KENYA Law and Practice Contributed by: Noella Lubano, Paul Kamara, Kateline Mang’ich and Anne Cheloti, Oraro & Company Advocates
• they fail to give prior notice to the liquidation com - mittee prior to selling the company’s assets to a person connected to the company (Section 462 (6) and (7) of the IA); or • they fail to lodge a copy of the notice with the Registrar of Companies within seven days of giv - ing notice to the court that they have vacated the office (Section 468 (10) of the IA). Bankruptcy Trustee A bankruptcy trustee has the powers to: • sell the property of the bankrupt; • discharge the bankrupt’s debts and give receipts therefor; • inform creditors of the steps that have been taken in the bankruptcy process; and • prove and claim any debts owed to the bankrupt. Furthermore, a bankruptcy trustee may carry on the business of the bankrupt and bring/defend legal pro - ceedings related to the bankrupt’s property, once the requisite approvals have been given. A bankruptcy trustee may be held personally and criminally liable if, without reasonable justification, they fail to lodge an order allowing them to dispose of assets that are the subject of a security with the Offi - cial Registrar, within 14 days (Section 227 (6) of the IA). 7.4 Other Consequences for Directors and Officers See 7.2 Personal Liability of Directors .
• give preference to the company’s creditors or a guarantor; • are extortionate credit transactions; or • relate to floating charges created during the rel - evant time/look-back period in favour of a person connected with the company or entered into in favour of other persons 12 months after the onset of insolvency or two years immediately preceding the insolvency. However, preference does not apply for transactions done in relation to the employees of the company (Section 684 (2)(a) of the IA). Look-Back Period A transaction performed at an undervalue will have a look-back period depending on the “relevant time” specific to each transaction, which means: • two years immediately preceding the onset of insolvency; • the time between the making of an administration application and the making of an administration order on the application; or • the time between lodging a copy of the notice of intention to appoint an administrator by the holder of a floating charge with the court and the making of the appointment (Section 684 of the IA). In contrast, the look-back period for extortionate credit transactions for companies in administration or under liquidation is three years before the insolvency proceedings commenced (Section 686 (2)(b)). The look-back period for floating charges on the com - pany’s undertaking or property is: • two years immediately preceding insolvency when such a charge is issued to a person related to the insolvent company; • 12 months preceding insolvency if the charge was created in favour of any other person; • the time between the making of an administra - tion application in respect of the company and the making of an administration order on the applica - tion; or • the time between lodging a copy of the notice of intention to appoint an administrator by the holder
8. Setting Aside or Annulling a Transaction 8.1 Circumstances for Setting Aside a Transaction or Transfer Transactions That Can Be Set Aside
Under Sections 682, 683, 686 and 687 of the IA, an administrator or a liquidator may apply to the court to set aside certain transactions if they: • are at an undervalue;
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