproceeding u nder this A ct that relates to a transaction (includingany gifts or improv emen t of property or otherw ise), security, orcharge that is voidable or m ay be set aside or al tered.

(2) When the foreign proceeding is a foreign non-main proceeding, the C ourt shal l ensure that the act ion re la tes to

Actions to avoidacts detrimentalto creditors.


Intervention bya foreignrepresentative inproceedings inKenya.

assets that, under the law of K enya, should be adm inistered in theforeign non-main proceeding.

(3) Nothing in subparagraph (1) affects the doctrine ofrelation back as it is applied in Kenya

26. On recognition by the co urt of a foreign proceeding, theforeign representative m ay intervene in any proceeding in w hichthe debtor is a party, so long as the requirements of the law ofKenya are com plied w ith.

PART 4—CO-OPERATION WITH FOREIGN COURTS AND FOREIGNR E P R E S E N TAT I V E S

Co-operationand directcommunicationbetween theCourt andforeign courts orforeignrepresentatives.

27. (1) In relation to matters referred to in paragraph (3),

the Court shall co-operate to the maximum extent possible withforeign courts or foreign representatives, either directly or throughan insolvency adm inistrator.

(2) The Court is entitled to communicate directlywith or to request information or assistance directly from foreign



with, or to request information or assistance directly from, foreigncourts or foreign representatives.

Co-operationand directcommunicationbetween theinsolvencyadministratorand foreign

representatives.

28. (1) In relation to matters referred to in paragraph 3(1),an insolvency administrator shall, in the performance of thatadministrator's functions and, subject to the supervision of theCou rt, co-operate to the maximu m ex tent possible w ith foreigncourts or foreign representatives.

(2) The insolvency administrator is entitled, in thee x e r c i s e o f i ts f u n c t io n s a n d s u b j e c t t o th e s u p e r v i s io n o f t h eCourt, to com mun icate directly w ith foreign courts or foreign


representat ives.

29 . Co-opera t ion r e fe r red to in pa rag raphs 27 and 28 m ay beimplem ented by any appropr ia te m eans , inc luding—

(a ) appointment of a person or body to ac t a tthe direct ion of the Court ;

(b ) com m unicat ion of informat ion by anym eans cons idered appropr ia te by the Co ur t ;

(c ) co-ordination of the administrat ion andsupervis ion of the debtor ' s asse ts andaffairs;

(d ) approval or implem enta t ion by cou r ts ofagreem ents concerning the co-ordinat ion ofproceedings; an d

(e ) co-ordination of concurrent proceedingsregarding the same debtor.

F o r m s o f c o -operation.

PA R T 5 — C O N C U R R E NT P R O C E ED IN GS

3 0 . ( 1 ) A f t e r t h e C o u r t h a s r e c o g n i s e d a f o r e i g n m a i nproceeding a proceeding under th is Act or may b e comm enced

C o m m e n c e m e n tof a proceed ing



proceeding, a proceeding under th is Act or may b e comm encedonly i f the debtor has asse ts in K enya.

(2 ) The e ffec t s o f tha t p roceed ing a re l imi ted to theasse ts of the debtor tha t a re loca ted in K enya an d, to the extentnecessary to implem ent co-opera t ion and co-ordinat ion un derparagra phs 27, 28 and 29, to other assets of the debtor that , underthe law of Ken ya, should be adm inistered in tha t proceeding.

of a p roceed ingin Kenya af terrecognit ion of aforeign mainproceeding.

31 . I f a fo re ign p roceed ing and a p roceed ing u nder th i s Ac tare taking place concurr ently in respect of the same debtor, theCou rt shall seek co-operat ion and co-ordination under paragrap hs

Co-ord iha t ion ofproceed ingunder the l aw ofKenya and a


foreignproceeding.

27, 28, and 29, in which case the follow ing provisions apply:

(a) when the proceeding in Kenya is takingplace at the time the application forrecognition of the foreign proceeding ismade;

(i) any relief granted under paragraph21 or 23 must be consistent w ith theproceeding in Kenya;

(ii) if the foreign proceeding isrecognised in Ken ya as a foreignmain proceeding—paragraph 22does n ot apply;

(b) when the proceeding in Kenya commencesafter recognition, or after the lodgem ent ofthe application for reco gnition, of theforeign proceeding-

(i ) the Co urt shall review any relief ineffect under paragraph 21 or 23 andshall mod ify or terminate it if it is

inconsistent with the proceeding inKenya;

(ii) if the foreign proceeding is a foreignmain proceed ing, the Court shall, inaccordan ce w ith paragraph 22(2),mod ify or terminate the stay halt or



mod ify or terminate the stay, halt orsuspension referred to in paragraph22(1) if it is inconsistent w ith theproceeding in Kenya;

(c) in granting, extending, or modifying reliefgranted to a representative of a foreign non -main proceed ing, the Cou rt shall ensurethat the relief relates to assets that, un derthe law of Kenya, should be administeredin the foreign non-m ain proceeding orconcerns inform ation required in thatproceeding.


3 2 . In m atters referred to in paragraph (1) in respect of moret han on e fo re ign p roceed ing 'egarding the same debtor, the Cou r tshall seek co-op erat ion and co-ordination. under paragraph 27 , 28and 29, in wh ich case the fo l low ing provis ions apply:

(a ) the Cou rt shall ensure that any rel iefgranted under paragraph 21 or 23 to arepresentat ive of a foreign non-mainproceeding af ter recogni t ion of a fore ignm ain proceeding i s cons istent wi th thefore ign m ain proceeding;

(b ) i f a fore ign m ain proceeding i s recognisedaf ter recogni t ion , or a f ter the lodgem ent of

an ap plication for recognit ion, of a foreignnon-m ain proceeding—the Cour t sha l lreview any rel ief in effect under paragrap h21 or 23 and sha l l m odify or te rminate i t i fi f i s inconsis tent wi th the fore ign m ainproceeding;

i f , a f te r recogni t ion of a fore ign non-m ainproceeding, another fore ign non-main

proceeding i s rdcognised , the C our t sha l lgrant , mo dify or terminate rel ief for thepur pose of facil itat ing co-ordination of theproceedings.

(c)

Co-ordination ofmore than oneforeignproceeding.



3 3 . In the absence of evidence to the con t rary, recogni tionO fa fo re ign m a in p roceed ing i s , fo r t he pu rpose o f com m enc ing aproceeding u nder this Act, proof that the deb tor is insolvent.

3 4 . Without affec t ing secured c la im s or r ights inrem, acredi tor w hoh s rece ived par t paym ent in respect of i t s c la im in aproceeding und er a law re la t ing to insolvency in a fore ignState

Presumptions ofinsolvencybased onrecognition of aforeign mainproceeding.

Rule of paymentin concurrentproceedings.


m ay not rece ive a paymen t for the sam e c la im in a proceedingunder this Act regarding the same deb tor, if the paym ent to theother creditors of the sam e class is proport ionately less than thepaym ent the creditor has already received.

SIXTH SCHEDULE S. 740)

CONSEQUENTIAL AMENDMENTS

PA R T 1 — A M EN D ME NT O F A D V O C A T E S A C T ( C A P. 1 6)

Section 16 elete paragraph (e) and substi tute the following :(Invalidagreements) (e) any d isposi t ion , con trac t , se t t lem ent ,

conveyance , de l ivery, dea l ing or t ransfertha t i s , under the Insolvency Act , 2012,void or ineffec t ive agains t the O ff ic ia lReceiver or a bank ruptcy t rus tee or an

interim trustee in proceedings under thatAct. .

PA R T 2 — A M E ND ME NT O F A R B I T R AT I O N A C T ( C A P. 4 )



Sect ion 38 epeal the section and sub sti tute the following:

Effect ofbankruptcy onagreement tosettledifferences byarbitration.

38.- (1) If—

(a ) i t is p rov ided by a t e rm in acontract to wh ich a bankruptis a party that any differencesarising out of or inconnect ion w i th the cont rac t

are to be referred toarbitration; and

11sfyvency Bidl

2 317

(b) the bankruptcy trustee adoptsthe contract,

the term is enforceable by or againstthat trustee sofar as relates to those differences.

(2) ubsection (3) applies if—

(a) a person who has beenadjudged bankrupt had,before the commencement ofthe bankruptcy, become aparty to an arbitrationagreement;

(b) any matter to which theagreement applies requires tobe determined in connectionwith or for the purposes ofthe bankruptcy proceedings;and

(c) the case is one to which

subsection (1) does notapply.(3) hen this subsection applies, any

other party to the agreement or—

(a) if there is no creditors'



committee, the bankruptcy-trustee; or

(b) if there is a creditors'committee—the bankruptcytrustee with the consent ofthe creditors' committee,

may apply to the High Court for an order directingthe relevant matter to be referred to arbitration in

accordance with the agreement.(4) n the hearing of an application

5 3 1 8 he Insolvency B ill , 2012

m ade under su bsect ion (3) , the High Cou r t may , ifof the opinion that that matter ough t to bedetermined by arb itration, mak e an order to thateffect .

(5) his sec t ion appl ies i f—

(a ) the arbitrat ion is a dom esticone;

(b ) the ban kru pt is a ci t izen of ,or ord inari ly resides in,Kenya; or

(c ) the law of Kenya isapplicable according to therules relat ing to the con fl ictof laws.

PART 3—AMENDMENT OF CHATTELS TRANSFER ACT (CAP. 28) -

Sect ion 13 epeal the sec t ion and subs t i tu te the fo l lowing sec t ion:

Unregisteredinstruments tobe void incertain cases.


the relevant chattels , in relat ion to aninstrument are the chattels referred to in



instrument, are the chattels referred to insubsection (2); and

the relevant event , in relat ion to a personwho owns or has an in teres t in the re levantchat te ls ' , means—

(a ) i f the person is adjudgedbankrupt—thecomm encemen t o f t hebankruptcy;

(b ) i f the person has entered intoa vo lun ta ry a r rangement -


the date on which thearrangement takes effect;

(c ) if the person has assigned therelevant chattels to creditors

or entered into a compositionwith creditors—the date onwhich the assignment orcomposition takes effect;

(d ) if a summary instalmentorder has been made inrespect of the person—thedate on which order takeseffect; or

(e ) if the person is subject to anexecution process—the dateon which the process takeseffect.

(2) n instrument relating to chattels

that is not registered before the deadline is void asagainst the persons specified in subsection (3) inso far as the property in, or the right to thepossession of, those chattels is after the relevantevent in the possession or apparent possessionof—



(a ) the person making or givingthe instrument; or

(b ) any person against whom theprocess was issued under orin the execution of which theinstrument was made orgiven.

(3) he persons referred to in

subsection (2) are as follows:(a) the Official Receiver or the

bankruptcy trustee in respect

5320 he 111S011 ellCy Bill, 2012

of the estate of the person towho m the relevant chattelsbelong;

(b ) the supervisor of anyvoluntary arrangement

entered into by that person,or the trustee acting underany com position or otherarrangement entered into forthe benefit of the creditors ofthat person;

(c ) any person wh o seizes therelevant chattels in thecourse of execu ting theprocess of a co urtauthorizing their seizure;

(d ) every person on w hosebehalf that process w asissued.

(4) or the purposes of subsection (2),the dead line for the registration of an instrume nt towhich this section a pplies is—

(a ) the period w ithin w hich theinstrument may be registeredin accordance w ith section 6;



or

(b ) if the High C ourt extends theperiod for registration, theexpiry of that extendedperiod.

(5) o long as an instrument continuesto be registered unde r this Act, the cha ttelscomprised in that instrument are, for the purposesof the Insolvency A ct, 2012, to be treated as beingnot ow ned by, or in the possession or at thed i s p o s a l o f , t h e p e rs o n w h o m a d e o rg v et h e


instrument."

PA R T 3 — I ND US T R I A L T R A I N IN G A C T ( C A P. 2 3 7 )

Section 27 ubstitute the following section:

ffect ofbankruptcy oncontract ofapprenticeshipor indenturedlearnership.

27. (1) If a contract of apprenticeship orindentured learnership is discharged by abankruptcy trustee in accordance with section69(2) of the Insolven cy Ac t, 2012, the bankruptcytrustee shall, within one month after dischargingthe contract, notify the discharge to the Director-General.

(2) A bankruptcy trustee who, w ithoutreasonable excuse, fails to com ply with subsection(1) commits an offence and o n conviction is liableto a fine not exceeding two hundred thousandshillings.

(3) A failure to comply w ithsubsection (1) does not prevent the discharge ofthe con tract from taking effect."

PA R T 4 — A M E ND M EN T O F I N SU R A N C E ( M O TO R V E H IC L E T H I R DPA R T Y R I SK S ) A C T ( C A P. 40 5 )



Section 15 epeal the section and substitute the following section:

Contracts ofinsuranceagainstliabilities tothird parties.


(a) insured person means aperson who is insured under acontract of insurance againstliabilities to third parties; an d

(b) insolvency event means-


(i ) in relation to a naturalperson, the making ofa bankruptcy order inrespect of the personor the entering into avoluntary arranged bythe person; or

(ii) in relation to acompany or otherbody corporate, themaking of aliquidation order or anadministration order inrespect of thecompany , or thepassing of a resolutionfor its voluntaryliquidation;

(c ) liabilities to third parties , inrelation to an insured, does

not include any liability of theinsured in the capacity ofinsurer under some othercontract of insurance.

(2 ) If an insured person, either beforeafter the occurrence of an insolvency even t, incursliability to a third party the person's rights against



liability to a third party, the person s rights againstthe insurer under the contract are transferred to andvest in the third party.

(3 ) If—

(a ) an order is made under Part Vof the Insolvency A ct, 2012for the administration of theestate of a deceased debtor inaccordance with that Part; and

•(b ) a debt provable in bankruptcy


is owing by the deceased inrespect of a liability againstwhich the deceased wasinsured under contract ofinsurance against liabilities tothird parties,

the deceased debtor's rights against the insurerunder the contract in respect of that liability are,irrespective of anything in that Act, transferred toand vest in the person to whom the debt is owing.

(4) n so far as a contract of insurancem ade in respect of any liability of the insured tothird parties purports (either directly or indirectly)to avoid the contract, or to alter the rights of theparties under it—

(a) on the happening of aninsolvency event involvingthe insured; or o

(b ) on the making of an order

under Part VI of theInsolvency Act, 2012 inrespect of the insured's estate,

the contract is void.

(5) n a transfer under subsection (2) orsubsection (3) the insurer becomes under the same



subsection (3), the insurer becomes under the sameliability to the third party as the insurer would havebeen unde r to the insured, but —

(a) f the liability of the insurer tothe insured exceeds theliability of the insured to thethird party, nothing in thissection affect the rights of theinsured against the insurer in

respect of the excess; and

(b) f the liability of the insurer to

5324 he insolvency Bill. 2012

the insured is less than thatliability, nothing in thissection affects the rights ofthe third party against theinsured in respect of thebalance.

6) his section does not apply to acompany that is in voluntary liquidation only for thepurposes of reconstruction, or of amalgamation ormerger with another company

PART 5 — MENDMENT OF INSURANCE ACT (CAP 487)

Section 95(Property inchild'sadvancementpolicy).

Delete subsection (3) and substitute the following subsections:

(3) f, during a child's lifetime, a person effecting apolicy in respect of the child dies or is adjudged bankrupt beforethe child has reached the vesting age, the representative of theperson holds the policy in trust for the child until the childreaches the vesting age or dies before reaching that age, subject

to any dealings other than 'testamentary ones by the personbefore death or bankruptcy.

