TERM 3 WEEK VII

CORPORATE & COMMERCIAL PRACTICE

WEEK OF 24th – 28th JUNE 2024
WORKSHOP 1 BY FIRM E7
INSOLVENCY & BUSINESS RESCUE PROCESSES
BRIEF FACTS:
Mulunzi Nkoko is a longstanding Commissioner in the Ministry of Education and a prominent
poultry farmer in Jinja, Uganda. He inherited the poultry business from his late father and
operates under the business name "Mulunzi Chicks". Nkoko operates primarily in supplying
day-old chicks and raised chickens wholesale and retail across Uganda.
Nkoko manages the farm overseeing operations while his nephew, Petulo Nkoko, handles sales
and cash collection. They avoid bank transactions preferring cash dealings.
In June 2021, Nkoko secured a UGX 1.5 billion business term loan from Stanbic Bank, using
the title of his 10-acre inherited land as security. Significant portions of the loan were allocated
to importing high-quality breeders and constructing new poultry pens, but construction delays
and operational issues led to financial strain.
Despite efforts, Nkoko fell behind on loan repayments. In March 2024, Stanbic Bank debited
USD 80,000 from his account to cover arrears, exacerbating his financial difficulties.
Concurrently, increased maize prices in January 2024 inflated production costs, further
straining his financial position.
Issues arose with Uganda Revenue Authority (URA) regarding tax audits and assessments.
Additionally, family disputes escalated over Nkoko's management of inherited property,
including allegations of fraud concerning mortgage transactions with Stanbic Bank.
On April 30th, Petulo reported a robbery of UGX 100 million collected from customers, adding
to Nkoko's troubles.
Nkoko's potential lifeline is a recent $4 million contract with Rafiki & Co. Ltd for exporting
dressed chicken, which could stabilize his finances if successfully executed.
ISSUES
1) Whether Mr. Nkoko’s business is cash flow insolvency or a balance sheet insolvency
and what events led to his financial distress?
2) Whether there are any potential legal options available to Mr. Nkoko to address his
financial distress?
3) Whether Mr. Nkoko can apply for an interim protective order?
 4) What is the forum, procedure and documents for obtaining an interim protective order?
5) What are the implications of the security interest held by creditors such as Stanbic bank
and Mugaga on Mr. Nkoko’s personal assets?
6) What are the statutory rankings of distribution of assets to creditors in case of
insolvency proceedings?
7) What are the voidable transactions disclosed in the fact sheet?
8) What is the procedure, forum and documents required to set aside the voidable
transactions?
9) Whether the bank can commencement bankruptcy proceedings against Nkoko?
10) What is the procedure, forum and documents for commencing bankruptcy proceedings?
11) What are the effects of Nkoko being declared bankrupt?
12) How can Nkoko be discharged from bankruptcy?
13) What roles would the insolvency practitioner play if Nkoko decides to file for
bankruptcy?
14) What options are available to Nkoko in restructuring his debts and business?
15) What are the crisis stabilization mechanisms I would advise Mr Nkoko to
follow?
16) What is the business viability assessment of Mr. Nkoko pursuant to the Diagnostic
Review Guidelines?

LAW APPLICABLE
1) Constitution of Uganda as Amended
2) The Insolvency Act No. 14/2011 (As amended in 2022)
3) The Insolvency Regulations SI No. 36 of 2013
4) The Insolvency Fees Regulations SI No. 26 of 2013
5) The Insolvency Practitioners Regulations S.I Mo. 55 of 2017
6) The Insolvency (Investigation and Prosecution) Regulations S.I No. 4 of 2018.
7) The Mortgage Act, Act No. 7 of 2009
8) Case law

TASK 1
PART A
Issue 1: Whether Mr. Nkoko’s business is cash flow insolvency or a balance sheet
insolvency and what events led to his financial distress
Cash Flow Insolvency: This occurs when a debtor is unable to pay their debts as they fall due,
despite having more assets than liabilities.
Balance Sheet Insolvency: This occurs when a debtor’s total liabilities exceed their total
assets, regardless of their ability to meet current obligations.
In determining the type of Insolvency for Mr. Noko’s Business, we shall analyse events leading
to Financial Distress in the circumstance
June 2021 Loan and Mismanagement:
Mr. Nkoko obtained a business term loan of UGX 1.5bn from Stanbic Bank.
Funds were insufficient to complete the construction of a new poultry pen, leading to
overcrowding and the death of many breeders.
Borrowing from Family and Money Lenders:
Borrowed UGX 100m from Mrs. Nkoko to complete the pen construction.
Took a UGX 50m loan from a money lender (Mugaga) at a high interest rate of 6% per month,
secured by his home title.
Rising Costs and Economic Factors:
Sharp increase in maize prices from UGX 600 to UGX 1,800, significantly increasing
production costs.
Overall increase in production costs without a corresponding rise in selling prices.
Bank Actions and URA Assessment:
Stanbic Bank debited USD 80,000 (UGX 300m) from his account for loan arrears.
Uganda Revenue Authority (URA) issued an assessment of UGX 700m.
Theft and Losses:
UGX 100m collected by Petulo was stolen at gunpoint.
The family disputes and potential legal challenges regarding the mortgage.
Unpaid Salaries and Supplier Debts:
Unpaid salaries, NSSF contributions, and various debts to suppliers.
High-Interest Accumulation:
Mugaga's interest continues to accrue, and the property title is already transferred to Mugaga's
name.
Is it Cash Flow Insolvency or Balance Sheet Insolvency?
Cash Flow Insolvency Indicators:
Immediate Inability to Meet Obligations: Mr. Nkoko is unable to pay debts as they come due
(Stanbic loan arrears, URA assessment, unpaid salaries, and supplier debts).
Revenue Issues: Despite having a substantial new contract, current revenues are insufficient to
cover liabilities.
Balance Sheet Insolvency Indicators:
Asset Valuation Issues: The revaluation of the mortgaged land showed it is worth less than
initially reflected (UGX 500m vs. the expected higher value).
Total Liabilities Exceeding Assets: Considering the revalued assets and the high debts, it
appears that liabilities might exceed the total assets.
Determination factors
Mr. Nkoko’s business is experiencing both cash flow and balance sheet insolvency. Here’s why:
Cash Flow Insolvency: The inability to meet immediate debt obligations as they fall due is
evident. This is highlighted by the missed payments on the Stanbic loan, the urgent borrowing
to meet short-term needs, and the unpaid salaries and suppliers.
Balance Sheet Insolvency: Given the devaluation of the mortgaged property and the
accumulation of high-interest debts, especially with the UGX 700m URA assessment,
liabilities likely exceed the total assets.
The following are the Events Leading to Financial Distress:
• Over-borrowing and High-interest Loans: Significant loans from Stanbic Bank and
high-interest loans from money lenders.
• Misallocation of Funds: Insufficient funds to complete critical infrastructure leading to
losses.
• Rising Costs: Increase in maize prices and overall production costs without a
corresponding increase in revenue.
• Theft and Security Issues: Loss of UGX 100m due to theft.
• Family Disputes and Legal Challenges: Potential legal challenges from family and
creditors.
• Market and Economic Factors: Difficulty in adapting to increased costs and
.
PART B
Whether there are any potential legal options available to Mr. Nkoko to address his
financial distress?
Nelson Nerima in his book "Uganda Insolvency Law Handbook" at page 27 states that an
individual who is insolvent (unable to pay his or her debts) has the following options:
1) Petition for his or her bankruptcy
2) Do nothing and risk a bankruptcy petition against him or her being presented by a
creditor or creditors
3) Negotiate with each creditor to obtain a rescheduling or write-off of his debts
4) Enter into a formal individual voluntary arrangement with his or her creditors

