Judicial Guide Book on Companies and Insolvency Law - Kenya Association of Manufacturers (KAM)

Businesses in Kenya are greatly affected by delays in determination of commercial cases. Prolonged commercial disputes affect the country’s competitiveness and ease of doing business. In addition, it discourages foreign investments in the country.

The Sustaining the Judiciary Transformation (SJT) Agenda 2017-2021 has prioritised increasing the speed and quality of justice. The SJT recognises that there are cases that have been in the judicial system for over five years that have not been resolved. The SJT states that the case backlog previously pegged at over 1 million in 2010, has reduced to 505,315 as at December 2016.

This is a marked improvement in dealing with the backlog, however, the SJT recognises that more needs to be done to speed up resolving these cases. The judiciary intends to recruit more judges and magistrates and expand the number of courts available across the country – including mobile courts.

The judiciary has also inculcated the culture of developing guidebooks to ease the process and increase the speed of determining cases, such as the Commercial Bench Book previously developed through a KAM and the Kenya Magistrates and Judges Association (KMJA) collaboration.

Since 2013, KAM has engaged the judiciary in a bid to improve the judicial processes that affect businesses. Starting in 2013, KAM partnered with the National Council on the Administration of Justice (NCAJ) to develop an illicit trade manual to help improve judicial processes to handle illicit trade. In 2014, KAM partnered with the KMJA to host the Annual General Conference (AGC) for judges and magistrates, during which a presentation on illicit trade was made and the manual was successfully launched in March 2015. In 2015, KAM further supported the judiciary to develop a commercial bench book to enhance the administration of justice, improve the quality of decisions made and ultimately boost investor confidence.

The Government of Kenya has recently overhauled the laws governing companies and insolvency in Kenya through the enactment of the Companies Act, 2015, and the Insolvency Act, 2015 and subsequent Regulations. The private sector has applauded the government for overhauling these laws.

KAM posits that the Companies Act, 2015, if well implemented, should make it easier for local and foreign investors to set up and run companies in Kenya. However, a key concern with this Act is that it is a voluminous document with 1,022 pages with 1,026 sections. This does not include Regulations. Key stakeholders responsible for interpreting the Act - judicial officers- have raised this concern on the difficulties of interpreting the law due to its bulkiness. Reading the voluminous law takes a lot of time and delays the period of administration of justice.

The Insolvency Act, 2015 consolidated bankruptcy and insolvency issues in the country into one law. Previously, insolvency touching on businesses was dealt with under the Winding-up provisions of the repealed Companies Act while the insolvency of natural persons was provided for in the now repealed Bankruptcy Act of Kenya (Cap 53 of the Laws of Kenya). In addition, the Act seeks to “redeem” companies to ensure they can continue as going concerns, through administration as compared to the repealed Act that sought to place businesses in liquidation. This has enhanced confidence to creditors who include both secured and non-preferential creditors. Most businesses are ranked as unsecured creditors and have been unable to recover their debts before the preferential creditors. The insolvency law reform has completely overhauled the insolvency and bankruptcy system in Kenya and there is a need to enhance awareness on the provisions of the Act to enhance compliance.

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