KENYA Law and Practice Contributed by: Noella Lubano, Paul Kamara, Kateline Mang’ich and Anne Cheloti, Oraro & Company Advocates
4.3 The End of the Restructuring, Rehabilitation and Reorganisation Procedure Involvement of Judicial Authorities A CVA must be approved by a court for it to be binding on the company and its creditors (Sections 629 and 630 of the IA). Termination of Restructuring Process A CVA may be terminated through a revocation or sus - pension order of the court upon a successful applica - tion by the creditor, member, provisional supervisor, administrator or liquidator that the CVA detrimentally affects their interests or that a material irregularity occurred at or in relation to either of the meetings held to discuss the proposal (Section 631 (2) of the IA). The CA does not explicitly provide for factors that could result in the challenge or revocation of a pro - posed SOA. However, the court’s decision approving the arrangement has no effect until the decision is lodged with the Registrar (Section 926 (4) of the CA). Failure to Observe the Terms of the Agreements As stated in 4.1 Opening of Statutory Restructuring, Rehabilitation and Reorganisation , the implemen - tation of a CVA is overseen by a supervisor, who is tasked with monitoring compliance by the company with the CVA’s terms. When the terms of the CVA are not complied with, the supervisor must report back to the court and file a Certificate of Failure, at which point the CVA ends prematurely and ceases to have an effect (Section 635 of the IA). In contrast, a failure by the company to comply with the terms of an SOA amounts to a breach of contract, and the affected creditors may pursue the company for a claim in breach of contract. 4.4 The Position of the Debtor in Restructuring, Rehabilitation and Reorganisation Position of the Debtor and Borrowing/Funding As stated in 4.1 Opening of Statutory Restructuring, Rehabilitation and Reorganisation , a company that has opted for a CVA or SOA does not benefit from
an automatic moratorium. However, it may apply for a moratorium to facilitate the restructuring process. While a company under a CVA or SOA continues trad - ing as normal, a supervisor works with the directors to manage the company and ensure compliance with the CVA or SOA. The terms of the CVA or SOA determine the ability of a company to obtain credit facilities. However, the company may not obtain credit facilities exceeding KES25,000 (approximately USD165) without informing the lending institution and/or person of the existence of the moratorium or its effect (Section 654 of the IA). Asset Disposition Process by Companies Under CVAs and SOAs Directors retain managerial control during the pen - dency of a CVA or SOA, and therefore oversee the sale of assets or the business. However, where a com - pany is under administration/liquidation, such roles are undertaken by the administrator or liquidator. Good title passes to the purchaser of the company’s assets, provided that the assets are not charged or, if charged, provided that the sale was pre-approved by the secured creditor or court. Any restrictions on a company’s dealings with its assets are determined by the terms of the CVA. How - ever, where a moratorium is in place, a company can only dispose of assets if there are reasonable grounds to believe that the disposal will benefit the company, and if doing so has been approved by the moratorium committee or the provisional supervisor (Section 655 (1) of the IA). In addition, a company may dispose of assets notwithstanding a moratorium if the disposal is within the ordinary course of business or pursuant to a court order. If the assets are secured, the consent of the secured creditor or the court is required prior to any disposal.
4.5 The Position of Office Holders in Restructuring, Rehabilitation and
Reorganisation Task and Powers
Please see 4.1 Opening of Statutory Restructuring, Rehabilitation and Reorganisation regarding the tasks and powers of various parties during CVAs.
288 CHAMBERS.COM
Powered by FlippingBook