ARRANGEMENT
The best option is an arrangement. A debtor can enter into an arrangement with creditors and
put forward his proposals on how he will be able to pay. If the arrangement is approved, court
enters an arrangement order which binds all parties and bars any subsequent bankruptcy
proceedings against the debtor.
S.2 of the Insolvency Act defines an “arrangement” to mean a composition in satisfaction of
an individual’s debts or a scheme of arrangement of an individual’s affairs or other arrangement
in respect of which an arrangement order is made under section 125.
A composition is an arrangement between the debtor and the creditors to accept less than what
they are owed or to accept modification of payment terms of what they are owed. (Nerima
supra)
The debtor who wishes to enter into a voluntary arrangement with the creditors must first make
a proposal for an arrangement.
Under Rule 67(1) of the Insolvency Regulations; The debtor’s proposal shall state why in the
debtor’s opinion an arrangement is desirable and shall specify:
a) Debtor’s assets, with an estimate of their respective values;
b) The extent, if any, to which the assets are charged in favour of creditors,
c) Particulars of any property, other than assets of the debtor, which is proposed to
be included in the arrangement, the source of the property and the terms on
which it is to be made available for inclusion;
d) The nature and amount of the debtor’s liabilities and the manner in which they
are proposed to be met, or otherwise dealt with by means of the arrangement;
e) The proposed duration of the voluntary arrangement;
f) The proposed dates of distributions to creditors, with estimates of their amounts;
g) The amount proposed to be paid to the proposed supervisor by way of
remuneration and expenses;
h) The manner in which funds held for the purposes of the arrangement are to be
banked, invested or otherwise dealt with pending distribution to creditors;
i) If the debtor has any business, the manner in which it is proposed to be
conducted during the course of the arrangement;
j) Details of any further credit facilities proposed to be arranged for the debtor,
and how the debts arising are to be paid;
k) The functions which are to be undertaken by the supervisor of the arrangement;
and
l) The name, address and qualification of the person proposed as supervisor of the
arrangement, and confirmation that he or she is, so far as the debtor is aware,
qualified to act as an insolvency practitioner.
Rule 67(2) the debtor’s proposal for arrangement shall be accompanied with a statement of the
debtor’s affairs verified by affidavit.
Advantages of Arrangement
An arrangement provides for the affairs of a debt with a view to the payment of the whole or
part of the debtor’s debts. This is the most flexible option if creditors can be convinced that a
person can trade out of their financial difficulties. The creditors also stand to benefit by such
an arrangement inasmuch as the debtor’s estate can usually be wound up more quickly and less
expensively than by official proceedings in bankruptcy.
Effect of an arrangement order
Section 127(1) Insurance Act an arrangement binds the individual in respect of whom the
arrangement order is made; the supervisor of the arrangement; and all the individual’s creditors
for claims arising on or before the day specified in the voluntary arrangement.
S.127(2) of the Insolvency Act, 2011 is to the effect that a person bound by an arrangement
shall not make an application for bankruptcy order, appoint a receiver of any property of the
individual and except with leave of court.
Nkoko in partnership with Rafiki & Co. Ltd has already signed a 5-year 4m USD contract to
export dressed chicken to UAE, North America, and other countries. His share in this contract
is 50%. On the basis of this income, he can enter into an arrangement with the creditors to
effectively pay them over a certain period of time while he runs his business.
PART C
Issue: Whether Mr. Nkoko can apply for an interim protective order.
Section 119(1) of the Insolvency Act 14 of 2011 is to effect that a debtor that intends to make
any arrangement with their creditor may apply to court for an interim protective order.
Section 120(1)(b) of the Insolvency Act 14 of 2011 provides that an application for the interim
protective order can be made by the debtor. It has been established that Nkoko seeks to enter
an arrangement with his creditors; as such, it is prudent that he enters an interim protective
order and the purpose is to give the debtor interim relief from creditors and give chance to
pursue or conclude the proposed arrangement.
In Deox Tebeingana v Vijay Reddy HC MISC cause no 286 of 2018, court held that an
interim protective order is issued on complete grounds of a debtor making meaningful
arrangements with the creditors.
Grounds for granting an interim protective order by court. Under Section 120(2):
a) The debtor intends to make an arrangement and where the debtor is an undischarged
bankrupt, he or she has given notice of the intention to the trustee of his or her estate;
b) A named insolvency practitioner is willing to act as supervisor of the proposed
arrangement, as a trustee or otherwise for the purpose of supervising its
implementation;
c) The debtor is an undischarged bankrupt or is able to petition for his or her own
bankruptcy;
d) A previous application has not been made by the debtor for an interim order in the last
twelve months; and
e) Making the order is appropriate for the purpose of facilitating the consideration and
implementation of the debtor’s proposed arrangement.
Duration of interim order
Subject to sections 123(2) and (3), an interim order ceases to have effect at the end of fourteen
working days after the making of the order.
The interim protective order under section 119(2) gives the following reliefs:
a) An application for bankruptcy relating to the debtor shall not be made or proceed;
b) A receiver of any property of the debtor cannot be appointed; and
c) Except with the leave of the court and in accordance with terms imposed by the court:
(i) No other steps shall be taken to enforce a charge over any of the individual’s
property;
(ii) No other proceedings, execution or other legal process shall be commenced
or continued against the debtor or his or her property; and
(iii) No distress shall be levied against the debtor or his or her property.
What is the forum, procedure and documents for obtaining an interim protective order?
Regulation 63(1) of the Insolvency Regulations No.36 of 2013 stipulates that an application
for an interim protective order must be made by summons in chambers. Within 7 working days
of filing the application, the applicant must serve copies to the following parties as specified in
Regulation 63(2):
• The trustee, if the debtor is an undischarged bankrupt;
• The proposed supervisor;
• The debtor, if the applicant is a trustee.
According to Regulation 64(1), the court will then schedule a hearing for the application.
Parties served with the application may appear in person or be represented at the hearing, as
per Regulation 64(3).
Under Section 120(3) of the Insolvency Act 14 of 2011, the court may stay any action,
execution, or other legal process against the debtor or their property once an application for an
interim protective order has been made. This measure will protect Mr. Nkoko from his creditors
after the application is filed.
According to Section 121 of the Insolvency Act, an interim protective order remains in effect
for fourteen working days after it is issued. The applicant must serve a copy of the interim
protective order to the relevant parties as outlined in Regulation 65 of the Insolvency
Regulations No.36 of 2013:
• The trustee, if the debtor is an undischarged bankrupt;
• The proposed supervisor.
In this case, only the proposed supervisor will be served.
PART D
What are the necessary documents
THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT KAMPALA
CIVIL DIVISION
MISCELLANEOUS CAUSE NO…2024

IN THE MATTER OF THE INSOLVENCY ACT, 2011

AND
IN THE MATTER OF AN APPLICATION FOR AN INTERIM PROTECTIVE
ORDER BY MR. MULUNZI NKOKO

CHAMBER SUMMONS

(Under Sections 119(1), 120, and 122 of the Insolvency Act, 2011, and Regulation 63(1) of
the Insolvency Regulations, 2013)

LET ALL CONCERNED PARTIES attend the learned judge in chambers on the ..................
day of .................. 2024 at .................. o'clock in the forenoon/afternoon as counsel for the
applicant shall be heard on an order that:
 1. An interim protective order be granted in favor of the applicant against his creditors.

GIVEN under my hand and seal of this honorable court this .................. day of ..................
2024.

..............................................
Registrar

DRAWN AND FILED BY

FIRM E7
PLOT 1117
LIRA

THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT KAMPALA
CIVIL DIVISION
MISCELLANEOUS APPLICATION NO…2024

IN THE MATTER OF THE INSOLVENCY ACT, 2011

AND
IN THE MATTER OF AN APPLICATION FOR AN INTERIM PROTECTIVE
ORDER BY MR. MULUNZI NKOKO

AFFIDAVIT IN SUPPORT

I, MULUNZI NKOKO, C/o E7 & Company Advocates, P.O. Box 7117, Lira, Uganda, do
solemnly swear and state THAT:

1. I am an adult Ugandan, a businessman of sound mind, the applicant, and debtor in this
matter, and I swear this affidavit in that capacity.
2. I am financially distressed and several proceedings and other legal processes have been
instituted against me by my creditors.
3. I have the resources, assets, and capacity to pay all my creditors but require time to
organize my business and settle the creditors' claims.
4. I intend to make an arrangement with all my creditors. A copy of the proposed
arrangement is attached hereto and marked as annexure "A."
5. I have appointed TUMWA RAMANTHAN N LULE, an insolvency practitioner, to act
as the proposed supervisor, and he has consented. A copy of the consent is attached
hereto and marked as annexure "C."
6. I have not made any previous application for an interim protective order in the last 12
months.
7. I am currently unable to pay my debts.
8. It is in the interest of justice to grant this application to facilitate the consideration and
implementation of the proposed arrangement.
9. Whatever I have stated herein is true and correct to the best of my knowledge.