3A ) The representative may assign, mortgage,charge, surrender, vary or otherwise deal with the policy andapply the proceeds (if any) as the representative believes to beappropriate for the maintenance or benefit of the child and thecontinuation of the policy



continuation of the policy

3B ) The insurer issuing the policy is under noobligation to ensure that the proceeds of the policy (if any) areapplied for the maintenance or benefit of the child.

(3B) In subsections (3) and (3A), therepresentative , in relation to—

a) in relation to a deceased, means theexecutor or administrator of the

deceased's estate; or

b) in relation to a person who has been


adjudged bankrupt, means the bankruptcytrustee of the person's estate or theOfficial Receiver. -

PART 6—AMENDMENT OF EMPLOYMENT ACT (CAP. 97)

Section 70(Role ofrelevantofficer).

Delete subsection (4) and substitute the following subsection:

(4) The following are relevant officers for thepurposes of this section-

a) a bankruptcy trustee or interimtrustee holding office under Part IIIof the Insolvency Act, 2012;

b) a liquidator appointed under Part VIof that Act:

c) an administrator appointed underPart VIII of that Act;

(.d) a supervisor under a voluntaryarrangement entered into-under PartIV or Part IX of that Act;

e) a trustee under a trust deed for hiscreditors executed by the

l



employer:

PART 7 AMENDMENT OF I IIRE-PURCI IASI', ACT (CAP. 507)

Section 30. epeal the section and substitute the following section;

Agreementbinding ontrustee orliquidator ofo tier.

30. I)

a) n the case of a naturalperson, the owner is


adjudged bankrupt; or

(b) in the case of a company,the own er is placed inliquidation,

a hire-purchase agreemen t entered into by theperson or company as ow ner continues in effectafter the commencement of the bankruptcy orliquidation and is binding on the bankruptcytrustee or liquidator, but w ithout affecting the rightof the ban kruptcy trustee or liquidator to disclaim.

(2) ubsection (1) does no t affect thepowers of the court to set aside any disposition of

property that is an un due preference. "

PART 8—AMENDMENT OF LAND ACT, 2012 (NO. 6 OF 2012)

Section 52. epeal the section and substitute the following section:

"Transmissionon bankruptcy

52. (1) On production to the Registrar ofa certified copy o f the order of court adjudg ing aproprietor bankrupt, or d irecting the estate of adeceased proprietor to be adm inistered inaccordan ce with section 375 of the InsolvencyAct, 2012, the Registrar shall register theb k h i d d



bankruptcy trustee, or the trustee appointed under

that section, as registered as proprietor of anyland, lease or charge of wh ich the bankrupt or thedeceased proprietor is proprietor, in place of thatbankrupt or proprietor.

(2) n m aking an en try in the registerfor the purpose o f subsection (1), the Registrarshall describe the ban kruptcy trustee, or thetrustee appointed under section 375 of theInsolvency A ct, 2012, as "trustee of the propertyof ( , a b a n k r u p t .


Section 103(Applicationfor relief bychargor).

In subsection (1), delete paragraph (e) and substitute the follow ingparagraph:

"(e) if the chargor has b een adjudged bankrupt,the bankruptcy trustee of the estate of thechargor;".

PA R T 9 — A M E ND M EN T O F L A N D R E G IS T R AT I O N A C T ( NO . 3 O F2012)

Section 27 epeal the section and substitute the follow ingsection:

"Transferwithoutvaluableconsideration.

27. (1) A proprietor who has acquiredland, a lease or a charge by transfer withoutvaluable consideration holds it subject to—

(a ) any unregistered rights orinterests subject to whichthe transferor held it; and

(b ) the provisions of theInsolvency Act, 2012, so faras they are applicable in thecircumstances.

(2) hen registered, such a transferhas the sam e effect as a transfer for valuableconsideration."



Section 63. epeal the section and substitute the follow ing section:

"Transmission.on bankruptcy

63. (1) On production to the Registrar ofa certified copy o f the order of court adjudging aproprietor bankrupt, or directing the estate of adeceased proprietor to be administered inaccordance w ith section 375 of the InsolvedcyAct, 2012, the Reg istrar shall register thebankruptcy trustee, or the trustee appointed


und er that section, as registered as proprietor ofany land, lease or charge of which the bankruptor the de ceased proprietor is proprietor, in placeof that ban krupt or proprietor.

(2) n m aking an entry in the register

for the purpose o f subsection (1), the Registrarshall describe the ban kruptcy trustee, or thetrustee appointed under section 375 o f theInsolvency A ct, 2012, as "trustee of the propertyof ( , a ban krupt"."

Section 71(Lodging of

cautions).

In subsection (1), delete paragraph (c) and su bstitute thefollowing paragraph:

(c) has made an application for a bankruptcyorder against the proprietor of anyregistered land, lease or ch arge,".

PART 10 MENDMENT OF LAW OF SUCCESSION ACT (CAP. 160)

Section 89 epeal the section.(Insolventestates)

PART 11—AMENDMENT OF MERCHANT SHIPPING ACT (NO 4 OF



PART 11—AMENDMENT OF MERCHANT SHIPPING ACT (NO. 4 OF

2009)

Section 106 elete the law relating to bankruptcy and substitute the law(Priority of elating to insolvency".liens).

PART 12—AMENDMENT OF METHYLATED SPIRITS ACT (CAP. 120)


Sect ion 49(Prohibit ionof sale unless.l icensed).

In subsection (1), delete paragrap h (d) and substi tute thefol lowing paragraph:

( c ) by a b ank rup tcy t rus t ee in r e spec t o fspir i ts forming part of the bank rupt 'sestate; .

PA R T 1 3 — A M EN DM EN T O F N A R C O T I C D R U GS A N DP S YC H O T R O P I C SU B STA N C E S C O N T R O L A C T ( C A P . 24 5 )

Section 31(Managementof proper ty byOfficialReceiver. )

Dele te subsect ion (4) and subs t i tu te the fo l low ing subsect ion:

"(4) On t a k i n gcus tody and cont ro l of a person 'sproperty in accord ance w ith a restraint order, the O fficialReceiver bec om es be ent i t led to rece ive , in respect of theperform ance of the Off ic ia l Receiver ' s funct ions in re la t ion tothe proper ty, fees equal to the fees tha t tha t would b e payab le i fthe O ff ic ia l R eceiver were car ry ing out the funct ions of abankru ptcy t rus tee under the Insolvency A ct , 2012.

PA R T 1 4 — A M EN DM EN T O F P R E V E NT I O N O F F R A U D( IN V ES T M E NT S ) A C T ( N O . 1 O F 1 9 7 7 )

Section 11 epeal the section and substi tute the following section:

G t 11 (1) S bj hi i



Guarantee

inconnectionwithprincipal'slicence.

11. (1) Subject to this section, apr incipal 's l icence m ay be granted to a persononly i f a guaran tee , in the prescr ibed form, i sprovided by such gu arantoi as the CabinetSecretary appro ves to the effect that , in the eventof an insolvency event involving the app l icantduring the curren cy of the licence, the guarantorwi l l pay to the b ankrup tcy t rus tee or the l iquidatorthe sum of one m i ll ion shi l lings or such o ther sum

as- the C abinet Secre tary de termines f rom t ime tot ime.


(2 ) The bankruptcy trustee orliquidator may recover from the guarantor a sumthat becomes payable to a bankruptcy trusteeunder a guarantee given in accordance withsubsection (1).

(3) If an y su ch su m ex ceed s th eamount required to satisfy the debts and liabilities(including the costs and expenses of thebankruptcy administration, the amoun t of theexcess or the amoun t of the sum (w hichever is theless) is repayable by the bankruptcy trustee orliquidator to or in relation to the guarantor.

(4 ) In this section, insolvency eventmeans—

(a) in relation to a naturalperson who is adjudgedbankrupt, thecommencement of thebankruptcy; and\

(b ) in relation to a company orother body corporate that isplaced in liquidation, thecommencement of theliquidation.

PART 15—AMENDMENT OF PROCEEDS OF CRIME AND ANTI-M O N EY L A U N D ER I NG ( N O . 9 O F 2 0 0 9 )



Section 79 epeal the section and substitute the following section:

"Effect ofbankruptcyon realizableproperty.

79. (1) When a person who holdsrealizable property is adjudged bankrupt—

(a) the property for the timebeing subject to a restraintor er m a d e b e f o re th e d a te


of the bankruptcy order;and

(b) the proceeds of anyrealizable property realizedbecause of section 75 andfor the time being underthe control of a receiverappointed unde r this Part,

does n ot vest in the Registrar of the High Co urt,Official Receiver or the Pu blic Trustee.

(2) f a defendant w ho has directly or

indirectly made a n affected gift to any otherperson is adjudged bankrupt, the followingprovisions apply:

(a) a court may not set asidethe disposition of tha t giftunder the Insolvency A ct,2012 if-

(i ) a prosecution for anoffence has beencommenced againstthe defendant andthe proceedingsagainst thedefendant have notbeen concluded; or



been concluded; or

(ii) the property of anyother person issubject to arestraint order;

(b) any court that sets aside adisposition in paragraph (a)

after the conclusion of theproceedings against thedefendant shall take intoaccount an y realization of


the property of otherpersons in accordance withthis Part.

(3) f a person has been adjudgedbankrupt, the powers conferred on the court bysections 64 to 72 and 73(2) or on a receiverappointed under this Part, may not be exe rcisedin respect of property that—

(a ) forms part of thebankrup t's estate; or

(b ) the O fficial Re ceiver-isentitled to claim from the

bankrupt under theInsolvency A ct, 2012.

(4) othing in the Insolvency Act,2012 prohibits a court or a receiver appointedunder this Part from ex ercising a powercontem plated in subsection (3) of any propertyor proceeds referred to in subsection (1)."

PA RT 16—A MENDMENT OF R ECOR DS DISPOSAL ACT (CAP . 14 )

Schedule n relation to theOfficial Receiver, delete "Ban kruptcy Act(Officers Cap. 53) – section 74" and substitute "Insolvency A ct, 2012 –included in ection 705".the definition



of "OfficialReceiver")

PA R T 1 7 — A M E ND M EN T O F R E GI ST R AT I O N O F B U S IN ES S NA M E SA C T ( C A P. 4 9 9 )

Section 4 elete paragraph (d) and su bstitute the follow ing paragraph:(Firms,individuals (d) every corporation having a place of


and usiness in Kenya and carrying oncorporations usiness under a business nam e that isto be ot its corporate nam e without anyregistered). ddition is required to be registered as

provided by this Act, except that-

(i) if two or m ore individualpartners have the same surname,the addition of an "s" at the endof that surname do es not of itselfrender registration nec essary;

(ii) if the business is carried on by abanlcrufitcy trustee or anadministrator appointed by thecourt„ registration is notnecessary; and

(iii) a purchase or acqu isition ofproperty by tw o or m ore personsas joint tenants or tenants incomm on does not of itselfconstitute the carrying on of a

business, even if the ownershares any profits from the saleof the property."

Section 5. epeal the section and substitute the following section:

"Requirement . (1) A natural person, firm orfor certain



orporation haying a place of business withinnominees, Kenya shall not-nvstees andagents to beregistered. a) carry on business wholly

or mainly as the nomineeor trustee of, or on behalf .of, one of more otherpersons, firms orcorporation; or

(b) act as a general agen t for a


foreign firm,

unless registered as provided by this A ct.

(2) ubsection (1) does no t apply toa business that is carried on by a bankruptcytrustee, liquidator or a dministrator appointed bya cou rt."

PA RT 1 8 — A M E N DM E NT O F W I L D LI F E (C O N SE RVAT I O N A N DMANA GEMENT) AC T (CA P. 376)

Section 42(Certificates ofow nership forpossession oftrophies).

Delete subsection (2) and sub stitute the following sub section:

(2) This section does not apply to the possessionof a trophy by a person w ho is in possession only because theperson is—

(a ) the liquidator or administrator of acompany that is in liquidation or underadministration; or

(b ) the bankruptcy trustee or interimtrustee of a bankrupt person's estate; or

(c ) the personal represen tative of adeceased person's estate."




M E MO R A N D UM O F O B J EC T S A N D R E A S O N S

The m ain purpose of this Bill is to repeal and replace the Bankruptcy A ct(Cap 53 of the Law s of Ken ya) and to simplify insolvency proceedings. TheBill seeks to encourage the dissolution of no n-viable and inefficient

businesses and the survival of efficient ones and to maximize the value ofliquidated assets. Among other things, the Bill also-

• provides for independent administrators to take control ofbusinesses at the point o f insolvency,

• provides for the equitable distribution o f liquidation assets am ongcreditors and

• provides effective mechanisms for indentifying and prosecuting.man agers or directors whose illegal actions con tribute to theinsolvency of a firm.

PA R T I of the B ill (clauses 1-3) contains prelim inary provisions. Clause 3of the B ill states that the objects of the B ill are—

(a ) to establish and provide for the operation of a framew ork for the

efficient and equitable administration of the estates of insolventnatural persons and uninco rporated entities com prising naturalpersons, and the assets of insolvent com panies and other bodiescorporate, that maintains a fair balance between the interests ofthose persons, entities, companies and bodies and those of theircreditors;

(b ) in the case of insolvent natural persons and un incorporated



entities comprising natural persons, and insolvent companies andother bodies corporate w hose financial position is redeem able-

(i) to enable those persons and entities to con tinue to operateas going concerns so that ultimately they may be able tome et their financial obligations to their creditors in full orat least to the satisfaction of those creditors; and

(ii) to achieve a better outcome for the creditors as a wholethan w ould likely to be the case if those persons an dentities were adjudgedbankrupt;


(c) in the case of insolvent companies and other bodies corporatewh ose financial position is redeem able—

(i) to enable those companies and bod ies to continue tooperate as going concerns so that ultimately they m ay be

able to m eet their financial obligations to their creditorsin full or at least to the satisfaction of tho se creditors; and

(ii) to achieve a better outcome for the creditors as a wholethan wo uld likely to be the case if those companies andbodies were liquidated; and

(d) in the case of insolvent natural persons and unincorporatedentities com prising natural pers'ons, and insolvent•companies and

other bodies corporate w hose financial position isirredeem able—to provide an orderly system for adjudging thosepersons bankrupt and for the efficient and optimal adm inistrationand distribution of their estates for the benefit of their creditors;

(e) in the case of insolvent companies and other bodies corporatewh ose financial position is irredeem able—to provide an o rderlysystem for liquidating the affairs of those com panies and bo dies

and for the efficient and optimal adm inistration and distributionof their assets for the benefit of their creditors.

PART4I (clauses 4-11) provides for the au thorisation o f insolvencypractitioners and prescribes their qualifications. A person w ho is not theholder of an au thorisation w ill be prohibited from acting as an inso lvencypractitioner. This m eans that an un qualified person w ill not be able to act asa bankruptcy trustee or interim trustee of a bankrupt's estate or as a,



liquidator, provisional liquidator or adm inistrator of a com pany or asupervisor of a voluntary arrangem ent. The Pa rt also prescribes theprocedure to be followed by an applicant seeking an authorisation from theOfficial Receiver to act as a n insolvency practitioner, will enable theOfficial Receiver to cancel an au thorisation in specified circumstances an dconfers a right o f appeal against decisions o f the Official Receiver.

PART III (clauses 12-301) sets out the rules for m aking bankruptcy ordersin respect of natural persons and for the adm inistration of their estates fort h e benefit of their creditors. The Part is divided into 25 Divisions.


Division 1 (clauses 12-16) deals with the nature of bankruptcy and relatedprocesses.

Division 2 (clauses 17-31) deals w ith bankruptcy applications by creditors.A creditor w ho has applied for a bankruptcy order in respect of a debtor w ill

be prohibited from starting or continuing an ex ecution process against thedebtor. On the hea ring of a bankruptcy application, the High Cou rt will beempo wered to adjudge a d ebtor if satisfied the deb tor is unable to pay his orher debts the circumstances specified in the Bill. The Court will have powerto halt bankruptcy proceedings in specified circum stances.

