Jomo Kenyatta University of

Agriculture and Technology, School

of Law
Insolvency Law: 2nd Class
Topic: Administration of Insolvency Regime

A. Institutions of Insolvency Regime

This part seeks to lay down the structure for addressing
insolvency in the community. In Kenya, these include:
Qualified Insolvency Practitioner
Official Receivers
The Relevant Cabinet Secretary
The Courts
Bankruptcy trustees

1. Qualified Insolvency Practitioners

Success of an Insolvency regime is heavily dependent
upon insolvency practitioners in private practice.
The practitioners do the work of liquidators, receivers,
trustees e.t.c.
The Insolvency Act of 2015 lays down the
qualifications for Insolvency Practitioners in Kenya.
Under the Act, an Insolvency Practitioner may be a
natural person only [section 6(2)]

Qualified Insolvency Practitioners

continued
Qualifications of the Practitioners
Should meet the educational and practical standards as
well as the experience prescribed by the regulations under
the Act [section 6 (1) (a)]
Should be a member of a professional body designated by
the Cabinet Secretary as a body of Insolvency Practitioners
under section 7 [ see section 6(1)(b) of the Act]
The practitioners must satisfy the requirements of the rules
governing their professional bodies, if any [section 6(1)(c)]

Qualified Insolvency Practitioners

continued
Who is disqualified from Practising?
An undischarged bankrupt [ section 6(2)(a)]
Inability to perform due to physical or mental infirmity
[section 6(2)(c)]
A person under disqualification order made under law
relating to companies [section 6(2)(b)]
A juristic person cannot be an Insolvency practitioner
[section 6(3)

Qualified Insolvency Practitioners

Continued
The Mandate of the Insolvency Practitioners:
Act as bankruptcy trustee or interim trustee in respect
of a natural persons property [section 4(1)(a)]
Act as permanent or interim trustee in the sequestration
of the persons property [section 4(1)(a)]
Act as a trustee under a deed of composition made for
the benefit of the creditors of a natural person [section
4(1)(b)]
Act as a trustee under a trust deed for the creditors of a
natural person [section 4(1)(b)

Qualified Insolvency Practitioners

Continued
Act as a supervisor of an approved voluntary
arrangement in respect of a natural person [section 4(1)
(c)] or a company [section 4(2)(b) & (c)]
Act as a liquidator, provisional liquidator or an
administrator of a company [section 4(2)(a)]
Penalty for Impersonating an Insolvency
Practitioner:
It is an offence to practice without authorization: upon
conviction, the offence attracts a fine not exceeding 5
Million Kenya Shillings/

2. The Courts
Play a central role: they direct how insolvency proceedings should be conducted.
Corporate insolvency: the courts are not involved in case of voluntary winding
up.
Exclusion of court helps save costs.
Kenyan Court System:
High court the main judicial forum for insolvency regime
Under section 2 of the Insolvency Act, there are two definitions relating to the
courts:
The first definition:
"the Court" means the High Court, and if there is an insolvency
that Court, means that division

division of

The Courtscontinued
Core functions of the high court include:
- Determining bankruptcy applications made by creditors (section 17)
- Determining bankruptcy applications made by debtors (section 32)
Other courts:
Section 2 of the Act:
"relevant court", in relation to a matter other than one that is specifically entrusted to
the High Court by a provision of this Act, means the court exercising or having
responsibility for exercising jurisdiction in respect of that matter
function stated in Section 22(1)
After a creditor's application has been made, the debtor or any creditor may apply to
the relevant court for an order stopping the issue or continuance by any other creditor
of an execution process against the debtor in respect of the property of the debtor.

