KENYA Law and Practice Contributed by: Noella Lubano, Paul Kamara, Kateline Mang’ich and Anne Cheloti, Oraro & Company Advocates
ever, the corporate status and powers of the company continue to have effect until the company is dissolved. Involuntary liquidation A company may be liquidated involuntarily (by the court) when: • it has resolved by special resolution that it be liqui - dated; • it is unable to pay its debts; • it does not commence its business within 12 months of incorporation or suspends its business for one year; • the number of members is reduced below two (save for private companies limited by shares or by guarantee); or • there is no voluntary arrangement at the end of a pre-insolvency moratorium, or the court is of the opinion that it is just and equitable that the com - pany be liquidated (Section 424 of the IA). An application to court for an involuntary liquidation may be made by the company, its directors, a creditor, a contributory of the company, a (provisional) liquida - tor or administrator, or the Attorney General on the grounds that it is in the public interest, following an inspection into the affairs of the company (Sections 425 and 426 of the IA). The court will hear the applica - tion and make a determination to dismiss the applica - tion, appoint an interim liquidator, adjourn the hearing of the application or make any other order. For involuntary liquidations, liquidation commences when: • a resolution to liquidate the company voluntarily has been passed and the court determines that the resolution was validly passed; • a liquidation order is issued by the court; or • an application for a liquidation order is passed
tors. The Receiver generally remains the agent of the company, but with fiduciary duties on account to the debenture holder (see Surya Holdings Limited & 2 oth- ers v Cfc Stanbic Bank Limited [2015] KEHC 2209 (KLR)). Once an administrative receiver is appointed, the directors take a backseat in the management of the company (see Cyperr Enterprises Ltd v Metipso Services Ltd & 2 Others [2011] KEHC 2652 (KLR)). Administrators Administrators are appointed by either the directors, the company itself, the court or the holder of a float - ing charge. Upon an application by either the company, the directors or creditors, the court may issue an admin - istration order if it is satisfied that the objectives of administration may be achieved. Such an application may also be made by the liquidator; if allowed, the administrator’s appointment is rendered effective, while the liquidation order is discharged (Section 557 of the IA). In the case of the holder of a floating charge, an administrator’s appointment will take effect upon notification to the court. Once an administrator is appointed, directors cannot perform managerial functions without the consent of the administrator, and may be required to furnish the administrator with the statement of affairs. The Insolvency Act requires all administrators to be insolvency practitioners. Therefore, administrators must be natural persons who meet the necessary aca - demic qualifications and have been licensed by the Office of the Official Receiver (Section 6 of the IA and Regulations 11 and 12 of the Insolvency Regulations). Liquidators Liquidators are appointed when a company is being placed under liquidation by its members, creditors or the court, upon an application by the official receiver, creditors, contributories, members or administrators/ provisional liquidators (Sections 382, 408, 16, 425 and 439 of the IA). As with an administrator, a liquidator must be an insolvency practitioner, who is a natural person with a licence and the requisite academic qualifications.
(Section 431 of the IA). 1.3 Statutory Officers Administrative Receiver
An administrative receiver/receiver and manager (“the Receiver”) is appointed by the holder of a debenture predating the Insolvency Act (Section 690) to realise the assets, in order to pay the monies owed to credi -
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