Insolvency Act

Cap. 53

This is the latest version of this Act.
Insolvency Act
LAWS OF KENYA

INSOLVENCY ACT

CAP. 53

  • Published in Kenya Gazette Vol. CXVII—No. 101 on 18 September 2015
  • Assented to on 11 September 2015
  • Commenced
  • Note: 30th November 2015— Parts I, III, V, 1st Schedule, 2nd Schedule; 18th January 2016—Parts II, VI, VII, VIII, IX, X, XI, XII, 3rd Schedule, 4th Schedule; 4th March 2016—Part XIII; 27th June 2016—Section 720
  1. [Amended by Movable Property Security Rights Act (Cap. 499A) on 16 May 2016]
  2. [Amended by Statute Law (Miscellaneous Amendments) Act, 2019 (Act No. 12 of 2019) on 23 July 2019]
  3. [Amended by Data Protection Act (Cap. 411C) on 25 November 2019]
  4. [Amended by Business Laws (Amendment) Act, 2020 (Act No. 1 of 2020) on 18 March 2020]
  5. [Amended by Finance Act, 2020 (Act No. 8 of 2020) on 30 June 2020]
  6. [Amended by Business Laws (Amendment) (No. 2) Act, 2021 (Act No. 1 of 2021) on 30 March 2021]
  7. [Revised by 24th Annual Supplement (Legal Notice 221 of 2023) on 31 December 2022]
An Act of Parliament to amend and consolidate the law relating to the insolvency of natural persons and incorporated and unincorporated bodies; to provide for and to regulate the bankruptcy of natural persons; to provide alternative procedures to bankruptcy that will enable the affairs of insolvent natural persons to be managed for the benefit of their creditors; to provide for the liquidation of incorporated and unincorporated bodies (including ones that may be solvent); to provide as an alternative to liquidation procedures that will enable the affairs of such of those bodies as become insolvent to be administered for the benefit of their creditors; and to provide for related and incidental matters.

Part I – PRELIMINARY PROVISIONS

1. Short title and commencement

(1)This Act may be cited as the Insolvency Act.
(2)The provisions of this Act shall come into operation on such date as the Cabinet Secretary may, by notice in the Gazette, appoint and different dates may be appointed for different provisions.
(3)Notwithstanding subsection (2), any provision that has not been brought into force within nine months after the publication of this Act shall come into force on the expiry of that period.

