The Insolvency Act, 2015 (the Act) was assented into law on 11th September 2015 and some of its provisions came into effect on the 30th of November by way of Legal Notice No. 244 of 2015. Some of these provisions include Parts I, III and V, the First Schedule and the Second Schedule. Any provision that is not brought into force through gazzetment within nine months after the publication of the Act shall automatically come into force on the expiry of that period. The Act also gives the Cabinet Secretary power to make regulations that may be necessary to transition from the Bankruptcy Act and Cap 486 to the Act.
Unlike previous legislation, the Act seeks to redeem insolvent companies through administration as opposed to liquidation. The Act focuses more on assisting insolvent natural persons, unincorporated entities and insolvent corporate bodies whose financial position is redeemable to continue operating as going concerns so that they may be able to meet their financial obligations to the satisfaction of their creditors. This includes, in the case of companies, the introduction of rights to conduct restructurings and bankruptcy work-outs under an administration process.
Winding-up of companies was previously provided for under Part VI of the Companies Act (Cap 486), while the insolvency of natural persons was covered in the Bankruptcy Act of Kenya (No. 32 of 1930). It is important to note that the transitional provisions of the Act provide that despite the repeal of Cap 486), the Bankruptcy Act and section 89 of the Succession Act (collectively, the “Repealed Acts”), the relevant provisions of these Repealed Acts will continue to apply to any ‘past events’. The rationale being that these past events relate to specific actions taken under the repealed legislation and include, for example, the passing by a company of a special resolution prior to the commencement of the Act, resolving that the company be wound up.
The new Act, is of even more significance to investors in light of recent happenings on the NSE, where oil and gas logistics firm Atlas Development & Support Services (also listed on the London Stock Exchange), recently announced that it will be closing its Kenyan subsidiaries (Ardan Logistics, Ardan Medical Services and Ardan Civil Engineering). Some of the firms’ creditors have sought the government’s intervention in the face of reports that the firm owes its creditors around KES 400 million (approximately USD 4 million). The firm’s creditors have until February 12th to prove their claims. The company also announced plans to focus more on its investment activities in Ethiopia, where it recently acquired a bottle making company – East Africa Packaging Holdings Limited.
For a detailed analysis of the Insolvency Act, 2015 click here