Division 3 (clauses 32-35) will enable a debtor to apply for a bankruptcyorder in specified circumstances. The Cou rt will have power to appoint anauthorised insolvency practitioner to inve stigate the affairs of the debtor.

Division 4 (clauses 36-40) provides for an interim trustee to be appointed inrespect of a bankrupt's estate on the application of a creditor.

Division 5 (clauses 41-47) provide for the processing of bankruptcyapplications. Bankruptcy comm ences on the making of a bankruptcy order,

which w ill be binding on everybody and not just the bankrupt. On themaking of a ban kruptcy order, the Official Receiver w ill be required tonom inate a bankruptcy trustee to adm inister the bankrupt's estate. TheOfficial Receiver will be required to establish and maintain a public registerof undischarged and d ischarged bankrupts.

Division 6 (clauses 48-58) deals with the processes that a re to take place onand after the comm encement o f a bankruptcy. As soon as practicable after

h f h b k h ff l ll b d



the com men cem ent of the bankruptcy, the Official Receiver will be requiredto serve a notice on the bankrupt requiring the bankrupt to lodge a statement

;of affairs with the O fficial Rece iver . The bankrupt w ill be required tocom ply with the by the specified deadline. The ba nkrupt's creditors w ill beentitled to inspect and take copies of the statement. The Official Receiverw ill then be required to co nvene the first meeting of creditors. How ever, theOfficial Receiver w ill be able to d ispense with this m eeting in certainspecified circumstances. If the Official Receiver decides not to convenesuch a meeting, the creditors can n evertheless requisition a creditors'meeting.


It will be unlawful to begin or continue an execution process in respect ofthe bankrupt's property after the bankruptcy order advertised. Bankruptcyproceedings will not be affected by the bankrupt's death.

Division 7 (clauses 59 to 80) provides for the appointment of a bankruptcytrustee to administer the bankrupt's estate and for the functions and powersof the trustee. Provision is made to deal the consequences of a failure of acreditors' meeting to appoint bankruptcy trustee. In certain cases, theCabinet Secretary will be able to appoint a bankruptcy trustee. If abankruptcy order is made when there is a supervisor of a summaryinstalment order approved in relation to the bankrupt, the High Court willhave power to appoint the supervisor of the order as bankruptcy trustee.The bankruptcy trustee will not be allowed to sell the bankrupt's property

before first creditors' meeting. When the bankruptcy trustee sells thebankrupt's property, the purchaser will get a good title to the property.

Among the bankruptcy trustee's powers are the power to invest surplusfunds of the bankrupt's estate and to assign the trustee's right to sue underthe proposed A ct and the power to apply for and obtain directions. from theHigh C ourt.

Special provision is made to address the situation that arises when thebankrupt is a partner in a business partnership. Further provision is m adefor the discharge or transfer of an indenture of apprenticeship or articles ofagreement on bankruptcy of the employer of the apprentice or articledemployee.

It will be possible to make an application to the High Court to reverse ormodify a decision of the bankruptcy trustee.



A bankruptcy trustee will be required to keep proper accounting records,which will have to audited, and at the end of the bankruptcy to prepare afinal statement of receipts and payments.

Provision is made for the circumstances in which a bankruptcy trusteevacates office and for the filling of vacancies and for the release of abankruptcy trustee from his or her obligations provided certain specified .

conditions aremet

The Insolvency B ill, 20/2 339

A bankruptcy trustee will be subject to the general control of the HighCourt. A bankruptcy trustee will liable for the misapplication of money andother property comprising the bankrupt's estate.

Division 8 (clauses 81 to 103) deals with creditors' meetings and specifiesthe kinds of creditors' meetings that are to be held and the procedure to befollowed in convening the meetings. The first creditors' meeting will berequired to appoint a chairperson to conduct the meetings. The chairpersonwill have power to adjourn a creditors' meeting.

The Bankruptcy trustee will'have an obligation to report to a creditors'meeting and to attend the meeting and be questioned. Provision is made fornon-creditors to attend a creditors' meeting in certain circumstances. It will

be a requirement that minutes of a creditors' meeting be recorded and thatthe record be kept.

Provision is made for-

• the number of persons required to attend for a creditors' meetingto be va lid ;

• who can represent creditors and the bankrupt at a creditors'meeting;

• the passing of resolutions at creditors' meetings;

• what votes can be counted for passing of resolutions at creditors'meetings;

• who may vote at creditors' meetings;

• when secured creditor may vote at creditors' meetings;

• when creditors holding a bill of exchange or promissory note may



• when creditors holding a bill of exchange or promissory note mayvote at creditors' meetings;

• the circumstances in which persons are disqualified from voting atcreditor's meetings; and

• the entitlement of the bankrupt partners' creditors (if any) to provedebts at creditors' meetings; and

•creditors to have the right to inspect documents.

5340he Insolvency Bill, 20 12

The creditors will be able to appoint experts or a committee to assist thebankruptcy trustee.

Division 9 (clauses 104-117) deals with the status of the bankrupt's propertyafter the commencement of the bankruptcy. The property will vest in thebankruptcy trustee and will be held in trust by bankrupt. The High Court

will have power to order money due to the bankrupt to be assigned to thebankruptcy trustee.

Provision is made for an execution creditor to retain execution proceeds incertain circumstances and for the duties of a judicial enforcements officer(such as a bailiff) in relation to a bankruptcy. A purchaser of a bankrupt'sproperty under a sale by a judicial enforcement officer will acquire a goodtitle to it.

In certain circumstances, the High Court will be able to set aside rightsconferred on ba nkruptcy trustee.

The Division also provides for—

• transactions mad e in good faith and for value after bankruptcy;

and• executions and attachments of a bankrupt's property made in good

faith.

Division 10 (clauses 118-129) deals with disclaimers of the bankrupt'sproperty and, in particularly, specifies the circumstances under which abankruptcy trustee may disclaim onerous property and the effect of suchdisclaimer. A person who sustains loss as a result of a disclaimer by thebankruptcy trustee to claim as a creditor in the bankruptcy or to apply to the



bankruptcy trustee to claim as a creditor in the bankruptcy or to apply to theHigh Court for an order vesting the disclaimed property in the person. The

- Division also specifies the pow ers of a bankruptcy trustee in relation todisclaimed property.

Division 11 (clauses 130 to 134) deals with goods that are held by abankrupt under a credit purchase transaction (such as a hire purchase

agreem ent) and imposes restrictions on a creditor dealing with those goods.The Division specifies a bankruptcy trustee's powers in relation to goodsthat are subject to a credit purchase transaction and provides for a creditor in


possession of any such goo ds to prove in bankruptcy if the bankruptcytrustee has not exercised tho se pow ers. A creditor will be able to assigngoods to the bankruptcy trustee.

Division 12 (clauses 135-136) deal with secon d bankruptcies and, inparticular, for the status of the bankrupt's property in the case of a seco ndbankruptcy

Division 13 (clauses 137-138) deals with persons who m ay be jointlyadjudged bankrupt and specifies how joint and separate estates are to beapplied. In such a case, separate accou nts will be required to be kept foreach bankrupt.

Division 14 (clauses 139-147) prescribes the du ties of a bankrupt du ring thebankruptcy. In particular, a bankrupt will be required-

• to disclose property acquired b efore discharge;• to deliver property to the bankruptcy trustee on dem and;• to give to the bankruptcy trustee accounting records an d other

documents;

• to give to the bankruptcy trustee information relating to thebankrupt's property;• to give the ban kruptcy trustee information relating to the

bankrupt's income and expenditure;• to notify the bankruptcy trustee of change in personal information;

and• to give the ban kruptcy trustee financial information.



Division 15 (clauses 148-159) imposes certain restrictions on a bankruptduring the bankruptcy. In particular, the Division will-

• provided that a bankrupt can be required to contribute to paym entof the bankru pt's debts;

• prohibit a bankrupt from en tering business;

• enable a w arrant to be obtained for the seizure of a bankrupt'sproperty;

534he Insolvency Bill, 2012

• enable a bankrupt's property to be seized;• require a bankrupt to vacate land or buildings if required to do so;• entitle a to inspect documents relevant to the bankruptcy;• impose restrictions on bankrupt's dealings with property;• prohibit a bankrupt from taking steps to defeat beneficial interests

of others in the bankrupt's property;• require a bank to notify the bankruptcy trustee of details of a

bankrupt's account; and

• enable a bankruptcy trustee to require the bank to search itsrecords relating to the bankrupt's account record.

Division 16 (clauses 160-166) confer a number of rights on the bankruptduring the bankruptcy, including the rights to retain-

• assets necessary to carry out the bankrupt's trade; and• househ old furniture and personal effects.• The bankruptcy trustee will be able to make an allowance to the

bankrupt.

Division 17 (clauses 167-187) provide for the examination of the bankruptby the bankruptcy trustee as well as the public examination of the bankruptby bankruptcy trustee or creditor before the High Court. The bankruptcytrustee will be able to summon the bankrupt and others for examination.Provision is made for the conduct of the examination of those summoned bythe bankruptcy trustee. A person summoned will be entitled to bereimbursed expenses incurred in attending the examination and will beentitled to be represented. Creditors will be entitled to inspect the recordsrelating to the exam ination, wh ich will not be allo.wed to be pdblished w ith



relating to the exam ination, wh ich will not be allo.wed to be pdblished w iththe consent of the High Court. A person holding bankrupt's documents andother records w ill not be entitled to a lien over them .

The Division also provides for the High Court to hold a public examinationin relation to a bankruptcy if the bankruptcy trustee or creditors require andfor the conduct of the public examination before the Court. The bankruptcy

trustee will be required to ensure that a record of the examination is kept.The consequences of a bankrupt's failing to attend the examinationa r e


specified. Howe ver, a bankrupt willbe entitled to be paid expenses forattending the exam ination.' It will be possible to extend the exa mination tocover com panies that are controlled by the ban krupt and by the ban krupt'sassociates. In relation to the ex am ination, there will no privilegeagainstself-incritVtion, but statements made in the course of the exam ination wil l

not general be a dm issible in criminal proceedings againsttheir maker.Persons exam ined w ill be entitled to be represented at the examination.

The D ivision prescribes certain offences relating to condu ct of exam inationsby a ban kruptcy trustee.

Division 18 (clauses 188-192) deals w ith the status of the bankruptscontracts, wh ich may be c ontinued by the ban kruptcy trustee or disclaimed

as onerous. Provision is made for the contract to be terminated byothercontracting party. Special provision is mad e for transactionsw ith thebankru pt that were m ade in ignorance of the bankruptcy. A bank rupt 's co-contractor w ill be able to sue and b e sued if there is a joint contractuall iabi l ity. Tht b ank ruptcy trustee w illbe entitled to recover the advoca te'scosts (if any).

Division 19 (clauses 193-213) deals with irregular transactions en tered intoby the bankrupt before the commencement of the bankruptcy. In particular,the Division will-

• enable insolvent transactions to be c ancelled by the bankruptcytrustee;

• provide for a series of transactions to be regarded as singletransaction in certain cases;

• enable insolvent charges to be cance lled on the bankruptcy



g p ytrustee's initiative;

• provide that a charge for new consideration or a replacementcharge w ill not be affected;

• provide for the appropriation of paym ents by the bankrupt to asecured creditor;

• provide that a charge agreed to before the be ginning of a specifiedperiod is not to be cancelled;


• enable "insolvent gifts" made within two year before bankruptcyto be cancelled;

• enable a gift made by a ban krupt between two an d five yearsbefore the bankruptcy to be cancelled by the bankruptcy trustee ifthe bankrupt was u nable to pay his or h er debts;

• empow er the High C ourt to order the retransfer of property or thepayment of an equivalent value;

• impose limits on wh at can be recovered;• enable the bankruptcy trustee to recover the difference in value if

the transaction is found to be un dervalue; and• empo wer the High C ourt to order the recipient of the bankrupt's

contribution to the property of another to pay the value of that

contribution to the bankruptcy trusteeDivision 20 (clauses 214-244) prescribes the procedure for the processing ofcreditors' claims ag ainst a bankrupt's estate and the du ties of the bankruptcytrustee in this regard. In particular, the Division-

• specifies what debts are provable debts;• prescribes the prooedure for proving debt;• will require the bankruptcy trustee to exam ine creditors' claims;• will require the bankruptcy trustee to give creditor notice of

grounds for rejecting a claim;• will confer on the bankruptcy trustee pow er to require and obtain

evidence of a d ebt;• provides for the giving of notices by a creditor to the bankruptcy

trustee to either allow or reject the creditor's claim;



• will empow er the High Cou rt to cancel a creditor's claim inspecified circumstances; to quash or vary the ban kruptcy trustee'sdecision rejecting creditor's claim; to m ake orders as to costs; andto order the d isposal of property that is subject to a ch arge;

• provides for the realisation of property that is subject to a security;• prescribes the bankruptcy trustee's powers when secured a

creditor values property that is subject to a ch arge and proves forthe balance;

The Insolvency Bill, 20 12 3 4 5

• provides for the valuation of a charge;• will enable a secured creditor who surrenders a charge to

surrender a claim or to withdraw a claim and subm it a new c laim• will enable a bankruptcy trustee, or the High Cou rt, to estimate the

amo unt of an u ncertain creditor's claim;• will enable a creditor to claim pre-bankruptcy interest;• provides for post-bankruptcy interest, and additional post-

bankruptcy interest on contract or judgmen t debt, to be paid if asurplus rem ains at the con clusion of the bankruptcy;

• will require a creditor to deduc t any trade.discounts received;• will enable a secured creditor to prove as an un secured creditor if

the security is void o r partly void;• will enable a judgm ent creditor to prove for costs;• enable a com pany to prove for unpaid calls; and• specifies the circumstances in w hich a guarantor for the ban krupt

may be able to prove a claim.

It will be an o ffence for a secured creditor to make a false claim.

Division 21 (clauses 245-252) deals with the distribution of the bankrupt'sestate at the con clusion of the bankruptcy. Special provision is mad e for thepaymen t of preferential debts for order in w hich preferential debts are to bepaid and for debts owed to a bankrupt's spouse. If a paymen t has beenmad e to a person on accou nt of a preferential creditor out of mon eyadvanced by another person for that purpose, the other person has, in thebankruptcy, the same right of priority in respect of the mo ney so ad vancedas the preferential creditor wo uld have. A priority will .be accorded to al dl d h h di i d ff f h b k



landlord or other to person w ho distrains on goo ds or effects of the bankruptwithin the 28 days immediately preceding the commencement of thebankruptcy and creditors will have priority over creditors of a jointbankrupt. The D ivision also provides for the final distribution of abankrupt's estate and for the holding o f a final meeting o f creditors.

Division 22 (clauses 253-270) provides that a bankrupt is autom aticallydischarged from bankruptcythree years after the comm encement of thebankruptcy or m ay be discharged earlier on the application of the bankrupt


and prescribes the process to be followed for a bankrupt to be dischargedfrom bankruptcy.

Creditors will have a right to object to the autom atic discharge of abankrupt. The High Co urt will have jurisdiction to hear and determine suchan objection and w ill be required to quash the discharge if any of thespecified grounds is established.

A b ankrupt will be able to apply for an absolute discharge on ground thatconditions of discharge are too onerous. A discharge will be conclusiveevidence of ban kruptcy and the validity of the bankruptcy proceedings.How ever, a discharge w ill not release the ban krupt's partners and certainother persons. A discharged bankrupt w ill continue have a n obligation toassist the bankruptcy trustee after discharge. If the C ourt refuses todischarge a bankrupt or, although discharging the ban krupt, suspends theorder discharging the bankrupt, the Official Receiver will be require torecord that information in relevant public register kept under Part XII.

