KENYA Trends and Developments Contributed by: Noella Lubano, Paul Kamara, Kateline Mang’ich and Anne Cheloti, Oraro & Company Advocates
final order. Furthermore, Section 384 (1) of the Insol - vency Act implies that liquidation proceedings may be commenced by a creditor or a decree holder whose decree remains unsatisfied. It has been consistently argued in Kenyan courts that persons who are not decree holders cannot institute liquidation proceedings. This matter was finally put to rest in the decision of the High Court in DAC Aviation (EA) Limited v Stevenson Kibara Ndung’u & 8 others [2020] KEHC 10299 (KLR), where it was held that the use of the term “includes” in the definition of a credi - tor expands the meaning of the term; a creditor is therefore not limited to one entitled to enforce a final decree or judgment. This has been reiterated in sub - sequent cases by the High Court, including Flower City Limited v Polytanks & Containers Kenya Limited [2021] KEHC 34 (KLR). On the issue of who is to issue a statutory demand, Section 384 (1)(a) of the Insolvency Act provides such demands will be issued by “a creditor (by assignment or otherwise)”. Kenyan courts have preferred different conflicting interpretations based on the circumstances of the case. For instance, in Blueline Properties Limit- ed v Mayfair Insurance Company Limited [2019] KEHC 7673 (KLR), the High Court applied the definition of a creditor as set out in Section 2 of the Insolvency Act and held that only the creditor can issue a statutory demand, and not its agents. This position was contradicted by the decision in Flower City Limited v Polytanks & Containers Kenya Limited [2021] KEHC 34 (KLR) and In re F. M. Macharia (K) Limited [2017] KEHC 5917 (KLR), where the High Court held that a statutory demand can be signed and issued by an agent of a creditor, including the credi - tor’s advocates. However, given that these findings are by courts of concurrent jurisdiction with no clarifi - cation having been issued by the Court of Appeal, the High Court judges have consistently followed these two conflicting views, causing confusion regarding the correct position. A complication on who should issue the statutory demand arises from the form provided by the law on how the statutory demand should be drafted. Section 425 of the Insolvency Act, read together with Regula -
tion 77B(2) of the Insolvency Regulations 2016, pro - vides that a statutory demand shall be in the form set out at Form 32E, found in the Insolvency Regu - lations. However, statutory demands issued as per Form 32E provide that the statutory demand is signed and issued by the Deputy Registrar of the High Court. In Laico Regency Hotel - Nairobi v Burguret Farm Lim- ited [2022] KEHC 469 (KLR), the High Court held that the issuance of a statutory demand by the Deputy Registrar does not make said demand defective. Fur - thermore, it was held in Kinuthia v Xplico Insurance Company Limited [2023] KEHC 23704 (KLR) and In the matter of Paleah Stores Limited [2021] KEHC 4200 (KLR) that a statutory demand is valid as long as it is issued as per Form 32E. However, in East African Cable Limited v Trans-Africa Energy Limited (Insol- vency Petition No E050 of 2021) [2022] KEHC 12260 and Global Truck Limited v Borderless Tracking Lim- ited [2020] KEHC 9650 (KLR), the High Court stated that the Deputy Registrar cannot issue a statutory demand as he/she is not a creditor to the company or an agent of the creditor. It is therefore evident that the Kenyan High Courts are conflicted on this issue, especially given that the Court of Appeal has not yet addressed it. However, in the cases of Inre Kipsigis Stores Limited [2017] KEHC 5210 (KLR), In re Sucasa at Mombasa Road Limited [2019] KEHC 8872 (KLR) and DAC Avia- tion (EA) Limited v Stevenson Kibara Ndung’u & 8 oth- ers [2020] KEHC 10299 (KLR), the High Court held that the form of a statutory demand does not matter, as long as the key elements are met. Such key elements are that: • the demand must be signed and dated by the creditor or its authorised agent; • the amount of debt claimed by the creditor must be stated; and • the demand must include an explanation to the company on: (a) the purpose of the demand; (b) how the demand may be complied with; and (c) the consequence of non-compliance with the demand, which is that winding-up/liquidation proceedings may be commenced.
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