2. Interpretation

(1)In this Act, unless the context otherwise requires—"affairs" in relation to a natural person or company, includes a business carried on by the person or company and any dealings conducted in the course of the business;"amount" means an amount of money;"apply to" includes apply in relation to;"associate"—
(a)in relation to a company, means—
(i)its holding company or its subsidiary;
(ii)a subsidiary of its holding company;
(iii)a holding company of its subsidiary;
(iv)a person who controls the company (whether alone or with the person's associates or with other associates of the company);
(v)any other company in which a director of the company is also a director; or
(vi)a natural person who is employed by the company;
(b)in relation to a partner of a partnership, means—
(i)any other partner of the partnership;
(ii)a member of the partner's family or of the family of another partner of the partnership;
(iii)a natural person who is employed by the partnership; or
(c)in relation to a natural person, means—
(i)a member of the person's family;
(ii)a company controlled directly or indirectly, by the person whether alone or with associates;
(iii)an associate of the person's associates; or
(iv)any person (including a company) who employs the person or by whom the person is employed;
"authorised insolvency practitioner" means a person who holds an authorisation granted under section 9;"bank" means a bank to which the Banking Act (Cap. 488) applies;"bankrupt" means a debtor who has been adjudged bankrupt under Part III and has not been discharged from bankruptcy;"the Bankruptcy Act" means—
(a)the Bankruptcy Act (Cap. 53) repealed by this Act; and
(b)the rules made under that Act;
"bankruptcy trustee", in relation to a bankrupt or a bankruptcy, means the trustee of the bankrupt's estate;"business" includes trade and profession;"business records", in relation to a bankrupt, includes accounting records, receipts, bills, invoices and any other documents relating to the bankrupt's business;"company" means a company or foreign company registered under the Companies Act (Cap. 486), and includes—
(a)a building society within the meaning of the Building Societies Act (Cap. 389);
(b)a limited liability partnership within the meaning of the Limited Liability Partnerships Act (Cap. 30); and
(c)a body (whether incorporated or not) of a class prescribed by the insolvency regulations for the purposes of this definition;
"conditional sale agreement" means an agreement for the sale of goods under which payment of the whole or a part of the purchase price is deferred and a security right in the goods is created or provided for in order to secure the payment of the whole or a part of the purchase price;"connected with", in relation to a company, has the meaning given by subsection (4);"control of" or "control over", in relation to documents or other property, includes having possession of, or custody over, the documents or property;"correspondence" includes correspondence by electronic means;"the Court" means the High Court, and if there is an insolvency division of that Court, means that division;"creditor" includes a person entitled to enforce a final judgment or final order;"credit purchase transaction" means a hire-purchase agreement, a conditional sale agreement, a chattel leasing agreement or a retention of title agreement;"debt" means an obligation or liability of a person to pay money or money's worth to another person; and includes (except when the context otherwise provides)—
(a)a liability under a written law;
(b)a liability for a breach of trust;
(c)a liability under a contract or bailment or in tort; and
(d)a liability arising from an obligation to make restitution;
"debtor" means a person who owes a debt;"document" means information recorded in any form; and in particular includes a summons, notice, order or other legal process and a register (whether in hard copy or electronic form);"electronic form" in relation to a document or information, means the storage or keeping of the document or information in the form of data, text or images by means of guided or unguided electromagnetic energy, or both;"execution process" means any of the following—
(a)issuing or proceeding with any of the following orders or warrants under a judgment or order obtained against the debtor in any court in its civil jurisdictions—
(i)an order or warrant for the possession, seizure, or sale of any property;
(ii)an order of attachment;
(b)obtaining a garnishee order in favour of a judgment creditor under the Civil Procedure Rules (Cap. 21, subleg);
(c)obtaining an order that a judgment creditor may sue a sub-debtor under the Civil Procedures Rules;
(d)having a charging order nisi made absolute under the Civil Procedure Rules;
(e)beginning or continuing proceedings in any court for the appointment of a receiver of property, except an application for the appointment of a person as interim trustee under section 36;
(f)exercising a power of re-entry under a lease, or a power terminating a lease;
(g)seizing or selling property by levying distress for rent;
"execution process" means any of the following:
(a)issuing or proceeding with any of the following orders or warrants under a judgment or order obtained against the debtor in any court in its civil jurisdictions—
(i)an order or warrant for the possession, seizure, or sale of any property;
(ii)an order of attachment;
(b)obtaining a garnishee order in favour of a judgment creditor under the Civil Procedure Rules;
(c)obtaining an order that a judgment creditor may sue a sub-debtor under the Civil Procedures Rules;
(d)having a charging order nisi made absolute under the Civil Procedure Rules;
(e)beginning or continuing proceedings in any court for the appointment of a receiver of property, except an application for the appointment of a person as interim trustee under section 36;
(f)exercising a power of re-entry under a lease, or a power terminating a lease;
(g)seizing or selling property by levying distress for rent;
"functions" includes duties and responsibilities;"goods" includes all chattels personal other than things in action and money, and all emblements, industrial growing crops and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale;"hire-purchase agreement" means a hire-purchase agreement as defined in section 2(1) of the Hire Purchase Act (Cap. 507);"insolvency regulations" means regulations made under this Act and in force;“Judicial enforcement officer" means a bailiff or other officer of a court who is charged with carrying out a process involving the execution or enforcement of an order or judgement of the court;"landlord", in relation to a letting of premises, includes any person to whom rent or other money is payable in respect of the occupation or use of the premises;"liquidation application", in relation to a company, means an application to the Court for a liquidation order in respect of the company;"liquidation order", in relation to a company, means an order of the Court for the liquidation of the company by the Court;"member", in relation to a company, includes a person who is not a member of a company but to whom shares in the company have been transferred, or transmitted by operation of law;"notice" means notice in writing;"officer", in relation to a company, means the chief executive officer, or any director, manager or secretary, of the company;"partnership" means a partnership within the meaning of the Partnership Act;"person" includes a partnership, an unincorporated association, a corporation, a co-operative society or an organization, the successors of a partnership, association, corporation, society or organization, and heirs, executors, liquidators of the succession, administrators or other legal representative of a person;"powers" includes rights and authorities;"preferential creditor" means a person to whom a preferential debt is owed;"preferential debts", in relation to a natural person or a company, means the debts listed in the Second Schedule;"property" includes money, goods, choses in action, land and every description of property, whether real or personal, legal or equitable, and whether located in Kenya or elsewhere, and includes obligations, easements and every description of estate, interest and profit, present or future, vested or contingent in, arising out of or incidental to property;"prescribed bankruptcy level" has the meaning given by subsection (5);"property" includes things in action;"provable claim", in relation to a bankrupt, means a claim that is provable by a creditor in proceedings under Part III;"purchaser", in relation to a credit purchase transaction, means the person to whom goods are disposed of under the transaction, and, if the rights of that person are transferred by assignment or by operation of law, includes the person for the time being entitled to those rights;"records" means information stored in documents or in an electronic database or by electronic means;"the Registrar" (except when used in reference to the Court) means the Registrar of Companies;"register", "registered" and "registration", in relation to a notice or other document required or permitted to be lodged with, or sent or notified to, the Registrar under this Act, means respectively register, registered and registration in the Register of Companies in relation to the company to which the notice or other document relates;"relative", in relation to a person, means—
(a)the parents, spouse, child, brother, or sister of that person;
(b)the parents, child, brother or sister of the spouse of that person; or
(c)a nominee or trustee for any of the persons specified in paragraph (a) and (b);
"relevant court", in relation to a matter other than one that is specifically entrusted to the High Court by a provision of this Act, means the court exercising or having responsibility for exercising jurisdiction in respect of that matter;"the repealed Companies Act" means—
(a)the Companies Act repealed by the Companies Act (Cap. 486); and
(b)the rules or regulations made under that Act;
"retention of title agreement" means an agreement for the sale of goods to a company, being an agreement that does not constitute a charge on the goods; but under which, if the seller is not paid and the company is wound up, the seller will have priority over all other creditors of the company with respect to the goods or any property representing the goods as long as it has satisfied the applicable requirements for third-party effectiveness under the Movable Property Security Rights Act (Cap. 499A);"secured creditor" means—
(a)a person holding a security on or against the property of the debtor or (any part of it) to secure a debt due or accruing due to the person from the debtor; or
(b)a person whose claim is based on, or secured by, a negotiable instrument held as collateral security and on which the debtor is only indirectly or secondarily liable;
"security" means any mortgage, charge, lien or other security;"security agreement" means an agreement under which property becomes subject to a security for the payment of an obligation;"service provider" means any entity or person who supplies fuel, water, electricity, telecommunications, or such other services as may be prescribed;"shares" include stocks;"special resolution" means a resolution of creditors passed in accordance with this Act;"terms" includes conditions;"transfer" includes conveyance, assignment and surrender;"under administration", in relation to a company, has the meaning given by section 521;"unsecured creditor", in relation to a natural person or a company, means a creditor of the person or company who is not a secured creditor;"written" or "in writing" includes respectively "written in electronic form" and "in electronic form".
(2)For the purposes of the application of this Act to a debt, it does not matter—
(a)whether the debt is present or future;
(b)whether it is certain or contingent; or
(c)whether its amount is fixed or liquidated, or is capable of being ascertained by fixed rules or as a matter of opinion.
(3)For the purposes of this Act, a person is a member of the family of a natural person if the person is the parent, spouse, brother, sister, child, uncle, aunt, nephew, niece, stepfather, stepmother, stepchild, or adopted child of the person concerned and, in case of an adopted child, the child's adopted parents.
(4)For the purposes of this Act, a person is connected with a company if the person—
(a)is an officer of the company or an associate of such an officer; or
(b)is an associate of the company.
(5)For the purposes of this Act, the prescribed bankruptcy level is the amount for the time being specified in the Insolvency Regulations.[Act No. 13 of 2017, Sch.]