Division 23 (clauses 271-273) will enable the High Court or the OfficialReceiver to annu l a bankruptcy order in certain circumstances-and specifies

the effect of the annulm ent of such an order.Division 24 (clauses 274-287) provides for compositions during bankruptcyboth in relation individual natural persons and in relation to m emb ers of apartnership. A m eeting of creditors of a bankrupt will be able to accept acom position by passing a preliminary resolution, but the com position willnot be effective unless it is approved by a co nfirming resolution. Acomposition w ill not be binding unless it is approved by the High C ourt.Other provisions of the Division-



• provide for a deed of com position to be executed and the effect ofsuch a deed;

• provide that a bankrupt w ill remain liable for unpaid balances ofcertain outstanding debts;

• prescribe the procedure to be followed after the High C ourt hasapproved the com position;

• prov ide fo r t hee n f o rc e m e n tof a composition;• confer exclusive jurisdiction on the High C ourt; and

The Insolvency hill, 2012 347

• provide for the law and practice in bankruptcy to apply to a deedOf composition.

Division 25 (clauses 288-301) prescribe certain conduct that w ill constitutebankruptcy offences and the maximum penalties that may be imposed onconviction for those offences. These offences include offences relating to-

• a bankrupt's debts;• a bankrupt's property;• written statemen ts given by a bankrupt to a bankrupt's creditors

and others;• certain documents prepared or produced by a bankrupt;• claims for fictitious losses or expenses;• obtaining credit by a bankrupt;• obtaining of creditors' consents by a bankrupt• a bankrupt's leaving Kenya without consent;• the failure of a bankrupt to keep and preserve proper record o f

transactions;• the failure of a bankrupt to keep proper records w ith intent to

conceal relevant information; and• the managem ent of companies by a bankrupt.

PA RT IV (clauses 302 to 360) provides for certain alternatives that willenable natural persons who are insolvent to restructure their debts and thusavoid bankruptcy. The Part is divided into four Divisions as follows:

Division 1 (clauses 302-321) will enable a debtor to en ter into a voluntaryarrangemen t with the debtor's creditors. An insolvent debtor wh o seeks the



gprotection o f a voluntary arrangem ent w ill, in the first instance, be requiredto apply to the High Co urt for an interim order. Wh ile an interim order haseffect in respect of a debtor-

• a bankruptcy application relating to the debtor may not be m ade orproceeded with;

• a landlord or other person to whom ren t is payable may exercise aright of forfeiture by peaceab le re-entry in relation to prem ises let


to the debtor in respect of a failure by the debtor to com ply with aterm or con dition of the debtor's tenancy of the premises on lywith the approval of the Court; and

• any o ther proceedings (including execution o r other legal process)may be begun or con tinued, and distress may be levied, againstthe debtor or the debtor's property only with the approval of theCourt.

An application to the High C ourt for an interim o rder may be m ade if thedebtor intends to m ake a proposal to the debtor's creditors for a com positionin satisfaction of the debtor's debts or a schem e of arrangem ent of thedebtor's affairs. W hen a n application for an interim order has bee n m ade-

• a landlord or other person to whom rent is payable by the debtorwill be only able to ex ercise a right of forfeiture in relation topremises let to the debtor for a failure of the debtor to com plywith a term of the tenancy o nly with the leave of the Court and inaccordance with any conditions imposed by the Court; and

• the Co urt will have pow er to prohibit distress from being leviedon the debtor's property or its subsequen t sale, or both and to halt

any action, execution or other legal process against the property orperson of the debtor.

The High C ourt may m ake an interim order on an application for an interimorder only if satisfied-

• that the debtor intends to m ake a proposal for a voluntaryarrangement;

• that the debtor was an un discharged bankrupt or was able to makean application for the deb tor's ow n bankruptcy;



an application for the deb tor s ow n bankruptcy;• that no previous application has been m ade by the debtor for an

interim order during the previous twelve mo nths; and• that the supervisor und er the debtor's proposal is willing to act if

the proposal is implemen ted.\


As soo n as practicable. after the m aking of an interim o rder, the designatedsupervisor will be required to subm it a report to the High C ourt stating(among other things)—

• wh ether the proposed voluntary arrangemen t has a reasonableprospect of being approved and implem ented; and

• wh ether a meeting should be convened to co nsider the debtors'proposal.

If it is reported to the H igh Co urt that a m eeting of the de btor's creditors.should be co nvened , the provisional supervisor will, unless the Cou rtotherwise directs, convene such a m eeting to consider the debtor's proposal.After a electing a chairperson, the m eeting is to be divided into three groupsfor voting purposes. One group will comprise secured creditors, a secondgroup w ill comprise preferential creditors, and the thifd grou p w ill com priseunsecu red creditors. The proposal will be approved if it is supported by am ajority of eack of the three groups. After the creditors' me eting, the debtoror any of the creditors w ill be entitled to apply to the High C ourt for anorder approving th e debtor's proposal (and w ill be able to do so even if itwas n ot approved by a m ajority of each of the groups of creditors). W hen

approved by the H igh Co urt, the proposal will take effect as a voluntaryarrangemen t and w ill be binding on the d ebtor and all creditors whoattended or w ere entitled to attend the creditors' meeting.

How ever, it will be possible to make an application to the High C ourtCha llenging a decision taken at the creditors' mee ting on the ground that theapproval of the propo sal unfairly affects the interests of a creditor of thedebtor or that a m aterial irregularity occurred at or in relation to the m eeting.

The deb tor, the creditor or the supervisor will be able to make such anapplication.



The supervisor w ill be responsible for implementing and supervising thevoluntary arrangement. However, a debtor or creditor who is dissatisfiedwith an action or decision of the supervisor in relation to the im plementationof the arrangemen t will be able to apply to the High C ourt for an orderquashing o r mod ifying the supervisor's action or decision.


Other provisions of the Division provide for an exped ited procedure for theapproval and implementation of a voluntary arrangem ent procedure, whichwill be only available if no application for an interim order has been mad eunder the provisions mentioned above. W hen the procedure is available, adebtor w ill be able to subm it to the Official Receiver a docu men t setting ou tthe terms of the voluntary arrangement that the debtor is proposing. Thatdocum ent will be required to be accom panied by a statement of the debtor'saffairs. If satisfied that the proposed v oluntary arrangem ent has areasonable prospect of being approved and implemen ted, the OfficialReceiver will be authorised to make arrangem ents for the purpose ofinviting creditors to decide w hether to approve it. If the Official Receiversubm its a report to the High C ourt stating that the proposed voluntaryarrangemen t has been approved, that arrangem ent will takes effect as a

voluntary arrangement and w ill bind the debtor those creditors who w erewas entitled to participate in the arrangements mentioned above. Provisionis also m ade for the implemen tation of an expedited voluntary arrangementand for its revocation in specified circumstances.

It will be an offence for debtor to make false representation fQr purpose ofobtaining creditors' approval. Provision is mad e for the prosecution ofdelinquent debtors in relation to the operation of the D ivision.

Division 2 (clauses 322-341) will enable a summ ary instalmen t order to bemade in respect of an insolvent debtor who is a natural person. A sum maryinstalment order is an order m ade by the O fficial Receiver directing thedebtor pay the debtor's debts either in instalments or in som e other way an deither in full or to the extent that the Official Receiver considers practicablein the circumstances. The Official Receiver will be able to make a summ aryinstalment order on the a pplication of a debtor a creditor w ith the debtor'sconsen t. The Official Receiver w ill be required to refuse an application fora sum mary instalment order if the application does not com ply with certain



a sum mary instalment order if the application does not com ply with certainspecified requiremen ts, wh ich include the submission of a statemen tstating-

• that the debtor proposes to pay the creditors in full or the am ountin the shilling that the debtor proposes to pay;

• the total amoun t of the weekly or other instalments that the debtorproposes to pay; and


• the nam e and address of the debtor 's proposed supervisor andannex the w ri tten consent of that person to be supervisor or i f thedebtor claims that a su pervisor is not necessary, the debtor 'sreasons for that c laim.

The O ff ic i0 Rece iver wi l l no t be ab le to mak e a summ ary ins ta lment orderwithou t having given the debtor and the credi tors an opportuni ty to mak erepresentat ions w ith respect to the matter. In addi t ion to an o rder for thepaym ent of the debts in ins ta lm ents , the Off ic ia l Rece iver wi l l be ab le tom ake o rders on related matters , such as the debtor 's future earnings orincom e. Unless the Off ic ia l Rece iver d ispenses wi th the ap poin tm ent , asum m ary ins ta lm ent order w i ll be ineffec t ive i f it does no t provide for theappoin tm ent of a su i tab le and wi l ling person to sup erv ise com pl iance by thedebtor w i th the te rms of the order. A su perv isor w i ll be respons ib le forsuperv is ing the debtor 's com pl iance w i th the te rms of the sum m aryinstaltnent order an d any related orders m ade by the O fficial R eceiver. Toensu re accoun tabi l ity, the Official R eceiver wil l be ab le to requ ire asupervisor or past supervisor to provide docum ents relating to theperforman ce of the superv isor 's respons ib i li ti es. Whi le a sum m aryinstalm ent order has effect , a person w ill not be able to begin or continue

proc eedings against the debtor un less the Official R eceiver gives perm issionfor a credi tor to begin or con tinue the proceeding s, or the debtor is in defaul tunder the order.

O ther p ro v i s ions o f the Div is ion -

• provide for the terminat ion of a supervisor 's appo intmen t forfai lure to supervise adeq uately;

• provide for the period for paym ent of instalmen ts;

• provide for the variat ion or discharge of summ ary instalm ent



• provide for the variat ion or discharge of summ ary instalm entorders;

• prescr ibe the effect of sum m ary instalm ent orders;

• provide for proceeding s against debtors;

• will require a supervisor to give not ice of the relevant sum m ary

instalment o rder to the debtor 's credi tors ;• provide for the establ ishm ent of a pu blic register of debtors

subject to current sum m ary instalment order;

5352 he Insolvency Hill, 20/2

• specifies when a sum mary instalment order ceases to be current;• provide for the disposal of claims of creditors when a sum mary

instalment order has effect;• provide for the paymen t of a debtor's earnings to the supervisor;

• prescribe the con sequences of d efault by a debtor to pay anamou nt due under summ ary instalment order; and

• will make it an offence for a de btor to obtain credit while asumm ary instalment o rder has effect.

Division 3 (clauses 342-360) prescribes a procedure for dealing with adebtor wh o has no realisable assets. A debtor w ho m eets the requisite

criteria will be able to apply to the Official Receiver for entry to the no -assetprocedure. The requisite criteria are that-

• the debtor has no realisable assets;• the debtor has no t previously been admitted to the n o-asset

procedure;• the debtor has no t previously been adjudged bankrupt;

• the debtor has total debts that are not less than one hu ndredthousand shillings and n ot mo re than four m illion shillings; and• the debtor does not have the means to repay any am ount towards

those debts.

The O fficial Receiver will not be able to adm it a debtor to the no -assetprocedu re in specified circumstance s, including the fact that-

• the debtor has con cealed assets with the intention of defraudingthe bankrupt's creditors (for exam ple, by transferring property to a



p ( p , y g p p ytrust); or

• the debtor has engaged in con duct that wou ld, if the bankruptwere adjudged bankrupt, constitute an offence under this A ct

W hen a debtor has been admitted to the n o-asset procedure, the OfficialRece iver will be required to notify the debto r's creditors. A debtor w ill beprohibited from obtaining credit after making an application for entryintothe no-asset procedure. After a debtor has been adm itted to entry to the no-

TheInsolvency Bill 20/ 2 353

asset procedure, the deb tor 's creditors w ill not be ab le to enforce thedebtor 's debts . Provision is made for the establishm ent of a pu blic registerof persons adm itted to the n o-asset procedure.

O ther prov is ions of the Divis ion-

• prescribe ho w a deb tor's participation in the no-asset proce dure isterm inated and w hen the O fficial R eceiver wil l be able toterm inate a debtor's participation in the no-asset proce dure;

• w ill allow the O fficial R eceiver to apply for a p reservation orderbecause of a debtor 's m isconduct;

• prescribes the effect of terminating a deb tor's participation in theno-asset procedure;

• al low a credi tor of the debtor to apply to the O fficial Receiver toterm inate a debtor's participation in the no-asset proce dure;

• provides for the discharge o f a debtor 's part icipat ion in the no -asset procedure; and

• prescribes the effect of discharging a debtor 's part icipat ion in theno-asset procedure an d provides that the discharge w ill not releasepartners of the debtor and certain others.

PA R T V (clauses 361-379) deals with the adm inistrat ion of the estates ofdeceased persons w ho are insolvent . The P ar t i s d iv ided in to threeDivisions.

Division 1(clause 361) contains an interpretation pro vision for the p urposeof the Part.

Division 2 (clauses 362-371) specifies the functions of the H igh Co urt inrespect of the adm inis tra t ion of such es ta tes . The Divis ion w i ll -



• enable the High Court to order such an estate be adm inisteredunder this P art;

• enable an application for such an order to be m ade by the executoror adm inistrator of the deceased or b y a credi tor or b eneficiary of

the deceased;


• enable the High Court to make an order for the administration ofsuch an e state by Official Receiver or the Public Trustee insteadof executor or adm inistrator;

• provide for such an estate to vest in a designated trustee;• require the trustee to realise, adm inister and distribute the estate;

• enti tle the surviving spouse to the household furniture and effects;and

• empower the t rus tee to make an al lowance to the survivingspouse.

Division 3 (clauses 372-379) prescribes the trustee's functions and powerswith respect to administration of an insolvent deceased's estate. The

Division-

• provides for the distribution of an insolvent deceased's estate,including how any•surplus is to be paid;

• provides for creditors to give notice of their claims to the executoror adm inistrator of the dece ased;

• will empower the trustee to act in relation to deceased's irregular

transactions and enable the trustee to cancel any ex ecution againstinsolvent deceased's estate; and• provides that certain acts of executor or administrator wil l be valid

if done in goo d faith.

PA RT V I (clauses 380-511) provides for the liquidation of companies. ThePart is divided into ten Divisions dealing with different kinds and aspects ofcompany liquidation. (Note that the former terms used in relation to theliquidation of companies wind up and winding up are universallyreplaced by the terms liquidate and liquidation , but the old terms will



still be relevant for those co m panies wh ose liquidation (or winding u p) hasnot been com pleted before the com mencem ent of the proposed Act.)

Divis ion 1(c lauses380-391) contains introductory provisions and providesan ove rv i ew o f t he P a r t . A l iqu ida t ion m ay be e i the r v o l un t a ry o r by t h e

High Cou r t . A d i s ti nc ti on i s to be d r aw n be tween a m em ber s ' vo lun t a ryl iq u i d a ti o n a n d a c r e d i to r s v o l u n t a r y l iq u i d a ti o n . I n g e n e r a l a c o m p a n y w i llnorm al ly be l i ab le to be p laced in l iqu ida t ion w hen i t becom es inso lven t ,


which means that it is unable to pay its debts as and when they are due. TheDivision-

• provides for the liability as contributories of present and formermembers and the liability of past directors and shareholders;

• deals with the position of limited companies that were formerlyunlimited and that of unlimited companies that were formerlylimited;

• prescribes the nature of a contributory's liability;• prescribes that the death of contributories does not affect their

liability;

• deals with the effect of contributory's bankruptcy and the liability

of contributories to contribute to the debts of a companyregistered but not formed under Companies Act, 2012.