Sworn at Kampala this ……………day of………2024 by the said Mulunzi Nkoko.

………………………………………
DEPONENT
 BEFORE ME:

………………………………………
COMMISSIONER FOR OATHS

DRAWN AND FILED BY

E7 & CO. ADVOCATES
P.O. BOX 7117
LIRA

TASK 2
Task 2(a)

What are the implications of the security interest held by creditors such as Stanbic bank
and Mugaga on Mr. Nkoko’s personal assets?

(i) Stanbic bank

(a) Section 119(1) of insolvency Act, is to effect that a debtor who intends to make any
arrangement with his /her creditors may apply to court for an interim protective order.

Section 119(2) of the insolvency Act is to effect that during the period for which an interim
order is in force, an application for bankruptcy in relation to the debtor shall not be made or
proceed.

Basing on the instant facts, Mr. Nkoko a debtor to Stanbic can apply for an interim protective
order from court so as not be declared bankrupt and enable him look for the remaining balance
to pay his creditor. The implication of this therefore is that the creditors cannot take any step
to realize the security as long as this order is in force.

(b) the other implication is stated under section 12(1) of the insolvency Act and is to effect
that in the absence of an interim protective order, the secured creditor is at liberty to realize his
or her security at a time notwithstanding the preferential dates. This implies that they will as
well be priority when it comes to payment which shall come before the unsecured creditors
thus an effect of the security interest held by creditors

(ii) Mugaga

It’s important to note that the security Mr. Nkoko deposited of the 10 acres have already been
put into Mugaga’s name. this contradicts the principle of mortgages in relation to security
interests.
A mortgage therefore as defined in Mutambulire vs Yosefu Kimera (1995) 150 was defined
to mean a transaction where the owner uses his or her interest in land as a security for the
payment of a loan of which this is redeemable upon payment of the outstanding loan. This
therefore explains the principle on mortgages as under section 8 of the Mortgage Act which
is to affect that, once a mortgage always a mortgage in that you can’t mortgage where you don’t
have interest. In other words, mortgage can’t operate as a transfer but rather security only

Basing on the instant facts, Mugaga transferred the interest given to him upon payment of the
debt owed to him to his name of which the implication of this is that it makes the transaction
void given the fact that a mortgage is only security and doesn’t amount to transfer of property
as per the law.

Part 2 (b)

Issue1: What are the statutory rankings of distribution of assets to creditors in case of
insolvency proceedings?
In the case of Siraje Ndugga v Kabito Karamaji & Donald Nyakairu the receiver of Specon
services Ltd HCMA No. 219 of 2020, it was stated that the hierarchy laid down by the
Insolvency Act determines which group of creditors is to be paid first and which group is to be
paid last. That each class of creditors must be paid in full before the funds are allocated to the
next group. Therefore, according to the facts preferential debts are paid first.
Preferential debts
The preferential debts are set out in Section 12(3), 4, 5 and 6 of the Insolvency Act 2011 as
Amended. Pursuant to these provisions’ payment will be made as follows.
Remunerations and expenses incurred by the trustee. Section 12(4) (a) of the Insolvency Act
2011.
The costs of the person who returned court for a bankruptcy order. Section 12(4) c of the
Insolvency Act 2011as Amended.
Salary arrears for at least four months. From the facts at hand, Mr Mulunzi Nkoko has unpaid
salaries of employees worth 50million Uganda shillings hence it can be paid at this point. This
is further reproduced in Section 12(5) e of the Insolvency Act 2011.
Tax arrears withheld and not paid to URA for 12 months prior to the commencement of
insolvency. This is provided for Section 12(6) a of the Insolvency Act 2011 as amended.
From the facts at hand, on 15th April Mr. Nikko was issued with an assessment of UGX
700million and therefore the trustee will have to pay tax arrears before going to the next debt.
NSSF Contributions. Section 12(6) b of the Insolvency Act provides that these will be paid in
full without paying the creditors.
From the Instant facts, Mr Nikko has unpaid NSSF arrears and retirement benefits worth UGX
25,000,000 thus the trustee will have to pay the same before paying the secured creditors.
Secured creditors
Having paid the preferential debts, the remaining balance will be paid to the secured creditors.
Secured creditors under the Act are defined to mean creditors who hold in respect of a debt or
obligation a charge over property. In the same case of Siraje Ndugga v Kabito karamaji
&Donald Nyakairu the receiver of Specon services Ltd HCMA No. 219 of 2020, it was
stated that secured creditors are paid before the unsecured creditors according to the hierarchy
because it would be defeating the objectives of the Insolvency Act to attend to the interests of
unsecured creditors over and above secured creditors.
Therefore, from the facts at hand, Mr Nkoko has 2 secured creditors that is to say Stanbic Bank
from which he obtained a business term loan of UGX 1.5 billion and the security for repayment
of the loan was the title of the 10 acres in his names and the other secured creditor is the money
Lender Mr Mugagga from whom he obtained a loan of UGX 50million Uganda Shillings and
as security he provided Mugaga the title for his home.
Unsecured creditors
Section 13(1) and (2) of the Insolvency Act 2011 as amended provides that the unsecured
creditors shall be paid in full and in the assets are not sufficient, their claims abate in equal
proportions.
From the facts at hand, the unsecured creditors include the loan of UGX 100m which he
obtained from his wife Mrs. Nkoko.

Part 2 (c)

What are the voidable transactions disclosed in the fact sheet?

In cases where the security for the loan granted by a money lender is land, the provisions of
the Mortgage Act 2009 shall apply. Section 8 (1) of the Mortgage Act 2009 provides that a
mortgage shall have the effect as a security only and shall not operate as a transfer of any
interest or right in the land from the mortgagor to the mortgagee. Therefore, a mortgagee or
money lender who requires a transfer as a condition for the grant of a mortgage commits an
offence and is liable to a conviction to a fine not exceeding 4000 currency points under Section
8 (3) of the Mortgage Act 2009. According to the facts, Mugaga’s policy of extending the loan
is transfer of property upon execution of the loan agreement which he already did in respect to
the title of Nkoko’s matrimonial home. Therefore, the transaction entered between Mugaga and
Nkoko is voidable and can be set aside. Furthermore, the fact that he did not comply with
Section 5 of the Mortgage Act 2009which requires proof of spousal consent before grant of
the loan makes the transaction voidable and thus can be set aside by the spouse.

Section 18 (1) (b) of the Insolvency Act 2011 provides that a transaction entered into by a
company or individual relating to any asset of the insolvent is voidable on the application of
the liquidator, receiver, member or contributory, trustee or creditor if the transaction involves;
employees, officers, professional or other service providers of the insolvent. Therefore, Stanbic
bank’s act of debiting itself USD 80,000 without a standing order of which the said money was
a prepaid sum by the Congolese customer for supply of maize puts it in a preferential position
affecting other creditors as a whole making it a voidable transaction which can be set aside.

Part 2(d)

What is the procedure, forum and documents required to set aside the voidable
transactions?

Procedure

Section 19 (1) of the Insolvency Act 2011 as amended provides that a liquidator, receiver,
member or contributory, trustee or creditor who wishes to have a voidable transaction under
sections 15, 16, 17, or 18 set aside shall;

(a) File in court a notice to that effect, specifying the transaction to be set aside and the
property or value which the liquidator or trustee wishes to recover
(b) Serve a copy of the notice on the person with whom the transaction was entered into
and on every other person from whom the liquidator, receiver or trustee wishes to
recover.

Regulation 203(1) of the Insolvency Regulations 2013 provides that every application to
court other that a petition shall be made by a notice of motion.

The application is by Notice of Motion supported by an affidavit under Order 52 of the

Civil Procedure Rules S.1 71-1

If a bankruptcy order has been issued, and a liquidator has been appointed to that effect, he
or she can apply to court to set aside voidable transactions.

Forum

The High Court of Uganda Holden at Jinja

Documents
 Notice of Motion

Affidavit in Support of Motion

THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT JINJA

MISCELLANEOUS CAUSE NO.………… OF 2024

OFFICIAL RECEIVER………………………………………...……………..APPLICANT

VERSUS

2. MUGAGA (A MONEY LENDER)

3. STANBIC BANK (U) LTD ……………………..…………RESPONDENTS

4. MR. MULUNZI NKOKO

NOTICE OF MOTION

(Brought Under Section 15, 16, 17, 18 And 19 of the Insolvency Act No.14/2011, and
Regulation 189 Of the Insolvency Regulations S I No.36 Of 2013 And Section 98 of the
Civil Procedure Act Cap 71).

