Tidy Endings: Kenya’s New Insolvency Act, 2015 Commences as UK Logistics Firm Exits the Kenyan market

Posted on September 12th, 2018

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that despite the repeal of Cap 486), the Bankruptcy Act and section 89 of the Succession Act (collectively, the “Repealed Acts”), the relevant provisions of these Repealed Acts will continue to apply to any ‘past events’. The rationale being that these past events relate to specific actions taken under the repealed legislation and include, for example, the passing by a company of a special resolution prior to the commencement of the Act, resolving that the company be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.

Commencement of the Insolvency Act, 2015: Legal Notice No.1 of 2016

Posted on August 13th, 2018

Share this article

Following the enactment of the Insolvency Act, 2015 (No. 18 of 2015); by way of Legal Notice No.1 of 2016, the following provisions of the Act came into operation as of 18th January 2016:

  1. Parts II, VI, VII, VIII, IX, X, XI, XII
  2. The Third Schedule
  3. The Fourth Schedule

Parts I, III and V, the First Schedule and the Second Schedule were brought into operation as of 30th November 2015 through Legal Notice No. 224 of 2015. In essence, the only provisions of the Act that remain to be operationalised are Part IV, Part XIII and the Fifth Schedule.

The Act has been hailed for its remarkable attempt to overhaul insolvency provisions under the Bankruptcy Act (Cap 53), Companies Act (Cap 489) and Section 89 of the Law of Succession Act (Cap 160). Some of the notable changes include the legal-rescue of insolvent businesses rather than winding them up by providing several alternatives such as rescheduling of debt to lengthen the repayment period instead of commencing bankruptcy proceedings in court. Subsequent to the Insolvency Act, natural insolvent persons could remain “bankrupt” forever. Now as a matter of law, a debtor will automatically be discharged from their debt after three years.

In conclusion, as it had been previously stated, the Insolvency Act consolidates the laws with respect to insolvency. This is in a bid to not only provide for and regulation of the bankruptcy or liquidation of natural persons, incorporated and unincorporated bodies but, also to enable their affairs to be managed for the benefit of their creditors. The latter is done by providing alternatives to bankruptcy and liquidation.

Eva Mukami

Posted on August 1st, 2018

Eva Mukami

Associate

 

T: +254 709 250 000/709 250 721

E: emukami@oraro.co.ke

 

Eva is an Associate in the Litigation Department and specialises in Arbitration & Mediation and Dispute Resolution.

She has advised local and international clients from various target sectors such as energy, oil, manufacturing and financial services in arbitration & mediation, constitutional law, land disputes, debt recovery, banking & commercial litigation, and insolvency matters.

Eva recently advised a bank on enforcement of third party securities under the Insolvency Act, 2015 as well as advising an oil company on its prospective claim against the National Land Commission for denial of fair administrative action under the Constitution in its compulsory acquisition of the oil company’s land.

Eva has a Bachelor of Laws (LLB) from Moi University and a post-graduate diploma in Law from the Kenya School of Law.

“Eva has advised a regional bank in an international arbitration”

Experience
  • Part of a team that is assisting in giving Kenya law advice and representing a Canadian based energy company as co-counsel in the International Centre for Settlement of Investment Disputes proceedings brought against the Kenyan Government in respect of the unlawful revocation of the company’s geothermal licence.
  • Part of the team representing a regional bank in an international arbitration at the ICC in a claim of USD 25 million brought by a Zambian borrower who claims he never authorised the bank to disburse funds to the borrower.
  • Part of a team that advised an international agricultural equipment company on registration of securities under the Movable Property Security Rights Act, 2017.
  • Part of a team that represented a landlord in its claim against an insolvent tenant that involved interpretation of the rights of a landlord under the Insolvency Act, 2015.
  • Part of a team that advised an oil company on its prospective claim against the National Land Commission for denial of fair administrative action under the Constitution in its compulsory acquisition of the oil company’s land.
  • Part of a team that advised an international tobacco processing company and its Kenyan subsidiary on their prospective claim for fraud and/or negligence against individuals in its employment.

Restructuring & Insolvency

Posted on July 19th, 2018

Our Insolvency and Restructuring practice group is well regarded in advising some of the largest and most complex restructurings and insolvencies.  We combine various practice areas to deliver practical advice on both contentious and non-contentious aspects of Insolvency law.

We regularly work closely with a broad range of stakeholders including banks, financial intermediaries, distressed companies, creditors, private equity sponsors, and governments.


Experience

Our recent experience includes:

  • Representing a company in insolvency proceedings against one of the largest supermarket chains in East Africa, now under administration, where it seeks to exercise its right of forfeiture, repossession and peaceable re-entry of its premises.
  • Advising a Tier 2 Bank on its rights as a lender to enforce third-party securities under the Insolvency Act, 2015 against a leading supermarket currently under administration.
  • Advising a consortium of banks in drafting agreements for a consortium of banks involved in a non-contentious insolvency matter.
  • Advising one of Kenya’s largest publicly listed companies in the restructuring of its debt, owing from local and international lenders.
  •  Advising the receiver-manager of a leading commercial bank to undertake the proposed restructuring including the powers the shareholders in the Company to sell their shares, and the company to issue additional shares to third-party investors.
  • Advised an East African government (through the office of the Attorney General) on the proposed capital restructuring of the national carrier in which the Government is a significant shareholder, including the legal implications of relinquishing its security.
  • Acting in an insolvency matter involving a manufacturer of edible salts (directors/shareholders) versus a Kenyan commercial bank in liquidation and receivership.

Recent Insights

Options for Companies in Distress on Account of the COVID-19 Pandemic or Similar Events

A ‘Dicey’ Matter: The Fate of Employees in Mergers and Acquisitions

Salient Changes Under the Business Laws (Amendment) Act, 2020


Related Services

Banking & Finance, Corporate & Commercial, Dispute Resolution

For more information about our Restructuring & Insolvency practice, please contact George Oraro SC (Founding Partner) or Noella Lubano (Partner).  Alternatively click here to download our Restructuring & Insolvency profile.

Key Contacts
George Oraro SC
Founding Partner

 

 

E: goraro@oraro.co.ke

Expertise

Posted on March 23rd, 2018

Practice Areas

Sectors

Construction

In the construction sector, we see the bigger picture ...

Education

Our lawyers understand the pressures faced by educational and training organisations

Energy

We are at the forefront of providing our clients with legal advice in a complex regulatory environment

Financial Services

We deliver legal advice that is technically sound, practical and commercially effective.

Manufacturing & Industries

We deeply understand our clients' businesses in this vast and vital sector of the Kenyan economy.

Public Sector

We deliver meaningful legal advice, through our deep understanding of how the public sector works.

About Us

Oraro & Company Advocates is a full-service market-leading African law firm established in 1977 with a strong focus on dispute resolution and corporate & commercial law. With a dedicated team of 10 partners, 4 senior associates, 10 associates, 1 lawyer and 36 support staff, the Firm has been consistently ranked by leading legal directories such as Chambers Global, IFLR 1000 and Legal 500 as a top-tier firm in Kenya.

Oraro & Company Advocates is an affiliate member of AB & David Africa.

Contact Us

Oraro & Company Advocates
ACK Garden Annex, 6th Floor, 1st Ngong Avenue
P. O. Box 51236 - 00200, Nairobi, Kenya.
T: +254 709 250 000
E: legal@oraro.co.ke | W: www.oraro.co.ke

Oraro & Company Advocates © 2021