Division 2 (clauses 392-397) deal with the voluntary liquidation ofcompanies and the circumstances under which a company may be liquidatedvoluntarily. The Division-

• specifies the circumstances in which company may be liquidatedvoluntarily;

• will require notice of a resolution to liquidate to be given;• prescribes when a liquidation is to commence;• prescribes the consequences of a resolution to liquidate;• will render void share transfers and attempts to alter member's

status after the passing of a liquidation resolution; and

• provides for the making and effect of declaration of solvency bydirectors of company.



Division 3 (clauses 398-403) specifically deals with a members' voluntaryliquidation. The Division-

• provides for the appointment of a liquidator in a members'voluntary liquidation;

• will enable a vacancy in the office of liquidator to be filled;

5356 he In solvency Bill, 2012

• will require the company to hold an annual general com panym eeting w hile the l iquidat ion continues;

• will require the com pany to h old a f inal m eeting prior todissolution; and

• provides wh at is to happen if the com pany is subsequ ently found

to be insolvent and for the conversion of the m em ber 's voluntaryliquidation to a creditors' voluntary liquidation.

Division 4 (414-421) pro vides for cr editors ' voluntary l iquidations. In thecase of a cred itors ' voluntary l iquidation, the Division-

• w ill require the com pany to conven e a m eeting of credi tors;• w ill requ ire the comp any's directors•to lay a statem ent of affairs

before the credi tors w ho at tend the m eeting;• provides for the appointm ent of a liquidator;

• w ill enable the creditors to appoint a liquidation com m ittee;

• provides for the h olding of a credi tors ' meeting if the l iquidat ionis converted from a m em bers ' voluntary l iquidation to a credi tors 'voluntary liquidation;

• provides that the directors' pow ers are to cease;• prov ides for the filling of a vacancy in the o ffice of liquidator;

• will require separate m eetings of the com pany and i ts credi tors tobe held every twelve mon ths; and f inal m eetings of the compan yand its creditors to be held p rior to dissolution.

Division 5 (414-421) contains provisions that apply to b oth k inds of

voluntary l iquidat ion. Those provis ions-

• provide for the comp any's property to be distr ibuted am ong i ts



m em bers after the satisfaction of its liabilities;

• w ill enable a l iquidator to be appointed or rem oved by the H ighCourt in specified circumstances;

• w ill requ ire a liqu idator to publish notice of his or her

appointment;


• will allow the liquidator to accept shares or company m embershiprights other consideration as consideration for the sale of companyproperty;

• will entitle a mem ber to require who did no t vote in favour of theresolution relating to the sale of the com pany's property to requirethe liquidator either to refrain from giving effect to the resolution

or to purchase the m ember' interest at a price to be determined byagreement;

• will enable certain questions relating to a liquidation to be referredto the High Court for determination; and

• will impose restrictions on directors' powers to appoint ornom inate liquidator of a com pany that is in voluntary liquidation.

Division 6 (422-458) provides for the liquidation of insolvent companies bythe High Court and specifies the circumstances in which a company may beliquidated by the Court. In relation to a com pany that is being or to beliquidated by the C ourt, the Division--

• provides for applications to the Cou rt for the liquidation o fcom panies (including applications for the liquidation of acompany on the grounds of public interest);

• prescribes the powers of the Court on the hearing of a liquidationapplication;

• will enable the High Court to halt or restrain proceedings against acompany after a liquidation application has been made;

• will render void dispositions of property by company aftercommencement of liquidation unless the Court otherwise orders;

• will also render void attachments and other form s of executionagainst the company after the commencemen t of liquidation;

• provides for when a liquidation by the Court is to comm ence;



provides for when a liquidation by the Court is to comm ence;• prescribes the consequences o f a liquidation order.• will enable the Official Receiver to require the company to submit

a statement o f affairs;

• will require the Official Receiver to conduct an investigation intothe failure of the com pany;




• provides that an order made by the C ourt on a contr ibutory is to beconclusive evidence of m oney ord ered to ' be paid by the'contributory;

• will em pow er the Cou rt to f ix deadlines for creditors to provetheir claims.;

• w ill enable the Co urt to adjust the r ights of contr ibutories;• wil l emp ower the C our t to m ake orders a l lowing cred i tors and

contr ibutories to inspect the com pany's records;

• provides for the paym ent of liquidat ion expenses;

• w ill enable an absconding contr ibutory to be arrested;

• provides for the pow ers of the Cour t to be cum ula tive; and

• w ill enable the Cou rt to delegate its pow ers to the l iquidator.Div is ion 7 (c lauses 45 9-469) prescr ibes the fun c t ions of l iqu ida tors inrelat ion to a volun tary l iquidat ions and l iquidat ions by the High C ourt . TheDivision includes provisions pro viding for

• the s tyle and t i t le und er wh ich a l iquidator is to condu ct al iquidation;

• i t be an offence for a person to m ake a cor rupt inducementaffect ing a l iquidator 's appo intmen t;

• the enforcem ent of a liquidator 's obl igat ions to lodg e, deliver andm ake returns, accounts and other docum ents;

• the rem oval a l iquidator from off ice in specif ied circum stances;

• the f i ll ing of vacan cies ' in th e off ice of l iquidator; an d

• the release of the l iquidator from his or her resp onsibi l it ies at theconclusion o f the liquidat ion.

Division 8 (clauses 471 483) contains pro visions that apply to al l com pan ies



Division 8 (clauses 471-483) contains pro visions that apply to al l - com pan iestha t a re in l iqu idat ion . The d iv ision inc ludes-

• provides for the t reatm ent of the deb ts of preferent ial creditors ,including the ranking of those debts ;



T h e h u o l v e n c y B 1 1 1 2 0 1 2 361• w ill requ ire a liquidator to lodge periodic statem ents w ith

Registrar of Com panies with respect tothe currentposit ion of aliquidation;

• specif ies the effect of resolut ions passed at adjourn ed m eetings ofcom pany's creditors and contributories;

• will empow er the Court to requ ire meetings to be held to ascertainthe w ishes of creditors or contributories;• w ill requ ire judicial notice to be taken o f court docum ents relating

to &liquidation; and

• provides for the sw earing of affidavits for the purposes o f the Part.

Division 9 (clauses 494-497) provides for the dissolut ion of com pan ies afterliquidation.

Division 10 (clauses 498 -Si 1) creates the fol lowing offences relat ing toconduct before and during a com pany's l iquidat ion:

• com m itting fraudulent acts in anticipation of liquidation;

• engaging in t ransact ions to defraud creditors of com pany inliquidation;

• engaging in m isconduct in the course of the l iquidat ion of acompany;

• fals ifying docu m ents relat ing to a com pany that is in l iquidat ion;

• m aking a m aterial omission from a statem ent relating to affairs ofa com pany tha t is in liquidation;

• m aking a false representation to creditors of a com pany tha t is in

liquidation.Under the Division, the High Cou rt wil l have pow er to m ake o rders againstdelinquent directors, l iquidators and others involved in a company



q , q p yl iquidation. The H igh Cou rt wil l also be able to mak e orders againstofficers of com pany an d others found to have participated in fraudulenttrading by a com pany that is in l iquidation and against off icers of a com panythat is engaging in wro ngful trading .

O ther prov is ions of the Divis ion-


• impose restriction on the re-use of com pany nam es.• will prohibit a d irector of a company in insolvent liquidation from

being a director of, or being involved with, any other co mpanythat is known by a "prohibited nam e" and will impose personalliability on a director of a com pany for the debts of the companyfollowing a contravention of the prohibition; and

• provide for the prosecution of delinquent officers and mem bers ofa company that is in liquidation by the Court.

PA R T V I I(clauses 512 to 519) provides for with the liquidation of anunregistered company an d specifies the circum stances under which such acompany can be liquidated. The P art will also enable a companyincorporated outside Ken ya to be liquidated even though it may be dissolved

will empow er the High C ourt to halt or restrain proceedings.PA R T V I I I(clauses 520 to 623), which is divided into eleven Divisions,provides for the administration of insolvent companies. The objectives ofthe administration of a company are-

• to maintain the company as a going con cern;• to achieve a better outcome for the com pany's creditors as a

wh ole than would likely to be the case if the company w ereliquidated (without first being under adm inistration); or

• to realise the property of the com pany in order to m ake adistribution to one or more secured or preferential creditors.

Division 1 (clauses 520-522) contains introductory provisions, which am ongothers, explain the n ature and o bjective of adm inistration.

Division 2 (clauses 523-529) provides for the appointm ent of adm inistratorsotherwise than by the High Court. The Division-



• specifies who will be able to appoint such an administrator; and• prescribes the duties, status of, and the qu alifications required for,

such an administrator.

It will not bepossible to appoint sucha n a d m i n is t ra t o r if th e r e le v a n tcompany-




Cou rt . I f an app ointm ent . If an appointm ent und er the Division turns ou t iobe inval id, the High C ourt w ill be able to mak e an order to the effect that theperson inval idly app ointed to be indem nified against l iabi li ty.

Div is ion 6 (c lauses 55 4-557) m akes spec ia l p rovision to en able holders ofqual ifying f loat ing charges to m ake ap pl icat ions for adm inistrat ion orders .

The Divis ion wi l l a lso enable the l iqu ida tor of a com pany to app ly for anadm inistrat ion o rder in cer tain circumstances.

Division 7 (clauses 558 -562) prescribes the effect of adm inistrat ion o rders .An adm inis t ra t ion order in respec t of compan y w i ll p revent the m aking ofan app l icat ion for a l iquidat ion order a nd w ill suspend pend ing appl icat ionsfor l iquidat ion orders . An adm inistrat ion order in respect of a comp any w illplace a m ora tor ium on br ing ing or cont inu ing inso lvency and o therproceedings aga ins t the com pany w hi le i t has e ffec t. There w i ll a lso be aninter im m oratorium w hen an appl icat ion for an adm inistrat ion order is made.While an adm inistrat ion order has effect in respect of a com pany, thecomp any w i ll be requi red to ensure tha t i ts bus iness documents andcom m unicat ions s tate that com pany's affairs are under adm inistrat ion.

Divis ion 8 (c lauses 563-575) dea l w i th the process of ad m iniste r ingcom pan ies w h i le t hey a re un de r adm in is t r at ion . Th e Div is ion -

• provides for the announcem ent of the adm inistrator 'sappointment;

• w ill require the com pany's off icer to provide the adm inistratorw ith a statemen t of the com pany 's affairs ;

• prescribes a deadline for the com pany 's statemen t of affairs to besubm itted to the adm inist ra tor ;

• w ill require the adm inistrator to mak e a s tatement set t ing out theadm inistrator 's propo sals w ith respect to the adm inistrat ion;

• provides for the condu ct of credi tors ' meet ings;



• provides for the condu ct of credi tors meetings;

• will require an ini t ia l credi tors ' m eet ing to be co nven ed except inspecif ied circum stances;

• provides for the business of such a m eeting;

• will e n a b l e th e a d m i n is t r a to r s p r o p o s a ls t o b e r e v i s e d ;


• provides for the consequ ences of a failure to obtain approval ofthe adm inistrator's proposals;

• provides for the ho lding of further creditors' meetings after theinitial m eeting;

• will enable a cred itors' meeting to establish a c reditors'

committee; and• will allow a creditors' meeting to be conducted by

correspondence.

Division 9 (clauses 576-602) prescribes the functions and pow ers of anadministrator. In addition to the powers set out in the Fourth Schedule, anadministrator's powers include power-

• to remove and appo int directors of the com pany;• to convene meetings of members and creditors of the company;

and.• to seek directions from the H igh Cou rt with respect to the cond uct

of the administration

A company under adm inistration w ill be prohibited from performingman agement functions w ithout the administrator's consent. Theadministrator will be able to distribute the company's assets among creditorsand o thers and to m ake special payments in certain cases. At thecom men ceme nt of the administration, the adm inistrator will be required toassume control of the com pany's property of com pany. The adm inistratorw ill also be responsible for mana ging the affairs and property of thecom pany and w ill be the com pany's agent. The ad ministrator will have

power to dispose of; and d eal with, property that is subject to a charge,whether the charge is a floating or a non-floating charge and to dispose ofgoods that are subject to credit purchase transaction (such as a hire purchaseagreement). Provision is made for the protection of secured and preferential



creditors.

M einbers of the com pany or its creditors will be able to challenge theadministrator's conduct of the administration by making an application tothe High Co urt, which w ill be able to carry out an ex amination of theadm inis tra tor s cond uct ofthe administration.

5 3 6 6he Insolvency Bill, 20 12

The appointm ent of an adm inistrator will automatically end at the end oftwelve m onths from an d including the date on w hich it took effect, but itwill be possible for the adm inistrator's term o f office to be extend ed incertain circum stances. The High Co urt will have power to terminate theadm inistration on the application o f the adm inistrator. In any event, theadm inistration will be terminated w hen its objective is achieved. The High

Cou rt will also be able to terminate the ad ministrator's appointment o n theapplication of a creditor and w ill be required to do so on the m aking ofpublic interest liquidation order.

The D ivision also prescribes the procedure for m oving from ad ministrationto a creditors' voluntary liquidation and for m oving from adm inistration todissolution.

An adm inistration order will be discharged if the adm inistrator'sappointment is terminated.

Division 10 (clauses 603-615) makes further provision w ith respect to thetermination of the appointment of adm inistrators and their replaceme nt. TheDivision—

Provides for the resignation of an administrator.

• will enable the High Co urt to remove an adm inistrator from officein certain circumstances;

• will require an administrator to vacate office on ceasing to bequalified;

• provides for the filling of a vacancy in the office of administrator;

• will enable the high court to replace an ad ministrator;• will permit the holder of a floating ch arge to appoint areplacement administrator;

• will enable a com pany, or its directors to appoint replacem ent •



will enable a com pany, or its directors to appoint replacem ent administrator if it or they appointed the previous administrator;

• will a competing floating charge-holder to apply to the High C ourtto appoint a replacement adm inistrator; and

• will enable a c reditors'm e e t in g t o r e p la c e a n a d m i n is t ra t o rappointed by the com pany or directors.


On vaca ting office, an adm inistrator will normally be discharged fromliability and w ill be entitled to be paid his or her remu neration and ex pensesout of the com pany's property and to have priority over holders of floatingcharges with respect to that remu neration and those expen ses.

Division 11 (clauses 616-621) contains supplementarypro visions relat ing tothe operation of the Part. The Division-

• .makes provision for joint and con current adm inistrators;foroffences com mitted by joint adm inistrators; and for administratorswh o act concurrently;

• will enable adm inistrators to be appointed to act concu rrently;• establishes a presum ption of vat Ity in relation to the acts of an

administrator;• provides for decisions of com pany directors;• will enable time limits to be extended; and• will allow certain specified periods to be varied by co nsent.

PA R T I X(clauses 624-676) will enable an insolvent com pany to enter intoa voluntary arrangement with its creditors. The Part is divided into twoDivisions.

Division 1 (clauses 624-635) will enable the directors of a company to ma kea proposal for a.voluntary arrangemen t with its creditorsunder whichthecom pany w ill enter into a com position in satisfaction of its debts or aschem e for arranging its affairs. A proposal ma y also be able tobe made-

• if the company is und er administration—by the ad ministrator; or

• if the compan y is in liquidation— by the liquidator.

A proposal w ill be required to make provision for the appointment of anauthorised insolvency practitioner to act as the supervisor of the voluntary



arrangem ent if it is approved . A special procedure is prescribed to deal withthe situation wh ere the supervisor is not the liquidator or adm inistrator ofthe company.