TAKE NOTICE That this Honorable Court shall be moved on the 25th Day of June, 2024 at
9:00 O’clock in the afternoon or soon after as Counsel for the Applicant can be heard for
orders that:

1) That the transaction with Mugaga dated February 2022 be set aside.
2) That the transaction of Stanbic Bank dated June, 2021 be set aside.
3) That the debtor pays the debt amounting to USD 450,000 and UGX 2,190,000,000/=.
4) That the costs of this application be provided for.

The grounds upon which this application is based are set out in the affidavit in support of this
application sworn by the applicant, which shall be read and relied on at the hearing. Briefly,
they are:

1) The 3rd respondent executed a pledge with the 1st respondent on a matrimonial home
without the consent of the wife, contrary to the law.
 2) The 1st respondent transferred the security into his name without following the
procedures under the law.
3) The 2nd respondent entered into a transaction with the 3rd respondent regarding
property which was undervalued.
4) The 2nd respondent entered into a transaction worth USD 500,000 with a Congolese
customer for maize supplies, from which the 3rd respondent deducted USD 80,000 to
satisfy a loan of UGX 1.5 billion.
5) It is in the interest of justice that this application be allowed and the transactions be
set aside.

Dated at Jinja this 25th day of June, 2024.

____________________________________

COUNSEL FOR THE APPLICANT

GIVEN under my hand and seal of this Honorable Court this……day of……2024

_____________________________

REGISTRAR

DRAWN & FILED BY

FIRM E7 & CO. ADVOCATES
P.O BOX 1172
Jinja-UGANDA.
 THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT JINJA

MISCELLANEOUS CAUSE NO.………… OF 2024

[OFFICIAL RECEIVER] ………………………………………...…………..APPLICANT

VERSUS

2. MUGAGA (A MONEY LENDER)

……………………..…………RESPONDENTS
3. STANBIC BANK (U) LTD

4. MR. MULUNZI NKOKO

AFFIDAVIT IN SUPPORT OF THE APPLICATION

I, [Official Receiver], of Firm E7&Co. Advocates, P.O Box 1172, Jinja Road, Jinja - Uganda,
do solemnly swear and state as follows:
1) That I am an adult male Ugandan of sound mind and a resident of Jinja, Jinja Road. I
depose to this affidavit in my capacity as counsel for the applicant and am well-versed
with the grounds of the application.
2) That the 3rd respondent, Mr. Mulunzi Nkoko, in March 2022, one year preceding his
insolvency, entered into a transaction with the 1st respondent, Mugaga, whereby he
borrowed UGX 50 million at 6% per month, pledging the title to his matrimonial home
as security. (A copy of the loan agreement and transfer Forms marked as ‘A’ is
attached hereto).
3) That at the time of this transaction, Mr. Nkoko was insolvent due to an outstanding loan
of UGX 1.5 billion with Stanbic Bank, rendering the transaction voidable and liable to
be set aside. (A copy of the loan agreement with Stanbic Bank marked as ‘B’ is
attached hereto).
4) That the loan transaction was executed without the consent of Mrs. Nkoko, the wife of
Mr. Nkoko, thereby making it voidable under laws governing matrimonial property.
5) That the 1st respondent, Mugaga, in the year preceding Mr. Nkoko’s insolvency,
unlawfully transferred the security into his name without following the statutory
procedures, rendering the transaction voidable.
6) That the 2nd respondent, Stanbic Bank (U) Ltd, in June 2021, one-year preceding Mr.
Nkoko’s insolvency, entered into a loan transaction of UGX 1.5 billion payable over 2
years with Mr. Nkoko, using 10 acres of land as security. (A copy of the UGX 1.5 billion
loan agreement marked as ‘B’ is attached hereto).
 7) That subsequent revaluation by the 2nd respondent revealed that the mortgaged land
was significantly undervalued at approximately UGX 500 million, contrary to its initial
valuation of UGX 1.5 billion, thereby making the entire transaction voidable.
8) That in March 2024, the year Mr. Nkoko became insolvent, the 2nd respondent
deducted UGX 80,000 equivalent to UGX 300 million from USD 500,000 deposited
by Mr. Nkoko’s customer for maize supplies, which further exacerbated his financial
situation.
9) That it is in the interest of justice that this application be allowed to set aside the above-
mentioned voidable transactions.
10) That I solemnly affirm that the foregoing statements are true and correct to the best of
my knowledge and belief.

SWORN at Jinja this _____________day of _____________ 2024.BY SAID [OFFICIAL

RECEIVER]

____________________________
DEPONENT

BEFORE ME
___________________________
COMMISSIONER FOR OATHS

DRAWN AND FILED BY:

FIRM E7&CO. ADVOCATES
P.O BOX 1172
Jinja-Road
Jinja, UGANDA

TASK 3
Brief facts
Stanbic Bank gave substantial support to Mr. Mulunzi Nkoko's poultry business through a UGX
1.5bn term loan. The loan, secured against 10 acres of his inherited land, was intended for
expanding his poultry operations. Despite ongoing financial struggles, including defaulting on
loan repayments, the bank extended the loan period to June 2024.On 30th March, the bank
debited UGX 300M (80,000 USD). Since that time Mr. Nkoko has faced challenges due to
insufficient funds and debts arising from other events. The bank has re valued the mortgaged
land at UGX 500M. The Bank wants to commence bankruptcy proceedings against Mr. Nkoko.
Issues
1. Whether the bank can commencement bankruptcy proceedings against Nkoko?
2. What is the procedure, forum and documents for commencing bankruptcy proceedings?
3. What are the effects of Nkoko being declared bankrupt?
4. How can Nkoko be discharged from bankruptcy?
5. What roles would the insolvency practitioner play if Nkoko decides to file for bankruptcy?
6. What options are available to Nkoko in restructuring his debts and business?
Law Applicable
1. Insolvency Act 2011 as Amended
2. Insolvency Regulations 2013
3. The Insolvency Fees Regulations SI No. 26 of 2013

RESOLUTION
Issue 1: Whether the bank can commence bankruptcy proceedings against an Mr. Nkoko?
In considering whether Stanbic Bank can commence bankruptcy proceedings against Mr.
Mulunzi Nkoko, we need to analyze his financial situation and legal standing based on
Ugandan law on insolvency and relevant facts in the circumstance.
According to Section 3 of the Insolvency Act as Amended, an individual is insolvent if they
are unable to pay their debts. The Section 3 further establishes that a debtor is presumed unable
to pay debts if:
(a) The debtor has failed to comply with a statutory demand.
(b) An execution against the debtor for a judgment debt has been returned unsatisfied.
(c) All or substantially all of the debtor's property is controlled by a receiver or another person
enforcing a charge over it.
Section 3(4) of the Insolvency Act as Amended further says Contingent or prospective debts
may be taken into account when determining a debtor's inability to pay.
Section 3(3) of the same Act establishes that the inability to pay debts can be proved by other
means beyond those listed.
From the facts, we establish that;
• Mr. Nkoko took a UGX 1.5 billion loan from Stanbic Bank. As of March 2024, UGX
300 million was debited by the bank from his account to cover arrears. The bank
extended his loan repayment period until June 2024, but he is still facing difficulties
meeting his obligations.
• He borrowed UGX 50 million from a money lender at 6% interest per month, with his
home as collateral. The property has already been transferred into the lender's name.
• URA issued an assessment for UGX 700 million in unpaid taxes.
• Various suppliers and unpaid salaries are accumulating.
• There is an unresolved robbery incident involving UGX 100 million collected by
Petulo.
• The value of his mortgaged land is now assessed at UGX 500 million, significantly
lower than before.
 • He has a promising 5-year, $4 million contract with Rafiki & Co. Ltd, expected to
generate substantial revenue.
• He also received USD 500,000 from a Congolese customer for a year-long supply
agreement.
• His primary business assets include the chicken pens and land inherited from his father.
• However, these assets are under dispute with his family and their value has been
significantly depreciated.
Therefore Mr. Nkoko is presumed under Section 3(3), (4) of the Insolvency Act as Amended
to be insolvent, as his liabilities exceed his immediate revenue, and he is unable to meet his
debt obligations as they fall due.
His substantial debts, particularly the overdue payments to Stanbic Bank, and the high-interest
loan from Mugaga, contribute to his insolvency status.
Based on the financial analysis and the legal framework, Stanbic Bank has valid grounds to
commence bankruptcy proceedings against Mr. Nkoko. Mr. Nkoko is unable to meet his debt
obligations, a clear sign of insolvency.