3. Objects and application of this Act

(1)The objects of this Act are—
(a)to establish and provide for the operation of a framework for the efficient and equitable administration of the estates of insolvent natural persons and unincorporated entities comprising natural persons, and the assets of insolvent companies and other bodies corporate, that maintains a fair balance between the interests of those persons, entities, companies and bodies and those of their creditors;
(b)in the case of insolvent natural persons and unincorporated entities comprising natural persons, and insolvent companies and other bodies corporate whose financial position is redeemable—
(i)to enable those persons and entities to continue to operate as going concerns so that ultimately they may be able to meet their financial obligations to their creditors in full or at least to the satisfaction of those creditors; and
(ii)to achieve a better outcome for the creditors as a whole than would likely to be the case if those persons and entities were adjudged bankrupt;
(c)in the case of insolvent companies and other bodies corporate whose financial position is redeemable—
(i)to enable those companies and bodies to continue to operate as going concerns so that ultimately they may be able to meet their financial obligations to their creditors in full or at least to the satisfaction of those creditors; and
(ii)to achieve a better outcome for the creditors as a whole than would likely to be the case if those companies and bodies were liquidated; and
(d)in the case of insolvent natural persons and unincorporated entities comprising natural persons, and insolvent companies and other bodies corporate whose financial position is irredeemable—to provide an orderly system for adjudging those persons bankrupt and for the efficient and optimal administration and distribution of their estates for the benefit of their creditors;
(e)in the case of insolvent companies and other bodies corporate whose financial position is irredeemable—to provide an orderly system for liquidating the affairs of those companies and bodies and for the efficient and optimal administration and distribution of their assets for the benefit of their creditors.
(2)This Act applies to natural persons, partnerships, limited liability partnership, companies and other corporate bodies established by any written law.

Part II – INSOLVENCY PRACTITIONERS

4. Circumstances in which person acts as insolvency practitioner

(1)A person acts as an insolvency practitioner in relation to a natural person if the person acts—
(a)as the bankruptcy trustee or interim trustee in respect of the person's property or as permanent or interim trustee in the sequestration of the person's estate;
(b)as a trustee under a deed that is—
(i)a deed of composition made for the benefit of the person's creditors; or
(ii)a trust deed for the creditors of the person; or
(c)as supervisor of a voluntary arrangement approved under Division I of Part IV.
(2)A person acts as an insolvency practitioner in relation to a company if the person acts as—
(a)the liquidator, provisional liquidator, administrator of the company;
(b)a supervisor of a voluntary arrangement approved under Part VIII; or
(c)a supervisor of a voluntary arrangement approved under Part IX.
(3)A reference in this section to a natural person includes, except in so far as the context otherwise requires, a reference to a partnership other than a limited liability partnership.