3. Cabinet Secretary
Functions include:
To designate professional bodies as recognized professional bodies for
insolvency practitioners [section 7(1)]
- The cabinet secretary is guided by section 7(2) which sets out
qualifications that professional bodies must have in order to be
recognized.
Power to make insolvency regulations (section 730)
Power to make transitional regulations [section 735 (1)]
Power to appoint the Official Receivers and Deputy Official Receivers (section
701)
Requirement to make annual report on the operation of the Insolvency Act
and table the same before both houses of parliament (section 728)

4. Official Receivers
Official Receiver (O.R) and the Deputy Official Receivers (D.O.Rs) are officers of
the High Court appointed by the Cabinet Secretary [section 701(1)].
Qualifications for appointment as an O.R or D.O.R:
Advocate, or a registered accountant, or a chartered public secretary [section
701(5)].
Should not be an undischarged bankrupt/not have entered into a scheme of
arrangement/not be subject to summary instalment order/not be subject to
asset procedure/not be subject to an order disqualifying a person from being a
director [ section 701(6)(a)]
Should not be a convict of an offence punishable by 2 years or more [section
701 (6) (b)]
Should not be a member of parliament [section 701(6)(c)]

Official Receiverscontinued
The office of O.R is a corporate entity with perpetual section, required
to have an official seal and capable of suing and being sued in its
corporate name Official Receiver in Insolvency [section 703(1) & (2)]
May do all things that a body corporate may do.
O.R and D.O.R immune from civil proceedings for omissions and
commissions done in good faith in the course of exercising their
functions (section 705)
Juridical functions of O.R & D.O.Rs:
Administer oath and statutory declarations.
Appear in relevant legal proceedings and examine witnesses in such
proceedings.

Official Receiverscontinued
Other functions:
O.R required to establish at Central Bank of Kenya an account called Insolvency Services
Account. Money received or recovered by OR is paid to the account. [section 708 (1) & (2)]
Establish and maintain register of undischarged and discharged bankrupts [section 47(1)]
O.R to ensure availability of public registers for inspection by members of the public. [(section
711)].
- Public registers contain information about; a bankrupt person or a person who has been a
bankrupt/a person subject to a current summary instalment order/person currently admitted to
no asset procedure [section 713(1)]
O.R may omit, remove or restrict access to information in the register if disclosure is prejudicial
to the person or his family [section 716(1)]
The name of a person who has been discharged from bankruptcy is removed from the public
register after the lapse of 4 years from the date of discharge [section 713 (6)]. However where a
person has been bankrupt more than once, or has been both bankrupt and discharged from no
asset procedure, his/her remains in the register permanently [section 714(1)].

Official Receiverscontinued
Powers relating to liquidation of companies (Part X of the Insolvency Act).
Power to entertain an application from a debtor to be admitted to no asset
procedure [section 344(1)]
Power to nominate a qualified a person as a bankruptcy trustee [section
44(1)]
Power to appoint a bankruptcy trustee (section 59)
Power to hold the office of bankruptcy trustee until an appointment is made
(section 78)
May act as interim trustee of the debtors property during the pendency of a
creditors application [section 36(1)]
Neither the government nor the O.R can be sued for any omission or
commission regarding the public register, done in good faith and in the
course of duty 9section 719)

5. Bankruptcy trustees
Is the manager of the property of a person declared
bankrupt
May be appointed by the creditors committee, the
Official Receiver or the Court [section 59]
Interim trustee: appointed after a creditor has filed
bankruptcy application to court. Any creditor may apply
for appointment of interim trustee [section 36(1)]

B. Options for Insolvents

Personal Insolvents:
Evade payment of debts; morally questionable
Attempt to re-finance
Try informal arrangement with some or all of creditors
Put forward individual voluntary arrangement (IVA)vote
Moratorium for debt payments (division 2
Apply for bankruptcy order
Wait to see if a creditor presents bankruptcy petition

Options for Insolvents

Corporate Insolvents
Evade payment
Attempt to re-finance
Try informal arrangement with some or all of the creditors
Enter administration (division 2- section 523)
Put forward a proposal for company voluntary arrangement (CVA)vote
Resolve to enter voluntary liquidation
Wait to see if a creditor presents an application for liquidation
Approach a secured creditor on the issue of appointing a receiver