Issue 2: What is the procedure, forum and documents for commencing bankruptcy
proceedings?
FORUM
According to Section 254(3) of the Insolvency Act, 2011 (as amended in 2022), the Chief
Magistrate has jurisdiction over all insolvency matters involving individuals where the subject
matter does not exceed UGX 50 million. For cases like that of Mr. Nkoko, where the subject
matter exceeds UGX 50 million, we shall invoke Article 139(1) of the 1995 Constitution of
Uganda, which grants unlimited original jurisdiction to the High Court to handle such matters.
PROCEDURE
To commence bankruptcy proceedings against Mr. Nkoko, Stanbic Bank must follow these
steps according to the Insolvency Act, 2011 of Uganda:
1. Issue a Another Statutory Demand under Section 4 of the Insolvency Act as Amended
and Regulation 4 of Insolvency Regulations 2013

The creditor should issue a statutory demand requiring Mr. Nkoko to pay the debt within a
specified period (typically 21 days). This serves as a formal demand for payment.
Under Regulation 4 of the Insolvency Regulations 2013, A statutory demand, made by a
creditor will be in Form 1 of Schedule 1, must specify the debt amount and, if applicable,
details of any court judgment or order. It should outline how the debtor can comply with the
demand, describe the nature of any security if the debt is secured, and explain options for
compounding the debt or providing a charge over property as security. Additionally, it must
inform the debtor that failure to comply within the specified time can lead to insolvency
proceedings and highlight the debtor's right to apply to the court to set aside the demand.
2. Serve of statutory demand on the Debtor (Mr. Nkoko) as stipulated under Regulation 5 of
the Insolvency Regulations 2013
A statutory demand must be served personally on the debtor. If the debtor cannot be found,
alternative methods include serving it at the debtor's registered office or place of business,
sending it by registered mail to the debtor's address, serving the debtor's legal representative if
known, or any other method determined by the court. Proof of service requires an affidavit of
service detailing the time and manner of service.
3. Failure to Comply with Statutory Demand:

If Mr. Nkoko fails to comply with the statutory demand within the specified period, the Bank
can use this non-compliance as evidence of his inability to pay debts under section 3(1) (a) of
the Insolvency Act as Amended
4. Draft and file a Bankruptcy Petition under section 20(2) of the Insolvency Act as
Amended

Upon failure by the debtor to satisfy the statutory demand made under section 4, a petition for
bankruptcy shall be presented by the Bank and the court may subject to sections 21 and 22 of
the same Act make a bankruptcy order in respect of the debtor. The Petition shall be supported
by an Affidavit as stipulated in Regulation 10 of the Insolvency Regulations 2013
Furthermore, the under regulation 9 Petition must be in Form 3 as per Schedule 1
5. Payment of Court Fees:

Pay the requisite court fees for filing the bankruptcy petition. The exact fees should be verified
with the court’s current fee schedule.
6. Serving the Petition on the Creditor (Mr. Nkoko) under Regulation 11(2) of the
Insolvency Regulations 2013

The creditor's petition must be served personally on the debtor by an officer of the court or a
person authorized by the court. Service is accomplished by delivering a copy of the petition,
which has been sealed by the court, directly to the debt
7. Publication of notice of petition under Regulation 13 of the Insolvency Regulations
2013

The Bank shall within seven working days after filing the petition give public notice of the
petition. The public notice shall be in Form 4 in Schedule 1.
8. Mr. Nkoko may reply under Regulation 14 of the Insolvency Regulations 2013

A debtor may respond to a bankruptcy petition or file a cross-petition within fifteen working
days after being served. This reply or cross-petition must be supported by an affidavit detailing
the grounds for opposition or the basis of the cross-petition. The response must then be served
on the petitioner in accordance with relevant regulations.
9. Notice by persons intending to appear under Regulation 15 of the Insolvency
Regulations 2013

Creditors who wish to be heard on a bankruptcy petition must notify the debtor or petitioning
creditor within five days of the notice's publication. The notice, in Form 5 of Schedule 1,
should include the creditor's name, address, contact details, the amount and nature of the debt,
and whether they support or oppose the petition. Creditors who fail to provide this notice may
only appear and be heard at the petition hearing with the court's permission.
10. Regulation 16 of the Insolvency Regulations 2013 stipulates that the petitioner shall
prepare for the court a list of the creditors and their advocates, if any, who have given notice
under regulation 14, specifying their names and addresses. The list shall be in Form 6 in
Schedule 1 and shall be submitted to the court before the hearing.
11. Under Regulation 17 of the Insolvency Regulations 2013, after the deadline for filing a
reply or cross petition has passed, the court may schedule a hearing for the petition. The
petitioner must then issue a hearing notice and serve it on the debtor, every creditor who
has expressed their intention to appear and be heard, and the official receiver.

12. Court Hearing:

Attend the court hearing on the scheduled date. The court will examine the evidence and decide
whether to issue a bankruptcy order against Mr. Nkoko.
13. Bankruptcy Order:

If the court is satisfied with the evidence, it will issue a bankruptcy order. This order effectively
places Mr. Nkoko in bankruptcy, transferring his estate to the official receiver for
administration.

Documents
Statutory Demand
Under Regulation 4 of the Insolvency Regulations 2013, A statutory demand, made by a
creditor will be in Form 1 of Schedule 1, must specify the debt amount and, if applicable,
details of any court judgment or order. It should outline how the debtor can comply with the
demand, describe the nature of any security if the debt is secured, and explain options for
compounding the debt or providing a charge over property as security. Additionally, it must
inform the debtor that failure to comply within the specified time can lead to insolvency
proceedings and highlight the debtor's right to apply to the court to set aside the demand

Petition
The petition, as per Form 3 in Schedule 1, must include: (a) the debtor's name, address, and
occupation; (b) details about the debtor's business, including whether it is conducted alone or
with others; (c) the amount of the debt owed; (d) the basis of the debt, including when and how
it arose; (e) confirmation that the debtor has failed to comply with a statutory demand; (f)
specifics regarding the date and manner in which the statutory demand was served; (g)
affirmation regarding the status of the statutory demand, including whether it has been
complied with, set aside, or if there is an ongoing application related to it; and (h) if applicable,
details about any court judgment or order from which the debt arose, including information on
any unsatisfied execution.
Affidavit in Support
Every petition must be accompanied by an affidavit, as required by regulation. For individuals,
the affidavit must be sworn by the petitioner or by one of the petitioners in cases involving
multiple individuals. In the case of a company, the affidavit should be sworn by a director,
secretary, or another authorized person representing the company.

THE INSOLVENCY ACT 2011 AS AMENDED

THE INSOLVENCY REGULATIONS 2013
STATUTORY DEMAND

To Mr. Mulunzi Nkoko

Mulunzi Chicks
Jinja

IN ACCORDANCE WITH SECTION 4 OF THE INSOLVENCY ACT, 2011, I

HEREBY DEMAND THAT YOU PAY UGX 1,600,000,000 (One Billion Six Hundred
Million Uganda Shillings)
Or compound with me or give me a charge over property to secure payment of the debt, to
my satisfaction within twenty working days from the date of service of this demand or such
longer period as the court may order.
Particulars of the debt:
Mr. Mulunzi Nkoko is indebted to me in the aggregate sum of UGX 1,600,000,000, being the
outstanding balance of a business term loan obtained from Stanbic Bank in June 2021. The
loan was intended for the importation of 10,000 high-quality breeders and construction of a
new poultry pen, of which the security is the title to 10 acres of land registered in his name.
The loan was repayable over 2 years with monthly installments. Despite several demand
letters and extensions granted by Stanbic Bank, Mr. Nkoko has failed to regularize his
payments, with significant arrears remaining unpaid.