5. Consequences of acting without authorisation

(1)A person who, not being the holder of an authorisation, purports to act as an insolvency practitioner in relation to a company or a natural person commits an offence and is on conviction liable to a fine not exceeding five million shillings.
(2)This section does not apply to the Official Receiver.

6. Qualifications for person to act as insolvency practitioners

(1)Subject to subsection (2) and (3), a person is qualified to act as an insolvency practitioner only if the person—
(a)satisfies the requirements of the insolvency regulations with respect to education, practical training and experience;
(b)is a member of a professional body recognised under section 7; and
(c)satisfies the requirements (if any) of the rules governing the body.
(2)A natural person is disqualified from being or acting as an insolvency practitioner if the person—
(a)has been adjudged bankrupt, or the person's estate has been sequestrated and, in either case, the person has not been discharged;
(b)is subject to a disqualification order made under the law relating to companies; or
(c)is unable to perform the functions of an insolvency practitioner because of physical or mental infirmity.
(3)A body corporate is not eligible to be an insolvency practitioner, but this subsection does not extend to an employee of a body corporate.
(4)A natural person who, during the two years immediately preceding the commencement of this Part, was carrying on any of the activities referred to in section 4(1) or (2) is, unless disqualified under subsection (2), taken to be qualified to be and to act as an insolvency practitioner on and after that commencement, but ceases to be so qualified unless the person has, within the twelve months after that commencement, complied with the requirements of subsection (1).

7. Duty of Cabinet Secretary to declare certain bodies to be recognised as professional bodies for the purposes of this Act

(1)The Cabinet Secretary shall, by notice published in the Gazette, declare one or more professional bodies to be recognised professional bodies for the purposes of this Act.
(2)The Cabinet Secretary may declare a professional body to be a recognised professional body only if it—
(a)regulates the practice of a profession; and
(b)maintains and enforces rules authorizing its members to act as insolvency practitioners to ensure that members—
(i)are fit and proper persons to act as insolvency practitioners; and
(ii)meet acceptable requirements relating to education practical training and experience.
(3)A reference to the members of a recognised professional body includes a reference to persons who are, whether members of that body or not, governed by its rules in the practice of the relevant profession.
(4)The Cabinet Secretary may revoke a notice made under subsection (1) if it appears to the Cabinet Secretary that the professional body no longer meets the requirements of subsection (2).
(5)A notice made by the Cabinet Secretary under this section takes effect from the date of the notice or such other date as is specified in it.
(6)The Cabinet Secretary may, in revoking a notice made under subsection (1), exempt a specified member, or a specified class of members, of the professional body concerned from the effect of the revocation and to authorise the member, or the members of that class, to continue acting as an insolvency practitioner or as insolvency practitioner for such period as the Cabinet Secretary determines and notifies in writing to the member or members concerned.
(7)In this section, "profession" means a profession involving carrying on any of the activities referred to in section 4(1) or (2).

8. Application to act as insolvency practitioner

(1)A person who wishes to act as an insolvency practitioner may apply to the Official Receiver for an authorisation to act as an insolvency practitioner for the purposes of this Act.
(2)The Official Receiver shall refuse an application under subsection (1) that—
(a)is not made in the manner prescribed by the insolvency regulations;
(b)does not contain or be accompanied by such information as the Official Receiver may reasonably require for purposes of determining the application; or
(c)does not comply with subsection (3); or
(d)is not accompanied by the fee so prescribed.
(3)The applicant shall include in, or attach to, the application evidence—
(a)that the applicant is qualified to act as an insolvency practitioner; and
(b)that the applicant—
(i)has a professional indemnity insurance policy or has provided security for the proper performance of the functions of an insolvency practitioner; and
(ii)that policy or security meets the requirements prescribed by the insolvency regulations with respect to acting as a practitioner; and
(c)that the applicant is a fit and proper person to act as an insolvency practitioner.
(4)The Official Receiver may direct that notice of the application be published in the Gazette or in such other publication as the Official Receiver specifies.
(5)Information to be provided to the Official Receiver under this section is, if the Official Receiver so requires, to be in such form or verified in such manner as the Official Receiver may specify.
(6)An application made under subsection (1) may be withdrawn at any time before it is granted or refused.

9. Grant or refusal of authorisation

(1)As soon as practicable after receiving an application made under section 8, the Official shall either grant or refuse the application.
(2)The Official Receiver shall grant an application made under section 8 if satisfied that—
(a)the application complies with the requirements of that section; and
(b)that the applicant is qualified to act as an insolvency practitioner and is a fit and proper person to act as such.
(3)The Official Receiver may not refuse an application for an authorisation without having given the applicant an opportunity to be heard.
(4)On granting an authorisation under this section, the Official Receiver shall notify the applicant in writing of the authorisation and specify the date on which the authorisation is to take effect.
(5)An authorisation granted under this section continues in force for such period, and subject to such reasonable conditions, as are specified in the authorisation.