The provisional supervisor will be required to con vene m eetings of thecompany and of its creditors. A proposal may be approved w ith or w ithoutmo difications, which m ay include a m edication replacing the supervisor.The m eetings will be required to appoint a chairperson. The creditors'meeting w ill be required to d ivide the creditors into three groups,com prising respectively the secured creditors; the preferential creditors; andthe unsecu red creditors. A proposal will be approved if it is supported by a

majority of the memb ers attending the com pany me eting and a majority ofeach of the three groups of creditors. After the meetings have concluded,any m emb er of the com pany or eligible creditor will be able to apply to theHigh Co urt for an order approving the proposal (with or withoutm odifications) On the hearing of the application, the Cou rt will, subject tocertain specified con straints, be able to m ake an o rder approving theproposal.

On being a pproved by the H igh Cou rt, the proposal will take effect as avoluntary arrangement, which w ill be binding on the com pany and all of thecreditors who were entitled to attend the creditors meeting. Specialprovision is made todeal with those creditors who might not have beenawa re of the holding of the creditors' meeting.

It will be possible for mem bers of the company or its creditors who claimthat they have been unfairly treated as a result of a decision m ade by themeeting of the com pany or the meeting of itscreditors to make anapplication to the High COurt for an orderaddres,sing theirconcerns.

It will be an offence for a co mpany or its officers to make falserepresentations or engage in fraudulent acts in relation to the m aking of aproposal. When a proposal takes effect as a voluntary arrangement, thesupervisor will be responsible for the implementation of the arrangem ent in

the interests of the compan y and its creditors and m onitoring compliance bythe company w ith the terms of the arrangement.

Other provisions of the Division provide for the prosecution of delinquentofficers of the com pany in relation to a proposal and provide for w hat is to



officers of the com pany in relation to a proposal and provide for w hat is tohappen if a voluntary arrangement ends prematurely.

Division 2 (clauses 636-676) provide for a moratorium on a co mpan y's debt

paymen ts of certain com panies when their directors propose a voluntary


arrangement. Only certain companies will be eligible to obtain amoratorium under the Division. The following companies will not beeligible:

banking and insurance companies;• companies under administration;

• certain project companies; and• companies with large outstanding liabilities;

Directors of an eligible company who wish to obtain a moratorium will berequired to prepare-

• a document setting out the terms of the proposed voluntaryarrangement; and

• a statement of the company's affairs containing such particulars ofits creditors and of its debts and other liabilities and of its assets asmay be prescribed by the insolvency regulations for the purposesof this section, and such other information as may be soprescribed; and

unless a supervisor has already been appointed for the proposed voluntary

arrangement, to appoint as supervisor of the proposed arrangement anauthorised insolvency practitioner who has consented to supervise it. Thesupervisor will be required to submit to the directors a statement indicatingwhether or not, in the supervisor's opinion-

• the proposed voluntary arrangement has a reasonable prospect ofbeing approved and implemented;

• the company is likely to have sufficient funds availableto it

during the proposed moratorium to enable it to carry on itsbusiness; and

• meetings of the company and its creditors should be convenedith i t id i g d i g th t g t



with a view to considering and approving that arrangement.

To obtain a moratorium, the directors of the company will then be requiredto lodge with the Court documents including-


(a ) the statement mentioned above;

(b ) a statement to the effect that the company is eligible for amoratorium and the basis of that eligibility;

(c ) a statement from the provisional supervisor thatthat supervisorhas consented to act;

(d ) a statement from the provisional supervisor that, in thatsupervisor's opinion-

• the proposed voluntary arrangement has a reasonableprospect of being approved and implemented;

• the company is likely to have sufficient funds available to itduring the proposed moratorium to enable it to carry on itsbusiness; and

• meetings of the company and its creditors should beconvened to consider the proposed voluntary arrangement.

A moratorium will take effect when the documents referred to above arelodged with the High Court and will end at the end of the day on which thefirst meetings of the company and its creditors are held or, if held•ondifferent days, at the end of the later of those days. As soon as amoratorium takes effect, the directors of the company will be required to

give notice of that fact to the supeivisor, who will be required to publish andgive notice that moratorium has taken effect.

Within fourteen days after a moratorium has come to an end, the supervisor_will be required to-

• publish notice that it has ended;

• send to the company and any creditor of the company of whoseclaim the supervisor is aware a notice to the effect that themoratorium has ended; and

• lodge a copy of the notice with the Registrar of Companies forregistration



registration.

While a moratorium has effect in respect of a company-

• an application for liquidation the company may not be made;


• a meeting of the company may be convened or requisitioned onlywith the consen t of the supervisor or with the leave of the HighCourt;

• a resolution for the liquidation of the com pany has n o effect;• the High'Court m ay not m ake an order for the liquidation of the

company;• an application for an adm inistrator to be appointed in respect of

the company m ay not be m ade and if made is of no effect;• an adm inistrator of the com pany ma y not be appointed by a

secured creditor or by the com pany or its directors;• a landlord or other person to w hom rent is payable will be able to

exercise a right of forfeiture in relation to premises let to thecom pany in respect of a failure by the company to co mply w ithany term of its tenancy of the premises only with the leave of theCourt; and

• steps may be taken to enforce any security over the com pany'sproperty, or torepossess goods in the com pany's possession u ndera credit purchase transaction only with the leave of the C ourt;and

• other pro ceedings ( including execution or other legal process)m ay be com m enced or cont inued , and d ist ress m ay be lev ied ,against the comp any or i ts property only with the leave of theCourt.

Special provision is made in respect of a m oratorium is on property that issubjec t to an uncrys ta l l ised f loa t ing ch arge . A secur i ty wi l l no t b eenforceable unless i t would benef i t the comp any.

When a m ora to rium has e ffec t in r e spec t o f a company-

• com pan y invoices and other docu m ents wil l be required to s tatesupervisor 's nam e and that m oratorium h as effect ;



supervisor s nam e and that m oratorium h as effect ;

• the com pany prohib i ted f rom obta in ing cred i t exceeding twenty-f ive thou sand sh i ll ings un less the credi t provider has beeninformed of the moratorium;

• the com pan y w ill be subject to restr ict ions in disposing of i tsproper ty and in m aking paym ents of m oney;


• the company will also be subject to restrictions with respect topaying debts and other liabilities; and

• the company will able to dispose of property and goods that aresubject to a security or held under a credit purchase transaction(such as a hire purchase agreement) in certain specified

circumstances.The supervisor will be responsible for monitoring the activities of thecompany during the moratorium to ascertain whether the proposed voluntaryarrangement is likely to be approved. The supervisor will not be allowed towithdraw his or her consent to acting as supervisor except with the approvalof the High Court unless the supervisor has concluded that the proposedvoluntary arrangement has no chance of being implemented or approved.Creditors and others will be able to challenge the supervisor's conductduring moratorium by application made to the High Court.

A creditor of the company will be able to pursue a claim against thesupervisor on the ground that the supervisor has caused the company tosustain loss (unless the company seeks to recover damages for the loss). .The High Court will be able to replace a supervisor on the ground that thesupervisor has failed to comply with his or her duties or has died or that isimpracticable or inappropriate for the supervisor to continue as such.

The supervisor will be required to convene meetings of both the companyand its creditors to consider a proposal for a voluntary arrangement. Theproposal may be approved with or without modifications, which mayinclude a medication replacing the supervisor. The meetings will berequired to appoint a chairperson. The creditors' meeting will be required to

divide the creditors into three groups, comprising respectively the securedcreditors; the preferential creditors; and the unsecured creditors. Theproposal will be approved if it is supported by a majority of the membersattending the company meeting and a majority of each of the three groups ofcreditors.



creditors.

At the conclusion of the meetings of the company and its creditors, anymember of the company or any eligible creditor will be able to apply to the

High Court for an order approving the proposal, On the hearing of such an


application, the Cou rt will, subject to certain constraints, be able theproposal.

On being approved either by the m emb ers and the three groups of creditorsor by the three groups of creditors or by the H igh Co urt, the proposal will

take effect as a voluntary arrangement, which will be binding on thecom pany and all of the creditors wh o w ere entitled to attend the creditorsmeeting. Special provision is mad e to deal w ith those creditors wh o m ightnot have been aw are of the holding of the creditors'meeting.

Special provision is made to de al with those creditors who m ight not havebeen aware of the holding of the creditors' meeting.

It will be possible for mem bers of the company o r its creditors who claimthat they have been unfairly treated to challenge a de cision taken at ameeting of the com pany or its creditors by making an a pplication to theHigh Co urt for an order addressing their concerns.

W hen a voluntary arrangement has taken effect, the supervisor wh o wa sappointed in respect of the m oratorium w ill becom e the supervisor of thevoluntary arrangement, unless another insolvency practitioner has beennom inated to replace that supervisor in accordance w ith a m odificationmade at a meeting of the com pany or its creditors, in which case thatpractitioner will become the supervisor of the arrangement. Whilethevoluntary arrangem ent rema ins in effect, the supervisor will beresponsiblefor implementing the arrangement in the interests of the com panyand itscreditors and m onitoring its com pliance by the com pany inaccordance withits terms. Creditors and m embers of the company who aredissat isf ied w ith

the performan ce of the supervisor will be able to obtain redressby m ak ingan application to the High Co urt.

A moratorium w ill be able to be extended in specified circumstances andunde r certain conditions. Provision is m ade for a m eeting of creditors to a



gestablish moratorium committee.

The following decisions will have effect if taken by meetings of both thecom pany and its creditors under the D ivision or, subject to an order of theHigh C ourt, taken by the relevant creditors' m eeting:

5374 he Insolvency Bil l , 2012

• the extension (or further extension) of a moratorium;• the ending of a m oratorium;• the establishment of a m oratorium com mittee;• the approval of the expected cost of a supervisor's intended

actions.

Other provisions of the Division-

• will enable a member or creditor of a company to challengeactions of the company's directors by application made to theHigh C ourt;

• create offences under the Division; and

• provide that certain provisions in floating charge documents are tcbe void.

PA RT X (clauses 677 to 690) contain provisions that apply both tocompanies in liquidation and companies under administration. The Part-

• provides for the realising of property of a company that is inliquidation or u nder ad m inistration;

• will require officers and former officers of companies to co-operate with administrators, liquidators, professional liquidatorsand the Official Receiver;

• will enable the High Court to conduct an inquiry into a company'sdealings on the application of the administrator, liquidator orprovisional liquidator of the company or the Official Receiver;

• will enable the High Court to set aside a transaction involving a

com pany in liquidation or under. adm inistration that is found tobeundervalue;• will enable the High Court to make an order rendering void an act

constituting a preference given to a person by a company andrestoring the position that which would have existed if the



g ppreference had not been given;

• will enable the High Court , to set aside certain extortionate credit

transactions;


• provides that in certain circum stances floating charge o n acom pany's undeiaking or property are to be invalid;

• provides that a lien or other right to retain possession o f any of thedocuments of a company that-is in liquidation or un deradm inistration w ill be un enforceable to the extent that its

enforcement would deny possession of any of the documents tothe liquidator or administrator;• will provide that if a request is made by or w ith'the consent o f a

liquidator, adm inistrator or other office-holder of a com pany forthe supply_of an y utility service (such as electricity, gas or water),the supplier will be able to make it a condition o f the supply thatthat office-holder w ill personally guarantee the paymen t of anycharges in respect of the supply, but will not be able to m ake it acondition for supplying the service, or take any action that ha s theeffect of making it a condition for supplying the service, that anyoutstanding charges are to be paid in respect of a service suppliedto the company before the liquidation of the company commencedor company entered administration; and

• will prohibit the appointm ent of a receiveror manager("administrative receiver") in respect of a co mpany .

PA R T X I (clauses 691-704) contains provisions for the enforceme nt of theproposed A ct and legal proceedings that m ay brought und er it. The P art is,divided into three D ivisions.

Division 1 (clauses 691-694) contains provisions designed to coun teractdebt avoidance by debtors wh o are natural persons and com plements aprovision of Part X that m akes similar provision in relation to com panies.The H igh Cou rt will be able to m pke orders relating to fraudulenttransactions (i.e. transactions entered into at an und ervalue). The followingpersons w ill be able apply for such an order:

• the O fficial Receiver;



• the O fficial Receiver;• a ban kruptcy trustee;• with the leave of the High Co urt—a victim o f a fraudulent

transaction.

5 3 7 6 he Insolvency Bill, 201 2

If a debtor has entered into such a transaction, the High C ourt will,'withincertain constraints, be able to m ake such order as it considers appropriate forrestoring the position to what it wo uld have been if the transaction had notbeen entered into an d for protecting the interests of persons wh o are victimsof the transaction. In making such a n order, the Court will have wide range

of options for addressing the situation.Division 2 (clauses 695-701) con tains general provisions relating to theenforcem ent of the proposed Act and legal proceedings. Those provisions-

• will provide for the enforcement of a co mpan y's obligations tolodge docum ents with the Registrar of Com panies with , or givenotice to, the Registrar of Com panies.

• will empow er the High Court to grant injunctions, on such termsas it considers just, restraining persons from engaging in specifiedconduct and, if in the opinion of the Court-it is desirable to do so,requiring persons to do any specified act or thing.

• provides that, if a provision of the proposed A ct provides that anofficer of a company (for example, a director) wh o is in defaultcom mits an offence, the officer com mits the offence only if the

officer authorises or permits, participates in, or fails to take allreasonable steps to prevent, the contravention of the act orcondu ct, or the failure to comply w ith the requirement, thatconstitutes the offence.

• provides that, if a body co rporate comm its an offence, an officerof the body, wh o is complicit in the offence, will also com mit anoffence and be liable to be punished accordingly.

• provides for the adm issibility in evidenc e of a statem ent of affairsor other statement prepared for purpose of a provision of theproposed A ct or the proposed insolvency regulations;

• provides that a legal proceeding u nder the proposed A ct is not tobe invalidated or set because of a d efect unless a person is



be invalidated or set because of a d efect unless a person isdetrimentally affected by the defect; and

• will enable the Rules Co mm ittee (with the ad dition of the Official

Receiver) to makeinsolvency procedure rules to be made for theconduc t of legal proceedings under the proposed A ct.


DiVision 3 (clauses 702-705) provides for appeals to the Court of Appealagainst decisions, and for the review of orders, made u nder the proposedAct. In particular, the Division-

• will enable the High C ourt to review, rescind or vary an ordermad e by it under the proposed Ac t;

• will confer a right of appeal against decisions of the High C ourtunder the proposed Ac t; and

• will enable the High Court or the Cou rt of Appeal to suspend abankruptcy, liquidation or adm inistration pending thedetermination of an appeal against it by the C ourt of A ppeal.

PA R T X I I (clauses 705 to 723) provides for the general adm inistration of

the proposed Act. The P art is divided into two P arts.

Division 1 (clauses 705-713)—

• provides for the appointment of the O fficial Receiver and D eputyOfficial Receivers;

• will enable a Deputy Official Receiver to act on behalf of the

Official Receiver;• provides for the incorporation of the O fficial Receiver as acorporation sole;

• provides for the vacation of office by the Official Receiver and aDeputy O fficial Receiver and for the filling of a v acancy in thatoffice;

• will protect the Official Receiver and Deputy O fficial Receivers

from liability for acts done or om itted ingood faith for thepurposes of•the proposed A ct;

• will enable the Official Receiver and the Deputy O fficialReceivers to charge fees for their services under the proposed A ct

• provides for the insolvency regulations to fix or prescribe the



provides for the insolvency regulations to fix or prescribe theamo unt or rates of those fees ;

• provides an account called the Insolvency Services Account to beestablished and m aintained; and


• will require the Ofzicial Receiver to pay certain unclaimeddividends and un distributed balances into Insolvency ServicesAccount.