_____________ _______________

For STANBIC BANK LIMITED

23rd June 2024
Received by:

________________ ___________________-

Mulunzi Nkoko or Authorized Representative]

23rd, June 2024
Petition
THE REPUBLIC OF UGANDA
IN THE HIGH COURT OF UGANDA AT JINJA
BANKRUPTCY PETITION NO._____OF 2024
IN THE MATTER OF MR. MULUNZI NKOKO
AND
IN THE MATTER OF THE INSOLVENCY ACT 2011 AS AMENDED
PETITION
Brought under section 20(2) of the Insolvency Act as Amended, Regulation 9 (2) of the
Insolvency Regulations 2013
The humble petition of Stanbic Bank Uganda Limited, a banking institution carrying on
business at Plot 5, Kampala Road, Kampala, Uganda, and having its principal place of business
at the same address, states as follows—
Mr. Mulunzi Nkoko is justly and truly indebted to Stanbic Bank Uganda Limited in the
aggregate sum of UGX 700,000,000 (Ugandan Shillings Seven Hundred Million), which
represents the outstanding balance of a business term loan obtained on 1st June 2021. This loan
was intended to finance the expansion of Mr. Nkoko's poultry business, specifically for
importing breeders from the Netherlands and constructing additional poultry pens on his
property in Jinja. The debt incurred interest at the rate of 10% per annum, and the principal and
interest payments have not been met as per the loan agreement.
The debt is for a liquidated sum payable immediately, and Mr. Nkoko appears to be unable to
pay it.
On the 1st day of April 2024, a statutory demand was served upon the debtor requiring the
debtor to pay Ugshs 700,000,000 owed to Stanbic Bank Uganda Limited.
To the best of my knowledge and belief, the demand has neither been complied with nor set
aside.
To the best of my knowledge and belief, there is no application to set it aside pending before
this Honourable court or any other court.
The debt arises under a business term loan agreement dated 1st June 2021, which was
subsequently secured by a mortgage over Mr. Nkoko's property located at Plot 15, Jinja,
Uganda. The mortgage was registered with the Lands Office in Jinja, and the value of the
security is estimated to be UGX 500,000,000.
Your petitioner therefore requests this honourable court that a bankruptcy order be made
declaring Mr. Mulunzi Nkoko bankrupt.

Dated at Kampala on the ___________ of _______________ 2024.

__________________________
 For: Stanbic Bank Uganda Limited
(THE PETITIONER)
Drawn and filed by
Legal Avenue Advocates
P.O Box 1423, Kampala

Affidavit in Support

THE REPUBLIC OF UGANDA

IN THE HIGH COURT OF UGANDA AT JINJA
BANKRUPTCY PETITION NO._____OF 2024
IN THE MATTER OF MR. MULUNZI NKOKO
AND
IN THE MATTER OF THE INSOLVENCY ACT 2011 AS AMENDED
AFFIDAVIT IN SUPPORT
I, Nabusayi Nishar Lule, and female adult Ugandan of sound mind, Bank Manager, and residing
at Makindye, do solemnly swear and affirm as follows:

1) That I am employed as BANK MANAGER at Stanbic Bank Uganda Limited, and I

am duly authorized to make this affidavit on behalf of the bank. (Attached is the Board
Resolution marked annexture “G”)
2) That I am familiar with the facts and circumstances relating to the indebtedness of Mr.
Mulunzi Nkoko to Stanbic Bank Uganda Limited as outlined in the accompanying
petition.
3) That the debt arises under a business term loan agreement dated 1st June 2021, which
was secured by a mortgage over Mr. Nkoko's 10 acres of land in Jinja (Attached is the
Credit Facility and Loan Payment Schedule marked Annexture “A” and “B”
respectively
4) That the mortgage was registered with the Lands Office in Jinja, and based on our re-
valuation, the estimated value of the security is UGX 500,000,000. (Attached is a copy
of the Certificate of Title with a registered Mortgage and Re- Valuation Report
marked Annexture “C” and “D”)
5) That I confirm that Mr. Mulunzi Nkoko is justly and truly indebted to Stanbic Bank
Uganda Limited in the aggregate sum of UGX 700,000,000 (Ugandan Shillings Seven
Hundred Million), (Attached is the Credit Facility and Loan Payment Schedule
marked Annexture “A” and “B” respectively
6) That above amount represents the outstanding balance of a business term loan obtained
on 1st June 2021. This loan was intended to finance the expansion of Mr. Nkoko's
poultry business, specifically for importing breeders from the Netherlands and
 constructing additional poultry pens on his property in Jinja ((Attached is the Credit
Facility marked annexture “A”)
7) That the debt incurred interest at the rate of 10% per annum, and despite several
demands for payment, Mr. Nkoko has failed to meet his obligations under the loan
agreement. (Attached is the Demand Notices marked annexture “E”
8) That I confirm that a statutory demand was served on Mr. Mulunzi Nkoko on the 1st
day of April 2024, requiring him to pay the sum of UGX 700,000,000 owed to Stanbic
Bank Uganda Limited. (Attached is the Statutory Demand marked annexture “F”
9) That to the best of my knowledge and belief, Mr. Nkoko has neither complied with nor
set aside the statutory demand served upon him.
10) That I am not aware of any application pending before this Honourable court or any
other court to set aside the statutory demand.
11) I respectfully request this Honourable court to consider the facts presented herein and
to issue a bankruptcy order declaring Mr. Mulunzi Nkoko bankrupt.
12) That whatever I have stated above is true and correct to the best of my knowledge.

Sworn at Kampala this ……………day of………2024

BY THE SAID NABUSAYI NISHAR LULE

____________________________________

DEPONENT

BEFORE ME:

________________________________________
COMMISSIONER FOR OATHS

DRAWN AND FILED BY

LEGAL AVENUE ADVOCATES
P.O. BOX 1423
KAMPALA

Notice of Petition

THE INSOLVENCY ACT 2011 AS AMENDED

THE INSOLVENCY REGULATIONS 2013
NOTICE OF A PETITION

PUBLIC NOTICE
TAKE NOTICE THAT on the 1st day of June 2024 a petition for bankruptcy in respect
to Mr. Mulunzi Nkoko was lodged in the High Court of Uganda at Jinja

Dated this 23rd day of June, 2024

........................................
For STANBIC BANK LIMITED

DRAWN AND FILED BY

LEGAL AVENUE ADVOCATES, P.O. BOX 1423, KAMPALA
Issue: 3: What are the effects of Nkoko being declared bankrupt?
If Mr. Nkoko is declared bankrupt, several legal and professional consequences will follow,
impacting his estate, career, and public office eligibility:
Estate Vesting:
Transfer of Estate Under Section 27 of the Insolvency Act, Mr. Nkoko's estate will
automatically vest in the official receiver and the trustee in bankruptcy. This means that all his
assets will be controlled by the trustee without any need for further legal actions such as
conveyance, assignment, or transfer.

No legal proceedings, execution, or other legal processes as stipulated under Section 27(1) (b)
of the Insolvency Act as Amended can be commenced or continued against the bankrupt or
their estate without:
• Written consent from the trustee, or
• Leave (permission) of the court, granted in accordance with terms imposed by the court.
This protection aims to prevent creditors from individually pursuing Mr. Nkoko, ensuring
equitable treatment of creditors through the bankruptcy process
Disqualification from Directorship:
Board Membership: Section 200 of the Companies Act, 2012 disqualifies a bankrupt
individual from being appointed as a member of the Board of Directors in any company.
Therefore, Mr. Nkoko would lose any current or prospective directorship roles.
Disqualification from Government Positions:
Government and Political Offices: The same section also disqualifies a bankrupt person from
being elected to or holding any of the following offices:
• President
• Member of Parliament
• Minister
• Member of a local government, council, board, authority, or any other government body
Vacancy in Public Office:
Immediate Vacancy: According to Section 45(2) of the Insolvency Act, if a person holding a
public office, such as a justice of the peace, is adjudged bankrupt, their office shall immediately
become vacant. This implies that Mr. Nkoko would lose the position of Commissioner in the
Ministry of Education he currently holds.