10. Power of Official Receiver to revoke authorisation

(1)The Official Receiver may revoke an authorisation granted under subsection (1) if satisfied that the holder of the authorisation—
(a)is no longer qualified to act as an insolvency practitioner;
(b)is no longer a fit and proper person to act as an insolvency practitioner;
(c)has been found guilty of an offence under this Act, or of an offence under any other Act involving fraud, dishonesty or breach of trust;
(d)has contravened or failed to comply with, or is contravening or failing to comply with, a condition of the authorisation; or
(e)in making the application for an authorisation, has provided the Official Receiver with false or misleading information.
(2)An authorisation granted under this section may be revoked by the Official Receiver at the request, or with the consent, of the holder of the authorisation.
(3)The Official Receiver may not revoke an authorisation (otherwise than at the request or with the consent of its holder) without having given its holder an opportunity to be heard.
(4)A revocation of an authorisation does not take effect until the period within which an appeal within which the holder of the authorisation can appeal against the revocation has expired or, if within that period, the holder lodges such an appeal, until the appeal is finally determined or is withdrawn, whichever first occurs.

11. Right to appeal against decisions of Official Receiver

(1)A person whose application for an authorisation to act as an insolvency practitioner is refused may appeal to the Court against the refusal.
(2)A person whose authorisation to act as insolvency practitioner is revoked otherwise than at the person's request or with the person's consent may appeal to the Court against the refusal.
(3)Such an appeal may be entertained only if—
(a)it is lodged with the Court within thirty days after the decision of the Official Receiver refusing the application or revoking the authorisation is notified to the applicant or holder of the authorisation, or within such extended period as the Court may allow; and
(b)is in the form, and complies with any other requirements, prescribed by the insolvency regulations for the purposes of this section.
(4)The Official Receiver is entitled to be served with a copy of the appeal and to appear at the hearing of the appeal as respondent.
(5)On the hearing of an appeal lodged in accordance with this section, the Court shall, if it considers that the refusal of the appellant's application, or the revocation of the appellant's authorisation, was not warranted, make an order quashing the decision of the Official Receiver refusing the application, or revoking the authorisation, but otherwise, it shall make an order confirming the Official Receiver's decision.
(6)The Court may make such ancillary or consequential orders as it considers appropriate, including an order as to payment of costs of the appeal proceedings.

Part III – BANKRUPTCY OF NATURAL PERSONS

Division 1 — Bankruptcy: introductory provisions

12. Interpretation: Part III

In this Part—"bankruptcy application" means an application for a debtor to be adjudged bankrupt;"bankruptcy order", in relation to a debtor, means an order of the Court adjudging the debtor bankrupt;"creditor's application" means a bankruptcy application made in accordance with section 17 by one or more creditors of a debtor;"debtor" means a natural person who owes money to one or more creditors; and, if a trust, partnership or other unincorporated body owes money to a creditor, includes all of the trustees of the trust, all of the partners of the partnership and all of the members of the body;"debtor's application” means a bankruptcy application made in accordance with section 32 by a debtor;"statutory demand" means a demand for payment of a debt made as referred to in section 17(3)(a) or (4)(a).

13. Nature of bankruptcy

(1)Bankruptcy occurs when the Court makes an order in respect of a debtor adjudging the debtor bankrupt—
(a)on the application of one or more creditors of the debtor made in accordance with section 17; or
(b)on the application of the debtor made in accordance with section 32.
(2)If a person is adjudged bankrupt—
(a)the property of the person vests in the bankruptcy trustee or, if there is no bankruptcy trustee, the Official Receiver;
(b)the person becomes restricted as to the business activities that the person can undertake; and
(c)the Official Receiver is entitled to recover assets that the person has transferred within the two years immediately preceding the bankruptcy.

14. Alternatives to bankruptcy

A debtor who is insolvent may as an alternative to bankruptcy—
(a)enter into a voluntary arrangement in accordance with Division I of Part IV;
(b)make a proposal to creditors in accordance with Division 2 of Part IV;
(c)pay creditors in instalments under a summary instalment order under Division 3 of that Part; or
(d)enter the no asset procedure in accordance with Division 4 of that Part.

15. Who is entitled to make a bankruptcy application

(1)A bankruptcy application may be made to the Court in accordance with the provisions of this Part—
(a)by one of the person's creditors or jointly by two or more one of them;
(b)by the debtor; or
(c)by the supervisor of any person who is for the time being bound by a voluntary arrangement proposed by the debtor and approved under Division I of Part IV.
(2)On the hearing of such an application, the Court may, subject to and in accordance with the provisions of this Part, make a bankruptcy order.
(3)An application may be made by a person referred to in subsection (1)(a) or (b) only if the debtor—
(a)is domiciled in Kenya;
(b)is personally present in Kenya on the date on which the application is made; or
(c)at any time during the three years immediately preceding that date—
(i)has been ordinarily resident, or has had a place of residence; or
(ii)has carried on business in Kenya.
(4)In subsection (3)(c), the reference to a debtor carrying on business includes—
(a)the carrying on of a business by a firm or partnership of which the debtor is a member; and
(b)the carrying on of a business by an agent or manager for the debtor for such a firm or partnership.