Division 2 (clauses 714-723) provides for the keeping of public registersrely: ;r to bankrupts, persons in respect of persons in relation to whom a

summary instalment order has been made and persons who have beenadmitted to the no-asset procedure. The Official R eceiver wi l l berequiredto ensure acce ss to the public registers.

The purposes of the public registers are to provide information to the publicabout bankrupts, persons who are subject to summary instalment orders, andpersons who have been admitted to the no-asset procedure and to facilitatecompliance with the requirement of proposed Parts and specifies the generalinformation to be included in the registers. Records relating to a person whohas been involved in more than one insolvency event are to be keptindefinitely.

It will be possible for certain restricted information to be included in theregister relating to bankrupts, but the Official Receiver will be required toensure that access to that information is limited to those persons who have a

right to it under another provision of the proposed Act. The OfficialReceiver will be able to omit, remove, restrict access to, or amend,information contained in a public register. Members of the public will havethe right to inspect the registers subject to the restriction mentioned above.The information contained in a public register will be made available forstatistical or research purposes.

The Government and the Official Receiver will be protected from beingsued for any act or omission in relation to the maintenance of a publicregister done or omitted to be done in good faith and with reasonable care.

PA R T XI II (clauses 724 to 740) contains miscellaneous provisionsdesigned tc supplement the proposed Act. The Part-



• provides for the application of the UNCITRAL model law oncross border insolvency set out in the Fifth Schedule to theproposed A ct;


• provides for the representation of bod ies corporate at meetings toheld under the propOsed Act;

• will require that the courts, the Official Receiver and others topublish orders and notices on their respectiVe websites;

• will require. the Official Receiver, bankruptcytrustees, l iquidatorsand ad M inistrators to notify creditors of steps inthe insolvency

process;• will provide for certain transaction s relating to a bankru pt's estateto be exem pt_from stamp duty;

• will provide for the re-direction ofbankrupt 's correspondence;

• will provide that if a request is mad e by or w ith the consent of an"officer-holder" (such a s a bankruptcy trustee or a supervisor of avoluntary arrangement) for the supply of .a utility service (such as

electricity, gas or w ater), the supplier will be able to make it acondition of the supply that the office-holder w ill person al lyguarantee the payment ofany ch arges in respect of the supply, butwill not be able to m ake it a condition for supplying the service, ortake any action that has the effect of ma king it a condition forsupplying the service, that any outstanding ch arges are to be paidin respect of a service supplied before the ban kruptcy or otherrelevant insolvency event occu rred;

• will enable the High Cou rt, on the application o f the OfficialReceiver, to make an o rder requiring the Kenya R evenueAu thority to produced certain docum ents for the purposes of anyproceedings against a debtor or ban krupt under Part III of theproposed-Act;

• will require the Cabinet Secretary to prepare an an nual reportabout the operation of the proposed Act and arrange for a copy ofit to be tabled in both Houses o f Parliament;

• provides for the service and giving of docu men ts on and naturalpersons the service and giving of docum ents on and by com paniesand o ther bodies corporate for the purposes of the proposed A ct;

ill th C bi t S t t k i l



• will empow er the Cabinet Secretary to make insolvencyregulations the purposes of the proposed Act;

provides for the proposed Act to bind the Governm ein, and


• will repeal the Bankruptcy Act (Cap. 53) and revoke subsidiarylegislation in force under that Act immediately before the repealtakes effect.

The Part also includes transitional provisions relating to the bankruptcy andinsolvency of natural persons and relating to the winding up and insolvencyof companies. In general, the provisions of the Bankruptcy Act and willcontinue to apply to and in relation to bankruptcies and bankruptcy andinsolvency proceedings involving natural persons that are in effect orpending at the commencement of the relevant provisions of the proposedAct. Similarly, the provisions of the Companies Act (Cap. 485) relating tothe winding up of companies and the appointments of receivers or receiversand managers in respect of companies will continue to apply to and inrelation to the winding up of companies that commenced, and theappointment of receivers and receivers and managers appointed, before the

commencement of the relevant provisions of the proposed Act. However,the Cabinet Secretary will have power to make transitional regulations that,if necessary, can m odify those transitional provisions.

The Part also makes a number of amendments to other Acts that containprovisions relating to the bankruptcy or insolvency of natural persons and tothe winding up of companies. Theseamendments are set out in the SixthSchedu le to the proposed A ct.

The B ill contains the follow ing Schedules:

The First Schedule specifies the powers of a bankruptcy trustee in relation toa bankrupt.

The Second. Schedule contains comprehensive provisions dealing with thedebts of preferential creditors. The Schedule applies to both insolvent

natural persons and to companies and other bodies corporate.

The Third Schedule specifies the powers of a liquidator in relation to acom pany in liquidation.

The Fourth Schedule specifies the powers of an administrator of a company



The Fourth Schedule specifies the powers of an administrator of a companythat is under adm inistration.


The Fifth Schedule contains a modified version of the U NCITRA L m odellaw on cross border insolvericy.

The Sixth Schedule sets out the consequential amendm ents to other Acts.

The en actment o f this Bill will require additional expend iture from the

Exchequer.

Dated the 9th November, 2012.

• GITHU MUIGAIAttorney-General .




TEXTS OF ENACTMENTS INTENDED TO BE AMENDED BY THISBILL

Section 46 of Advocates Act Cap. 16), which it is attended to amend

Invalid agreements

46. Nothing in this Act shall give validity to—

(a ) any purchase by an advocate of the interest, or any partof the interest, of his client in any su it or othercontentious proceeding; or

(b) any agreement rel ieving any advocate fromresponsibility for professional negligence or any otherresponsibility to which he would otherwise be subjectas an advoca te; or

(c ) any agreement by which an advocate retained oremployed to prosecute or defend any suit or othercontentious proceeding stipulates for payment only inthe event of success in such suit or proceeding or t'latthe advoca te shall be remun erated at different ratesaccording to the success or failure thereof; or

(d ) any agreement by which an advocate agrees to acceptin respect of professional business, any fee or o ther ,consideration which shall be less than the remuneratiorprescribed by any order under section 44 respect of thatbusiness or more than twenty five percent of thegeneral dam ages recovered less the party and the partycosts as taxed or agreed ; or

(e) any disposition, contract , sett lement, conveyance,delivery, dealing or transfer which is, under the lawrelating to bankruptcy, invalid against a trustee orcreditor in any bankruptcy or com position.

Section 38 of Arbitration Act (No. 4 Of 1995), which it is attended to amend



Effect of bankruptcy on agreement to settle differences by arbitration.

The Insolvency Bill, 20 12 38338 . (1) Where i t i s p rov ided by a t e rm in a con t rac t t o wh ich a

bank rupt is a par ty that any differences ar is ing out of or in connec t ion withthe contrac t shall be referre d to arbitration,then i f the t rustee in bank ruptcyadopts the contract , that term is enforceable by or against him so far asrelates to those differences.

(2) Where a person wh o has been ad judged bank rupt had , beforethe comm encement of the bank ruptcy, becomes a par ty to an a rb i t ra t ionagreement , and any m at te r to w hich the agreement app l ies requi res to bedeterm ined in conn ect ion w i th or for the p urposes of the bank ruptcyproceedings , then i f the case i s one to w hich sub sec t ion (1) does no tapp ly—

(a ) any o ther par ty to the agreem ent or, wi th the consent ofthe com m ittee of inspect ion, the t rustee in bank ruptcym ay app ly to the court having jur isdiction in thebank ruptcy proceedings for an order direct ing that them atter in quest ion shal l be referred to arbi t rat ion inaccordance wi th the agreement ; and

(b ) the court , i f i t is of the op inion that , having regard to a l lthe circumstances of the case, the m atter ought to bedetermined by arbi t ration, m ay mak e an orderaccordingly.

(3) This sec t ion sha l l apply in d om est ic a rb i t ra t ion or i f thebank rupt person is a Kenyan or i f the law of Keny a is applicable accordingto the ru le of confl ict of law s.

Section 13 of Chattels Tran sfer Act Cap. 28), which it is propose d to am end

Unregistered instruments to be void in certain cases

13. (1) Every ins t rumen t , un less reg is te red in the m anner providedund er this Part , shal l , upo n the exp irat ion of the t ime for registrat ion o r, i fthe t ime for registration is extended b y the High C ourt , upo n the expirat ionof the ex tended t ime, be deem ed f raudulent and void as aga ins t—



(a ) the off ic ia l rece iver or t rus tee in bank ruptcy of theestate of the person w hose chat tels or any of them arecom pr i sed in the ins t rument ;


(b ) the assignee or trustee acting under any assignment forthe benefit of the creditors of that person;

(c ) any person seizing the chattels or any part thereofcom prised in the instrumen t, in execution of the processof any court authorizing the seizure of the chattels, ofthe person by whom or concerning whose chattels the

instrument was made,so far as regards the property in or right to the possession of any chattelscomprised in or affected by the instrument which, at or after the time ofbankruptcy, or of the execution by the grantor of the assignment for thebenefit of his creditors, or of the execution of process (as the case may be),and after the expiration of the period within which the instrument is requiredto be registered, are in the possession or apparent possesion of the person

making or giving the instrument, or of any person against whom the processwas issued under or in the execution of which the instrument was made orgiven, as the case m ay be.

(2) So long as an instrument continues to be registered hereunder,the chattels comprised in that instrument shall not be deemed to be in thepossession, order or disposition of the grantor, within the meaning of theBankruptcy Act.

Section 70 of Em ployment Act (No. 11 of 20 07) which it is proposed toamend

Role of relevant officer

70. (1) Where a relevant officer has been, or is required to be ,appointed in connection with an employer's insolvency, the Minister shal lnot make a payment under section 66 in respect of a debt until the`Ministerhas received a statement from the relevant officer of the amount of that debtwhich appears to have been owed to the employee on the appropriate dateand to remain unpaid.

(2) A relevant officer shall, on the request of the Minister,provide the Minister with a statement for the purposes of subsection (1) as



p p p ( )soon as is reasonably practicable.

(3) If the Minister is satisfied that he does not require a statementunder subsection (1) in order to determine the amount of a debt which was


owed to the employee on the appropriate date and remains unpaid, he maymake a payment in respect of the debt without having received thestatement.

(4) The following are relevant officers for the purposes of thissection—

a) a trustee in bankruptcy or a permanent or interimtrustee within the meaning of Bankruptcy Act;

b) a liquidator;

c) an administrator;

d) a receiver or manager;

e) a trustee under a composition or arrangement between

the employer and his creditors; and

f) a trustee under a trust deed for his creditors executed bythe employer.

Section 30 of Hire Purchase Act (Cap . 507), which it is proposed to am end

Agreement binding on trustee or liquidator of owner

30. If the owner is adjudged bankrupt or (being a company) is inliquidation, a hire-purchase agreement entered into by him as owner shallremain in full force and effect and shall be binding on the trustee inbankruptcy or liquidator, as the case may be, but without prejudice to hisright to disclaim:

Provided that this section does not affect the powers of the court to set asideany disposition of property made by way of undue preference.

Section 27 ofindustrial Tra ining Act (Cap . 23 7), which it is proposed toamend

Bankruptcy

27. Where, under the provisions of subsection (1) of section 39 of the



27. , p ( )Bankruptcy Act, a contract of apprenticeship or indentured learnership is

discharged by the apprentice or indentured learner giving notice in writingto the trustee in bankruptcy to that effect, the trustee shall, within a period


of one month of receiving the notice, notify the Director-General thereof,and failure so to notify the Director-General shall be an offence, withoutprejudice however to the complete discharge of the contract.

Section 95 of Insurance Act (Cap. 487) which it is proposed to a m end

Property in child s advancement policy

95. (1) The provisions of this section shall apply to every child'sadvancement policy, whether effected before, on, or af ter the appointeddate.

(2) Where a child whose life is insured under a child'sadvancement policy has, whether before, on, or after the appointed date,attained the vesting age, the policy shall be deemed to have been, or, as thecase may be, shall become, as on and after the date on which the childattained the vesting age, the absolute property of the child both at law and inequity, subject—

(a ) to any debt ow ing to the insurer under, or secured by,the po licy;

(b ) to any dealing done, prior to the attainment by the childof the vesting age, by the ow ner of the policy; and

(c ) to any dealing done, after the attainment by the child ofthe vesting age and prior to the appointed date, by theow ner of the policy.

(3) On the death or bankruptcy, during the child's lifetime andbefore he attains the vesting age, of the person effecting the policy, theexecutors, administrators, official receiver or trustee in bankruptcy of the

person effecting the policy as the case may be (in this subsection referred toas the representative ) shall, subject to any dealings other thantestamentary by the person effecting the policy before his death orbankruptcy, hold the policy in trust for the,child until he attains the vestingage, or dies before attaining the vesting age, and the representative mayassign, mortgage, charge, surrender, vary or otherwise deal with the policy



and apply the proceeds as he thinks fit for the maintenance or benefit of thechild and the upkeep of the policy, and the insurer issuing the policy shallbe unde r no obligation to see to the application of the proceed s.


(4) Nothing in this section shall invalidate a paym ent ma de beforethe appointed da te in respect of a child's advancem ent policy if thepaymen t, but for this Act, would have be en valid.

Section 1 5 of Insurance (Motor Vehicle Third Par ty Risks) Act (Cap. 40 5)which it is proposed to a m end

Rights of third parties against insurers on bankruptcy, etc., of insured

15. (1) Where u nder any co ntract of insurance a person (in this sectionreferred to as the insured ) is insured against liabilities to third parties whichhe may incur, then—

(a ) in the event of the insured becom ing bankrupt ormaking a composition or arrangement with his

creditors; or(b ) in the case of the insured being a compan y,in the event

of a winding-up o rder being made, or a resolution for avoluntary winding u p being passed, with respect to thecompany, or of a receiver or manager of the com pany'sbusiness or undertaking being duly appointed, or ofpossession being taken, by or on b ehalf of the holders

of any debe ntures secured by a floating charge, of anyproperty comprised in o r subject to the charge, if eitherbefore or after that event any such liability as aforesaidis incurred by the insu red, his rights against the insurerunder the con tract in respect of the liability shall,notw ithstanding anything in any law to the con trary, betransferred to and vest in the third party to w hom theliability was so incurred.

(2) Where an order is made u nder section 121 of the B ankruptcyAct for the adm inistration of the estate of a deceased deb tor according to thelaw of bankruptcy, then, if any debt provable in bankruptcy is owing by thedeceased in respect of a liability against which he w as insured under acontract of insurance as being a liability to a third party, the deceaseddebtor's rights against the insurer unde r the contract in respect of that



debtor s rights against the insurer unde r the contract in respect of thatliability shall, notwithstanding anything in that A ct, be transferred to andvest in the person to whomthe d ebt is owing.


(3) In so far as any contract of insurance made in respect of anyliability of the insured to third parties purports, whether directly orindirectly, to avoid the contract or to alter the rights of the partiesthereunder upon the happening to the insured of any of the events specifiedin paragraph (a) or paragraph (b) of subsection (1) of this section or uponthe making of an order under section 121 of the Bankruptcy Act in respectof his estate, the contract shall be of no effect.

(4) Upon a transfer under subsection (1) or subsection (2), theinsurer shall be under the same liability to the third party as he would havebeen under to the insured, but —

(a) if the liabili ty of the insurer to the insured exceeds theliability ofthe insured to the third party, nothing in thissection shall affect the rights of the insured against the

insurer in respect of the excess; and(b ) if the liability of the insurer to the insured is less than

the liability of the insured to the third party, nothing inthis section shall affect the rights of the third partyagainst the insured in respect of the balance.