Additionally, a portion of the Nkoko’s salary can also be included in the estate, will be
determined by the court. As per section 31(1) (c) of the Insolvency Act as Amended
Issue 4: How can a bankrupt be discharged?
For Mr. Nkoko to be discharged from bankruptcy, he must follow the procedures outlined under
the Insolvency Act and Regulations as follows:
Application for Discharge: Mr. Nkoko can apply to the court for a discharge order under
Section 42(1) of the Insolvency Act. This application should be made by Notice of Motion
supported by an affidavit, as per Regulation 59(1) of the Insolvency Regulations, 2013.
Payment of Fees: He needs to pay the requisite fees for the application (UGX 20,000) and for
the affidavit in support (UGX 15,000), as stipulated in the Insolvency (Fees) Regulations, 2013.
These fees must be filed on the court record along with the application.
Service of Application: A copy of the application must be served on the official receiver, the
trustee, or any creditor with an unsatisfied claim against the estate, according to Regulation
59(2). Mr. Nkoko should file an affidavit of service to confirm that this has been done.
Report by Official Receiver: Upon receiving the application, the official receiver is required
to file a report within 21 working days, as per Regulation 60(1). This report should detail how
Mr. Nkoko has complied with his obligations under the Insolvency Act, include the final report
of the trustee, and any other relevant matters.
Filing of Report: The official receiver must file the report with the court and serve a copy on
the trustee and Mr. Nkoko after 7 working days, as specified in Regulation 60(2).
Setting a Hearing Date: The court will then set a date for the hearing where it will determine
whether to grant the discharge order to Mr. Nkoko.
Granting the Discharge Order: If the court deems fit, it will grant an order discharging Mr.
Nkoko from bankruptcy.
Issuance of Certificate: Upon granting the discharge order, the court will issue Mr. Nkoko
with a certificate of bankruptcy, as per Regulation 61.
Publication of Order: Mr. Nkoko must serve a copy of the discharge order on the official
receiver, who will publish it in the official gazette within 14 days at Mr. Nkoko’s expense

Issue 5: What roles would the insolvency practitioner play if Nkoko decides to file for
bankruptcy?
Section 2 of the Insolvency Act defines an insolvency practitioner to means a person who is
not an official receiver who is qualified to act as an insolvency practitioner within the meaning
of section 203;
Section 203 (1) Insolvency Act 2011, defines an Insolvency practitioner to mean a person who
acts as any of the following;
a) A receiver
b) A provisional administrator,
c) An administrator
d) A provisional liquidator
e) a liquidator
f) A proposed supervisor of a voluntary arrangement
 g) A supervisor of a voluntary arrangement; or
h) A trustee in bankruptcy
Further provides that only an insolvency practitioner can be appointed as a receiver.
Section 2 of the insolvency Act defines a receiver includes a receiver and manager or
administrative receiver in respect of any property and any person appointed as receiver by or
under any document, or by the court.
Section 2 Insolvency Act defines an administrative receiver means a receiver appointed over
the whole or substantially the whole of the property and undertaking of a grantor or a person
who would be a receiver but for the appointment of another person.
Section 25 of the insolvency Act provides for appointment of trustee, that the creditors’ first
meeting shall, appoint a trustee and vest the bankrupt’s estate in the trustee.
Regulation 34 of the insolvency regulations also provides that the creditors shall at their first
meeting appoint a trustee and a person shall not be appointed trustee unless that person is an
insolvency practitioner.
Qualifications of an Insolvency practitioner
Section 204 (1) of the Insolvency Act provides that for one to act as insolvency practitioner,
he or she shall be lawyer, an account, or a chartered secretary who is a registered member of
the relevant professional body.
Section 204(2) provides for what disqualifies one from being an insolvency practitioner to
include a person less than 25 years old, a corporate body, an undischarged bankrupt, person of
unsound mind, a person disqualified for fraudulent dealings or convicted for a crime involving
dishonesty o or moral turpitude or any person disqualified from acting as such.
Regulation 3 of The Insolvency Practitioners Regulations, 2017 provides for an up-to-date
register of insolvency practitioners that should be kept by the Official receiver.
Regulation 5 of the Insolvency Practitioners Regulations provides that an application for
registration of an Insolvency practitioner shall be made to the Official receiver in the Form 1
specified in Schedule 1.
Duties of an insolvency practitioner
Include the duties of trustee and a receiver because they all entitle an insolvency practitioner.
Section 29(1) of the Insolvency Act the fundamental duty of a trustee is to collect, realize as
advantageously as is reasonably possible and distribute, the bankrupt’s estate in accordance
with this Part and Part II
Section 29(2) without prejudice to subsection (1), a trustee shall;
a) Take custody and control of the bankrupt’s estate
b) Register in his or her names all land and other assets forming part of the bankrupt’s
estate at the making of the bankruptcy order notwithstanding any transactions that
may have taken place and any other law
c) Keep the bankrupt’s estate’s money separate from other money held by or under the
control of the trustee;
 d) keep, in accordance with generally accepted accounting procedures and standards,
full account and other records of all receipts, expenditures and other transactions
relating to the bankruptcy and retain the accounts and records of the bankruptcy for
not less than six years after the bankruptcy ends
e) permit those accounts and records to be inspected by any committee of inspector
unless the trustee believes on reasonable grounds that inspection would be
prejudicial to the bankruptcy or if the court so order, any creditor; and
f) Perform any other function or duty specified in this Act
1. Section 179 (1) of the insolvency act provides for the fundamental duty of a receiver is
to exercise his or her powers in a manner which he or she believes on reasonable
grounds to be in the best interests of all persons in whose interests the receiver is
appointed
Section 179 (2)Subject to subsection (1), a receiver shall have power over the property in
receivership with reasonable regard to the interests of the grantor, any person claiming, through
the grantor, an interest in the property in receivership, any unsecured creditor of the grantor
and any surety or guarantor who may be called upon to fulfill any obligation of the grantor to
a person in whose interest the receiver was appointed, if that obligation is not satisfied by
recourse to the property in receivership
Section 179(3)A receiver shall not defend any proceedings relating to any breach of duty under
this section on the ground that the receiver was acting as the grantor’s agent or under a power
of attorney from the grantor, or receive compensation or indemnity from the property in
receivership or the grantor in respect of any liability incurred by the receiver through any
breach of a duty under this section.
Section 180 (2) of the insolvency act provides for the General duties of receiver shall;
a) take custody and control of all the property which is under receivership
b) register in his or her names all land and other assets under receivership;
c) investigate the state of affairs of the property under receivership
d) give a general notice of his or her interest in all property that has not yet come under
his or her control
e) keep all money relating to the property in receivership separate from other money
received in the course of, but not relating to, the receivership and separate from
other money held by or under the control of the receiver
f) keep, in accordance with generally accepted accounting procedures and standards,
full accounts and other records of all receipts, expenditure and other transactions of
the company
g) Retain the accounts and records of the company for not less than six years after the
receivership ends.
Section 181 (1) of the insolvency Act provides for the powers of a receiver who shall have the
powers expressly or impliedly conferred by the appointing document and unless specifically
provided to the contrary;
a) May demand or recover, by action or any other means, all income of the property
in receivership,
b) Issue receipts for income recovered
c) manage any of the property under receivership;(d
 d) inspect at any reasonable time any documents of the grantor or other records relating
to the property under receivership, in the custody of the grantor or of any other
person; and
e) Execute in the name and on behalf of the grantor all documents necessary or
incidental to the exercise of the receiver’s powers.
In conclusion, the case of Douglas Medforth Vs James Peter Blake & others (2000) Ch 86
court held that a receiver or manager who sells but fails to take reasonable care to obtain a
proper price may incur liability notwithstanding the absence of fraud. The manager or receiver
ought to manage the property with due diligence and utmost good faith, to make sure that the
interest on the secured debt can be paid and the debt itself re-paid.

Issue 6: What options are available to Nkoko in restructuring his debts and business?
Given the complex financial situation of Mr. Mulunzi Nkoko, several options are available for
restructuring his debt and business. Here are the possible strategies:
1. DEBT RESTRUCTURING
Negotiation with Creditors:
Stanbic Bank: Approach the bank to renegotiate the terms of the loan. This could involve
extending the repayment period further, reducing the interest rate, or even a temporary
moratorium on payments until the business stabilizes.
Money Lender (Mugaga): Negotiate to restructure the loan with Mugaga. Given that the
property is already transferred into Mugaga's name, Nkoko could seek to negotiate better terms
for repurchasing the property or an extended payment plan.
Debt Consolidation:
Consolidate smaller debts into one larger loan with more manageable terms. This can simplify
the repayment process and potentially reduce the overall interest rate.
2. ASSET LIQUIDATION AND MANAGEMENT
Sale of Non-Core Assets:
Identify and sell non-essential assets to raise immediate cash. This could include equipment,
or other properties that are not critical to the business operations.
Equity Release:
Seek potential investors willing to invest in the business in exchange for equity. This can
provide a cash influx without increasing debt.
3. BUSINESS RESTRUCTURING
Incorporation of the Business:
Incorporate Mulunzi Chicks into a limited liability company. This could provide tax benefits
and protection of personal assets from business liabilities. It also makes the business more
attractive to investors.
Partnership with Rafiki & Co. Ltd:
Leverage the 5-year, $4 million contract with Rafiki & Co. Ltd. Use this as a basis for securing
short-term financing or as a means to attract investors.