16. Proceedings on a bankruptcy application

(1)A bankruptcy application may not be withdrawn without the approval of the Court.
(2)The Court has a general power to dismiss a bankruptcy application or to stay proceedings on such an application on the ground that the Court is of the opinion that a requirement of this Part or the insolvency regulations has not been complied with in a material respect.
(3)If the Court stays proceedings on a bankruptcy application, it may do so on such terms as it considers appropriate.

Division 2 — Bankruptcy applications by creditors

17. Creditor may apply for bankruptcy order in respect of debtor

(1)One or more creditors of a debtor may make an application to the Court for a bankruptcy order to be made in respect of the debtor in relation to a debt or debts owed by the debtor to the creditor or creditors.
(2)Such an application may be made in relation to a debt or debts owed by the debtor only if, at the time the application is made—
(a)the amount of the debt, or the aggregate amount of the debts, is equal to or exceeds the prescribed bankruptcy level;
(b)the debt, or each of the debts, is for a liquidated amount payable to the applicant creditor, or one or more of the applicant creditors, either immediately or at some certain, future time, and is unsecured;
(c)the debt, or each of the debts, is a debt that the debtor appears either to be unable to pay or to have no reasonable prospect of being able to pay; and
(d)there is no outstanding application to set aside a statutory demand in respect of the debt or any of the debts.
(3)For the purposes of subsection (2)(c), a debtor appears to be unable to pay a debt if, but only if, the debt is payable immediately and either—
(a)the applicant creditor to whom the debt is owed has served on the debtor a demand requiring the debtor to pay the debt or to secure or compound for it to the satisfaction of the creditor, at least twenty-one days have elapsed since the demand was served, and the demand has been neither complied with nor set aside in accordance with the insolvency regulations; or
(b)execution or other process issued in respect of the debt on a judgment or order of any court in favour of the applicant, or one or more of the applicants to whom the debt is owed, has been returned unsatisfied either wholly or in part.
(4)For the purposes of subsection (2)(c), a debtor appears to have no reasonable prospect of being able to pay a debt if, but only if, the debt is not immediately payable and—
(a)the applicant to whom it is owed has served on the debtor a demand requiring the debtor to establish to the satisfaction of the creditor that there is a reasonable prospect that the debtor will be able to pay the debt when it falls due;
(b)at least twenty-one days have elapsed since the demand was served; and
(c)the demand has been neither complied with nor set aside in accordance with the insolvency regulations.
(5)This section is subject to sections 18 to 20.
(6)An overstatement in a statutory demand of the amount owing by the debtor does not invalidate the demand unless—
(a)the debtor notifies the creditor that the debtor disputes the validity of the demand because it overstates the amount owing; and
(b)the debtor makes that notification within the period specified in the demand for the debtor to comply with it.
(7)A debtor complies with a demand that overstates the amount owing by—
(a)taking steps that would have complied with the demand had it stated the correct amount owing, such as by paying the creditor the correct amount owing plus costs; and
(b)taking those steps within the period specified in the demand for the debtor to comply.

18. When court can make bankruptcy order on application by secured creditor

(1)A debt that is the debt, or one of the debts, in respect of which a creditor's application is made need not be unsecured if either—
(a)the application contains a statement by the person having the right to enforce the security that the creditor is willing, in the event of a bankruptcy order being made, to give up the security for the benefit of all the bankrupt's creditors; or
(b)the application is expressed not to be made in respect of the secured part of the debt and contains a statement by that person of the estimated value at the date of the application of the security for the secured part of the debt.
(2)In a case to which subsection (1)(b) applies, the secured and unsecured parts of the debt are to be treated for the purposes of sections 17, 19 and 20 as separate debts.

19. Expedited creditor's application

If a creditor's application is made wholly or partly in respect of a debt that is the subject of a statutory demand, the application may be made before the end of the twenty-one day period referred to in section 17 if—
(a)there is a serious possibility that the debtor's property, or the value of any of that property, will be significantly reduced during that period; and
(b)the application contains a statement to that effect.