(5) For the purposes of this section, liabilities to third parties , inrelation to a person insured under any contract of insurance, shall notinclude any liability of that person in the capacity of insurer under someother contract of insurance.

(6) This section shall not apply where a company is wound upvoluntarily merely for the purposes of reconstruction or of amalgamationwith another company.

Section 52 of Land Act No. 6 of 2012), wh ich it is proposed to amen d

Transmission on bankruptcy

52. (1) Upon production to the Registrar of a certified copy of theorder of court adjudging a proprietor bankrupt, or directing that the estate ofa deceased proprietor shall be administered according to the law ofbankruptcy—



(a) a copy of the order shall be filed with the registrar; and


(b) the trustee in bankruptcy shall be registered asproprietor of any land, lease or charge of w hich thebankrupt or the deceased proprietor is proprietor, inplace of the bankrupt or d eceased proprietor.

(2) A trustee in bankruptcy sha ll be described in the register as"trustee of the property of ( , a bankrupt".

Section 103 of Land Act (No. 6 of 2012), which it is proposed to amend

Ap pl ica t ion fo r r e l ie f by ch a rgor

103. (1)An application for relief against the exercise by thechargee ofany of the rem edies referred to in section 85 (3) (a) and (b) may be m adeby—

(a ) the chargor;

(b ) if two or m ore persons are joint chargors, by one ormo re of them o n their own behalf;

(c ) a spouse of the chargor;

(d ) a lessee of the ch argor; or

(e ) the trustee in bankruptcy of the c hargor.(2 ) If an application m ade in accordan ce subsection (1) (b) is not

mad e by all the joint chargors, then, unless the cou rt orders otherwise, itmu st be served on all the joint chargors.

(3 ) An application for relief may be m ade at any tim e after theservice of a n otice unde r section 90 (1), section 91 (2), section 94 (1),section 95 (1), or during the exercise of any of the remed ies contemplated in

those sections.(4 ) An application for relief is not to be taken as an a dm ission by

the chargor or any o ther person applying for relief that—

(a ) there has been a breach of a coven ant of the charge bythe chargor;



(b ) by reason o f such a breach, the chargee h as the right to

exercise the remedy in respect of which the applicationfor relief has been made;


(c ) all notices that were required to be served by thechargee were properly served; or

(d ) the period for remedying the breach specified in thenotice served under section 90 was reasonable or hadexpired,

and the co urt may grant relief without determining all or any of the mattersdescribed in paragraph s (a), (b), (c) or (d).

Section 27 of Land Registration Act (No. 3 of 2 01 2), which it is proposed toamend

Tran s fe r wi thou t va luab le cons ide ra t ion

27. (1) A proprietor who ha s, acquired land, a lease or a charge by

transfer without valuable consideration shall hold it subject to—(a ) any un registered rights or interests subject to w hich the

transfero•held it;

(b ) the law relating to Bankruptcy; and

(c ) the winding-up provisions of the Com panies Act, Cap.486.

(2) No twithstandin g subsection (1), the transfer whe n registered,shall have the sam e effect as a transfer for valuable consideration.

Section 63 of La nd R egistration Act (No. 3 of 2 01 2), which it is proposed toamend

Tr a n s m i ss io n o f b a n k r u p t c y

63. (1) Upon produ ction to the Registrar of a certifiedcopy of theorder of cou rt adjudging a proprietor bankrupt, or directing that the estate ofa deceased proprietor be administered according to the law on bankruptcy—

(a ) a copy of the order shall be filed; and

(b ) the trustee in bankruptcy shall be registered asproprietor of any land, lease or charge of w hich the



bankrupt or the deceased proprietor is proprietor, in

place of the bankrupt or deceased proprietor.


(2) A trustee in ba nk rup tcy shal l be described in the register ast rustee of th•property of a bankru pt .

Section 71 of Land Reg istration Act No. 3 of 2012), which it is proposed toamend

Lodging of cautions

71. ( 1) A p e r s o n w h o —

(a ) claims the r ight , w hether contractual or otherw ise, toobtain an, interest in any land, lease or charge, capab leof creat ion by an instrum ent regis trable under this Act ;

(b ) is entitled to a licence; or

(c ) has presented a b ankru ptcy, pet it ion against theproprietor of an y regis tered land, lease or charge,

may lodge a caut ion w i th the Regis t rar forbidding the regis t ra t ion o f d isposi tions ofthe land, lease or charge concerned an d the m aking of en t r ies affec ting the land leaseor charge.

(2) A cau t ion m ay e i the r—

(a ) forbid the registrat ion of disposi tions and the m aking o fentries; or

(b ) forbid the registrat ion of disposi tions and the m aking o fentr ies to the extent expressed in the cau t ion.

(3) A-caut ion sha l l be in the prescr ibed form , and the Regis t ra rm ay requ ire the caut ioner to support the caut ion by a s tatutory declarat ion.

(4) The R egist ra r m ay re jec t a caut ion tha t i s unnecessary orwh ose purpose can be e ffec ted by the reg ist ra tion of an ins trum ent underthis Act .

(5) Sub ject to this sect ion, the caut ion sh al l be reg istered in theappropriate register.



Section 89 of Law of succession Cap. 160), which it is propo sed to am end


In so lven t e s t a t e s

89. (1) Wh ere an ap plication for a gran t of probate or letters ofadm inistration show s by the inventory therein that the estate the subjectthereof will, after paymen t of funeral and o ther expenses, be insolvent, thecourt shall of its ow n m otion order the adm inistration of that estate inbankruptcy as provided by section 121 of the Bankruptcy A ct.

(2 ) If and so soon as any personal representative know s or hasreason to believe that the estate in respect of w hich probate or letters ofadm inistration have been granted to him will prove to be insolvent, he shallforthwith petition for administration thereof in bankruptcy.

(3 ) This section shall have effect notwithstanding anythingcontained in the Bankruptcy A ct.

Section 1 06 of Mercha nt Shipping Act (No. 4 of 20 09), which it is proposedto am end

Priority of liens

106. The m aritime liens set out in section 105 sh all take priority over—

mo rtgages and preferential rights registered under this Part, or arising underthe law relating to bankruptcy, and except•as provided in section 107 n oother claim shall take priority over them.

Section 4 of Methylated Spirits Act (Cap . 12 0), which it is proposed to a m end

Prohibition of sale unless licensed

4 . 1) Any pe rson w ho sells, or keeps or exhibits for sale, anymethylated spirits, wh ether by w holesale or retail, except under and in

accordance w ith the terms and co nditions of a licence issued to him under •this Act, shall be guilty of an offence an d liable to a fine no t exceeding fivethousand shillings or to imprisonm ent for a term n ot exceeding six m onths,or to both such fine and im prisonment, and an y spirits, together with thevessels containing them , in respect of wh ich the offence was com mittedshall be liable to fo rfeiture:

(2) Subsection (1) shall not apply to a sale



(2) Subsection (1) shall not apply to a sale-


(a) byauction, by an auctioneer licensed under theAuctioneers Act;

(b ) by a dec eased person 's legal personal representative, ofspirits forming part of the d eceasedperson's estate;

(c ) by a trustee in ban kruptcy, of spirits forming part of thebankrupt's estate;

(d ) by the liquidator of a c om pany, of spirits forming partof the company's assets;

(e ) of any spirits or preparation declared by the M inister bynotice in the Gazette to be excluded from the operationof this section.

Section 31 of Nar cotic Dr ugs and Psychotropic Substances Control Act (Cap.245), which it is proposed to amend

Manage then t o f p rop e r ty by O ff ic i a l R ece ive r

31. (1) W here the Co urt has directed the Official Receiver unde rsection 26 to have the c ustody and control of any property specified in arestraint order, the Court m ay—

(a) on the application of the Director of PublicProsecutions, the Official Receiver or the personagainst whom the order has been made—

(i) give instructions to the Official Receiver inrespedt of themanagement of the property; and

(ii) decide any question that may arise in the courseof the m anagement of the property by the OfficialReceiver; and

(b) on the application of the Director of PublicProsecutions o r the Official Receiver direct the personagainst whom the restraint order has been made, tofurnish to the Official Receiver, within such tim e asmay be specified by the Court, such information and

ti l l ti t th t i t f hi h



particulars relating to the property, in respect of w hichthe restraint order has been mad e, as may be specifiedin the direction.


(2) The Official Receiver shall not be personally liable—

(a ) for any loss or damage , arising from his having takencustody or control of any property, sustained by aperson claiming the property or any interest in theproperty; or

(b) for the cost of proceedings taken to establish any claim

to the property or to a ny interest in the property, unlessthe Court is of the opinion that the Official Receiverhas been guilty of negligence in respect of the taking ofcustody or co ntrol of the property.

(3) The Official Receiver shall not be personally liable for anytaxes, duties, rates or other municipal or other statutory charges imposed byor under any law in respect of the property of any person of which he has

been directed by a restraint order to take custody and control except to theextent, if any, of rents and profits received by the Official Receiver inrespect of that property on or after the date of the restraint order.

(4) Where the Official Receiver has taken custody and control ofthe property of any person in accordance with a restraint order, he shall beentitled to receive, in respect of the exercise and the performance of hisfunctions in relation to the property, fees equal to the fees that he would be

entitled to receive if he were exercising and performing the functions inconsequence of his having taken custody or control of the property by virtueof a receiving order made un der the Bankruptcy A ct, Cap. 53.

Section 1 1 of Prevention of Fraud (Investm ents) Act (No. of 1977 ), which it isproposed to amend

Guarantee in connexion with principal s licence.

11. (1) Subject to the provisions of this section, a principal's licenceshall not be granted to any person unless a guarantee, in the prescribedform, is provided by such person as the Minister may approve, that, in theevent of the bankruptcy of the applicant during the currency of such licence,the person giving such guarantee will pay to the trustee in bankruptcy thesum of fifty thousand shillings or such other sum as the Minister may fromtime to time prescribe



time to time prescribe.

The Insolvency Bill, 2612 • 395

(2 ) An y sum beco ming payable to a trustee in bankruptcy under aguarantee given und er subsection (1) of this section m ay be recovered bythe trustee from the person by who m it is payable, and, whe re any such sumexceed the amo unt required to m et the debts and liabilities (including thecosts and ex penses of the adm inistration in bankruptcy) of the bankrupt, theamo unt of the excess or the amo unt of such sum , whichever is the less, shall

be repaid by the trustee in bankruptcy to, or to the personal representativesof, the person by wh om the gua rantee was given.

(3 ) W here a person in respect of whom a guarantee is given unde rthis section is a corporation, reference in this section—

(a ) to the bankruptcy of such person and the ad ministrationthereof sha ll,mutatis mutandis,be construed asreferences to an order that the corporation shall be

wo und up by or unde r the supervision of the court andto such winding up;

(b ) to the trustee in bankruptcy shall be construed asreferences to the corporation.

Section 79 of Proceeds of C rime a nd Anti-money Laund ering (No. 9 of 20 09),which it is proposed to a m end

Effec t o f bank rup tcy o n r ea l i zab le p rop e r ty.

79. (1) When a person w ho h olds realizable property is adjudgedbankrupt—

(a ) the property for the time being subject to a restraintorder mad e before the date of the bankruptcy order; and

(b ) the proceeds of any realizable property realized byvirtue of section 75 and for the time being un der thecontrol of a receiver appointed u nder this Part,

shall not vest in the R egistrar of the High Co urt, Official Receiver or thePublic Trustee.

(2) W hen a defendant who has directly or indirectly m ade anaffected gift to any other person is adjudged bankrupt—



g y p j g p

(a) no court shall set aside the disposition of that gift underthe Bankruptcy Act, if-


(i) a prosecution for an offence has been institutedagainst the defendant-and the proceedings agdinstthat person have n ot been concluded; or

(ii) the property of any other person is subject to arestraint order;

(b) any court that sets aside any disposition in paragraph

(a) after the conclusion of the proceedings against thedefendant, shall take into account any realization of theproperty of other person in terms of this Part.

(3) W here a person has been adjudged bankrupt, the powersconferred upon the co urt by sections 64 to 72 and 73(2) or upon a receiverappointed under this Part, shall not be exercised in respect of any propertywhich-

(a ) forms part of the bankrupt's estate; or(b ) the Official Receiver concerned is entitled to claim

from the bankrupt under theBankruptcy Act .

(4) Nothing in the Bankruptcy A ct shallbe construed asprohibiting a court or a receiver appointed und er this Part fronex ercisingany pow er contemplated in subsection (3) of any property or proceeds

mentioned in subsection (1).Section 4 of Registration of Business Names Act (499), which it is proposedto amend

Fi rms , i nd iv idua l s and co rpora t ion to b e r eg i s t e red

4. Subject to this Act—

(a ) every firm h aving a place of business in Kenya andcarrying on business under a business name which do esnot consist of the surnam es of all individuals wh o arepartners and the corporate names of all corporationswhich are partners, without any add ition o ther than theforenames of individual partners or the initials of suchforenames; and



(b ) every individual having a place of business in K enyaand carrying on business under a business name w hich


does not consist of his surnam e without any add itionother than his forenam es or the initials thereof; and

(c)_ every individual or firm having a place o f business inKen ya, who, or a mem ber of which, has either before orafter the commencement of this Act changed his name,otherwise than, in the case of a wom an, in consequence

of marriage; and(d) every corporation having a place of b usiness in Kenya

and carrying on business under a business name whichdoes not consist of its corporatename wi thou t anyaddition, shall be registered in them anner requ i red bythis Act: Provided that-

(i) wh ere two or more individual partners have thesame surnam e, the addition of an "s" at the end ofthat surnam e shall not o f itself render registrationnecessary;

(ii) wh ere the business is carried on by a trustee inbankruptcy or by a receiver or manager appointedby the court, registration shall not be necessary;

(iii) a purchase or acqu isition of property by two ormo re persons as joint tenants or tenants incom mo n shall not of itself be deem ed to be acarrying on of a business, whether or not theown er share any profits from the sale thereof.

Section 5 of Registration of Business Names Act (499), which it is proposedto amend

R eg i s tr a t ion b y nom inee , e t c .

5. Where a firm, individual or corporation having a place of businesswithin K enya carries on business wholly or mainly as the nom inee ortrustee of or for another person or other persons, or ano ther corporation, oracts as general agent for any foreign firm, the first-mentioned firm,individual or corporation shall be registered in the man ner provided by this



Act:


Provided that w here the business is carried on by a trustee in bankruptcy orby a receiver or m anager appointed by an y court, registration under thissection shall not be necessary.

Section 42 of Wildlife (conservation and Management) Act (Cap. 376)),which it is proposed to a m end

Certificates of ownership for possession of trophies.

42. (1) Except as otherwise provided by this Act,any person who isin possession of any trophy, or of any ivory or rhinoceros horn o f anydescription,w i th o u t a l s o b e i n g inpossession of a certificate of own ership inrespect thereofshal l b e g u i lt yof a forfeiture offence and—

(a ) if that person is the holder of a dealer's licence und ersection 43, be liable to a fine not exce eding thirtythousand shillings or to imprisonm ent for a term n otexceeding five years or to both; or

(b ) in any other case, be liable to a fine not exceeding tenthousand sh illings or to imprisonment fora ,term notexceeding three years or to both.

(2 ) This section shall not apply td the possession of a trophy by

any person w ho has the possession solely by reason of being a receiver ortrustee in bankruptcy or the personal representative of a decea sed person.

(3 ) In this section and in sections 44 and 45 "certificate ofownership" means—

(a ) a certificate of own ership issued under any of theprovisions of this Act;

(b ) a certificate of ownership issued und er any former lawrelating to wildlife; and

(c ) a certificate of ownership or equivalent docum entsissued by a com petent officer or other authority of thecountry of origin of the trophy concerned.