Operational Efficiency:
Improve operational efficiency to reduce costs. This could involve modernizing the farming
practices, investing in technology, or finding cheaper suppliers.
4. LEGAL AND FINANCIAL ADVICE
Professional Advisors:
Hire a financial advisor to create a detailed restructuring plan and a lawyer to handle
negotiations with creditors and any legal disputes with family members.
5. ENGAGE WITH UGANDA REVENUE AUTHORITY (URA)
Negotiation for Tax Payment Plan:
Negotiate a payment plan with the URA to settle the UGX 700 million tax assessment. The
URA may agree to a staggered payment plan considering the financial difficulties.
6. FAMILY MEDIATION
Resolve Family Disputes:
Engage a mediator to resolve disputes with family members over the inheritance and business.
A resolution could involve a financial settlement or formalizing their involvement in the
business.
7. ALTERNATIVE FINANCING
Government Grants and Loans:
Explore government programs or grants available for agricultural businesses in Uganda. These
could provide low-interest loans or grants to support business recovery.
Implementation Steps
Conduct a Comprehensive Financial Review: Assess the exact financial status, including all
debts, assets, income, and liabilities.
Develop a Detailed Restructuring Plan: Work with financial advisors to draft a comprehensive
plan.
Communicate with Creditors: Start negotiations with creditors immediately to prevent further
legal actions.
Monitor Progress Regularly: Establish a regular review process to monitor the implementation
of the restructuring plan and make adjustments as necessary.
Mr. Nkoko has several options to restructure his debt and business, from negotiating with
creditors and improving operational efficiency to incorporating the business and leveraging
partnerships. Engaging professional advisors and resolving family disputes will be critical to
successfully navigating this challenging period and stabilizing the business.
TASK 4

Issue 1: What are the crisis stabilization mechanisms I would advise Mr Nkoko to follow?

Taking into consideration paragraph 5 of the Diagnostic Review Guidelines, i would advise
Nkoko to the following;

We advise Mr Nkoko to develop cash generation initiatives like;

Negotiate extension of creditor’s payments; Mr Nkoko should negotiate with the 100
employees and 80 casual labourers and URA on an extension of payment. This is so that he can
first clear the debt he has with the bank and the moneylenders. This will allow him to do away
with the big debts so as to incur more profits which he will use to pay the employees and URA.

Reduce stock. We advise Mr Nkoko to reduce the number of chickens. In the instant facts he
states that he was rearing over 50,000 birds on 10 acres of land. He then used 750m to import
10,000 high quality breeders from the Netherlands. However, due to the failure in construction
of another pen, this forced him to overcrowd the existing pens and this led to the death of 500
birds.

Therefore, we advise Mr Nkoko to reduce the number of stocks to a number that is

manageable so as to reduce on the losses he is facing and also to avoid getting more loans.

Stop planned expenditure (particularly capital expenditure); in the instant facts, Mr Nkoko
states that his biggest hope is in a 5 year, 4m$ contract that he has recently signed in partnership
with Rafiki & Co. Ltd to export dressed chicken to UAE, North Africa and other countries. His
share is 50% as he will be the source of the chicken. The company is owned by Mulunzi and a
group of his investment club members.

We advise Mr Nkoko to stop this expenditure for the time being and first settle the debts he
has, entering a 4m$ contract right now when he has debts of over USD 450,000 & UGX
2,190,000,000/= doesn't seem ideal as the 4m$ can be used to clear some of his debts and gain
more profits.

Purchase/ contract order controls; in the facts, Mr Nkoko has a tendency of taking on heavy
purchases and orders which in the end force him to acquire loans to deal with those contracts.
For instance, in March, Nkoko had no choice but to borrow UGX 50m from Mugaga, a money
lender to purchase birds from a competitor in order to clear an order made by a Congolese
customer. Hence acquiring more loans (debts).

We advise Mr Nkoko to control the contracts or orders he takes on and only focus on those
which he can manage and do away with those that entail him to borrow money in order to clear
them. This is because if he keeps going for big contracts, he will keep getting more loans.

Establish and implement emergency cash management controls; we advise Mr Nkoko to

implement an emergency cash management control like a savings scheme where he can store
money to be used in emergency situations.

Introduce cash rationing; cash rationing is the process of placing a limit on the extent of new
projects, contracts or investments that one decides to undertake. We advise Mr Nkoko to put a
limit on new contracts as they have a tendency of forcing him to acquire new loans hence
making him more in debt.

Management of the press; in the instant facts, Mr Nkoko states that some creditors have
started coming to his commissioner’s office thinking that the embarrassment will put him under
pressure to pay them, some are threatening to report him to his supervisors. We advise Mr
Nkoko to devise a comprehensive communication strategy with the creditors so as to avoid any
involvement with the press.

Engagements with employees, financial lenders, key suppliers etc; we advise Mr Nkoko to
have engagements with his employees, financial lenders like the money lenders on the troubles
he is facing financially and the measures he is taking to clear those debts. This will help him to
keep them in the know and to stop them from thinking that he doesn't want to pay them.

Issue 2: What is the business viability assessment of Mr. Nkoko pursuant to the Diagnostic
Review Guidelines?

Guideline 7 of the Diagnostic Review Guidelines provides for viability assessment

Financial/structural crisis

The bank. Mr. Nkoko obtained a business loan of Ugandan Shillings 1.5 billion payable in two
years. He used a title of the 10 acres of land which was in his name as the security. The bank
indebted UGX 300 million which was his earlier on the loan and has an outstanding amount of
850 million. This outstanding amount is urgent because failure to clear it, the Stanbic bank will
foreclose on the mortgaged land and it is where the business is established. Mr. Nkoko can
request the bank to restructure the loan facility payment terms from 2 years to 5 years since he
has signed a contract with Rafiki & Company Limited worth 4 million USD

Congolese customer. Mr. Nkoko has an outstanding debt of USD 450,000 with the Congolese
customer for supply of 1000 dressed chicken. He convinced the Congolese customer to make
a long-term order and pay the same. The customer is likely to institute civil and potential
criminal action for non-delivery.

URA. URA audited his business and issued him with the assessment of UGX 700 million
shillings and is threatening to institute distress actions and enforcement of the tax obligations.

Mugaga. Mr. Nkoko obtained a loan facility from Mugaga of UGX 150 million and has
likelihood of losing his home due to transferred security.

Ms Nkoko. Mr. Nkoko obtained a loan facility from Ms Nkoko of UGX 100 million which she
borrowed from her brother a prominent money lender whereby Mr. Nkoko gave his wife
postdated cheques for payment and will be arrested.

Employees. Mr. Nkoko was employing 100 people with 20 full time employees and 80 casual
Labourers. The have not been paid their salaries and they have an outstanding debt of 50 million
Ugandan Shillings and can institute legal action for unpaid up wages.

NSSF. Mr. Nkoko is mandated under the law to remit NSSF contributions for the employees.
There is a threat of institution of criminal action for nonpayment of statutory dues.

Transporters. They rendered services to Mr. Nkoko and have an outstanding balance of UGX
15 million shillings. There is a threat of legal action for unpaid services.

Suppliers. They supplied goods to Mr. Nkoko worth UGX 300 million and there is a threat of
legal action by the suppliers.

Reversal of the causes of decline

Financial policy.

Inappropriate financing sources. Mr. Nkoko obtained a business loan of UGX 1.5 billion to be
payable in 2 years. He borrowed a 1.5 billion to be paid in a short time which was intended for
a long-term investment.

High costs structures. Mr. Nkoko used 750 million to import ten thousand high quality breeders
from Netherlands. He incurred a lot of expenses while importing the breeders which could be
have been secured locally.
Resistance of stakeholders towards the restructure/ turnaround

Mr. Nkoko can enter in a restructure agreement with his creditors, employees, suppliers and
the Congolese customer.

END