20. Proceedings on creditor's application

(1)The Court may not make a bankruptcy order on a creditor's application unless it is satisfied that the debt, or one of the debts, in respect of which the application was made is either—
(a)a debt which, having been payable at the date of the application or having since become payable, has been neither paid nor secured or compounded for; or
(b)a debt that the debtor has no reasonable prospect of being able to pay when it falls due.
(2)If the application contains a statement of the kind referred to in section 19, the Court may not make a bankruptcy order until at least twenty-one days have elapsed since the service of the relevant statutory demand.
(3)The Court may dismiss the application if it is satisfied that the debtor is able to pay all of the debtor's debts or is satisfied—
(a)that the debtor has made an offer to secure or compound for a debt in respect of which the application is made;
(b)that the acceptance of that offer would have required the dismissal of the application; and
(c)that the offer has been unreasonably refused.
(4)In determining for the purposes of subsection (3) whether the debtor is able to pay all of the debtor's debts, the Court shall take into account the debtor's contingent and prospective liabilities.
(5)In determining for the purposes of this section what constitutes a reasonable prospect that a debtor will be able to pay a debt when it falls due, the Court shall presume that the prospect given by the information known to the creditor when the creditor entered into the transaction resulting in the debt was a reasonable prospect.
(6)Nothing in sections 17 to 19 prevents the Court from allowing a creditor's application to be amended by the omission of any creditor or debt and to be proceeded with as if action taken for the purposes of those sections had been taken only by or in relation to the remaining creditors or debts.

21. Creditor's execution process not to be issued or continued

(1)A creditor who makes an application for a bankruptcy order in respect of a debtor may not issue an execution process against the debtor in respect of the property of the debtor to recover a debt on which the application is based.
(2)If the creditor has already issued the execution process, the creditor may not continue it.
(3)The creditor may make an application to the relevant court for approval to issue or continue the execution process.
(4)On the hearing of an application made under subsection (3), the relevant court may make an order permitting the applicant to begin or continue the execution process but only if it is satisfied after considering all representations made to it that the interests of the other creditors will not be detrimentally affected.
(5)Any action taken in contravention of subsection (1) or (2) is void.

22. Power of relevant court to stay execution processes by other creditors or allow them on terms

(1)After a creditor's application has been made, the debtor or any creditor may apply to the relevant court for an order stopping the issue or continuance by any other creditor of an execution process against the debtor in respect of the property of the debtor.
(2)On the hearing of an application under subsection (1), the Court may make an order—
(a)stay the execution process on such terms as the Court considers appropriate; or
(b)allowing the execution process to continue on such terms as the Court considers appropriate.

23. Execution process issued by other court

(1)This section applies if an execution process has been issued by a court other than the High Court.
(2)If it is proved to the issuing court that an application for a bankruptcy order in respect of the debtor has been made to the High Court, that court may either—
(a)stay the execution process on such terms as it considers appropriate; or
(b)permit the execution process to continue on such terms as it considers appropriate.

24. No restriction on execution process if bankruptcy application withdrawn or dismissed

The restrictions in sections 21 to 23 on issuing or continuing an execution process do not apply if an application is withdrawn or dismissed.

25. When court may adjudge debtor bankrupt

(1)The Court may make a bankruptcy order in respect of the debtor if the creditor has complied with section 7.
(2)The Court may refuse to adjudge a debtor bankrupt if—
(a)the applicant creditor has not satisfied the requirements specified in section 17;
(b)the debtor is able to pay the debtor's debts; or
(c)it is just and equitable that the Court should not make a bankruptcy order.

26. When the Court may stay application

The Court may, at any time, stay an application by a creditor for bankruptcy on such terms, and for such period, as the Court considers appropriate.

27. Orders if more than one application

(1)If there is more than one bankruptcy application in respect of a debtor, and one application has been stayed by an order of the Court, the Court may, if it believes there is a good reason to do so, make a bankruptcy order in respect of the application that has not been stayed.
(2)On making a bankruptcy order under subsection (1), the Court shall dismiss the application that has been stayed on such terms as it considers appropriate.

28. Orders if there is more than one order

If an application made by a creditor for a bankruptcy order relates to more than one debtor, the Court may refuse to make such an order in respect of one or some of the debtors without affecting the application made in relation to the remaining debtor or debtors.

29. Power of the Court to make order staying bankruptcy application, etc.

(1)This section applies if a debtor—
(a)has made a disposition of all, or substantially all, of the property of the debtor to a trustee for the benefit of the creditors of the debtor;
(b)has made a proposal under Division I of Part IV; or
(c)has applied for a summary instalment order under that Division.
(2)The debtor, the bankruptcy trustee or any creditor may apply for an order under this section.
(3)On the hearing of an application under this section, the Court may make any of the following orders—
(a)an order staying the bankruptcy application;
(b)an order staying any other bankruptcy application;
(c)an order as to costs;
(d)if it orders costs to be paid to the creditor who applied for the bankruptcy application—an order that the costs be paid out of the assets of the debtor.
(4)This section does not limit the powers of the Court under section 39.

30. Court may stay application while underlying debt is determined

(1)This section applies if a debtor appears in opposition to a creditor's application and the debtor claims that the debtor—
(a)does not owe a specified debt to the creditor; or
(b)owes a specified debt to the creditor, but the debt is less than the prescribed bankruptcy level.
(2)The Court may, instead of refusing the application, stay the application so that the issue of—
(a)whether the debt is owed; or
(b)how much of the debt is owed, can be resolved at trial.
(3)As a condition of staying the application, theCourt may require the debtor to give security to the creditor for any debt that may be established as owing by the debtor to the creditor, and for the cost of establishing the debt.

31. Court may allow one creditor to be substituted for another

In the case of a creditor's application, the Court may substitute another creditor for the creditor making the application if—(a)the applicant creditor has not proceeded with due diligence, or at the hearing of the application offers no evidence; and(b)the debtor owes the other creditor two hundred and fifty thousand shillings or more.

Division 3 — Bankruptcy applications by debtors

32. When debtor may make application for bankruptcy order

(1)A debtor may make an application to the Court for an order adjudging the debtor bankrupt only on the grounds that the debtor is unable to pay the debtor's debts.
(2)The Court may decline to deal with such an application if it is not accompanied by a statement of the debtor's financial position containing—
(a)such particulars of the debtor's creditors and of the debtor's debts and other liabilities and assets as may be prescribed by the insolvency regulations; and
(b)such other information as may be so prescribed.
(3)The Court may reject a statement of the debtor's financial position if of the opinion that it is incorrect or incomplete.
(4)A debtor who makes an application under this section shall publish a notice of the application in—
(a)a newspaper circulating within the region in which the debtor ordinarily resides; and
(b)in such other publications (if any) as may prescribed by the insolvency regulations for purposes of this section.
(5)The Court may decline to hear the application if subsection (4) has not been complied with to its satisfaction.

33. Appointment of insolvency practitioner by the Court

(1)Subject to section 34, on the hearing of a debtor's application, the Court may not make a bankruptcy order if it appears to the Court—
(a)that if a bankruptcy order were made the total amount of the applicant's debts, so far as unsecured, would be less than the small bankruptcies level;
(b)that if a bankruptcy order were made, the value of the bankrupt's estate would be equal to or more than the prescribed minimum value;
(c)that, during the five years immediately preceding the debtor's application, the debtor has—
(i)neither been adjudged bankrupt; nor
(ii)made a composition with the debtor's creditors in satisfaction of the debtor's debts or a scheme of arrangement of the debtor's financial affairs; and
(d)that it would be appropriate to appoint an authorised insolvency practitioner to prepare a report under section 34.
(2)If, on the hearing of the application, it appears to the Court that it would be appropriate to make an appointment as referred to in subsection (1)(d), the Court shall appoint an authorised insolvency practitioner in relation to the debtor—
(a)to prepare a report under section 34; or
(b)subject to Division 1 of Part IV, to act in relation to any voluntary arrangement to which the report relates as supervisor for the purpose of supervising its implementation.
(3)In this section—
(a)"prescribed minimum value" means the amount for the time being specified in the insolvency regulations for the purposes of this section;
(b)"small bankruptcies level" means the amount for the time being so specified for the purposes of this section.

34. Action on report of insolvency practitioner

(1)The insolvency practitioner appointed under section 33 shall—
(a)inquire into the debtor's financial affairs; and
(b)within such period as the Court may specify, submit a report to the Court stating whether the debtor is willing to make a proposal for a voluntary arrangement in accordance with Division 1 of Part IV.
(2)If the insolvency practitioner proposes to state that the debtor is willing to make such a proposal, that practitioner shall also state—
(a)whether, in his or her opinion, a meeting of the debtor's creditors should be convened to consider the proposal; and
(b)if, in that practitioner's opinion such a meeting should be convened—the date on which, and time and place at which, the meeting should be held.
(3)On considering a report submitted under this subsection (1), the Court may—
(a)without any application, make an interim order under section 306, if it considers it appropriate to do so for the purposes of facilitating the consideration and implementation of the debtor's proposal; or
(b)if it considers it would be inappropriate to make such an order—make a bankruptcy order in respect of the applicant.
(4)An interim order made in accordance with subsection (3)(a) ceases to have effect at the end of such period as the Court may specify for the purpose of enabling the debtor's proposal to be considered by the debtor's creditors in accordance with the applicable provisions of Division I of Part IV.
(5)If the insolvency practitioner has proposed in the report that a meeting of the debtor's creditors should be convened, the insolvency practitioner shall, unless the Court otherwise directs, convene such a meeting for the time, date and place proposed in the report.
(6)Such a meeting is to be taken to have been convened under section 309 in which case subsections (2) and (3) of that section and sections 309 to 314 apply to the meeting.

35. Joint application can be made by two or more debtors

Two or more debtors, who are partners in a business partnership, may make a joint application under section 32.

Division 4 — Appointment of interim trustee in respect of debtor's property

36. Appointment of interim trustee of debtor's property on application of creditor

(1)After a creditor's application has been made, the creditor or any other creditor of the debtor may apply to the Court for an order for the appointment of an authorised insolvency practitioner as interim trustee in respect of all or a specified part of the debtor’s property.
(2)The Court may make such an order at any time before a bankruptcy order is made in respect of the debtor.
(3)In making an order under subsection (1), the Court may authorise the interim trustee to do all or any of the following—
(a)take control of any property of the debtor;
(b)sell any perishable property or property of the debtor that is likely to fall rapidly in value;
(c)control the affairs or property of the debtor as directed by the Court.
(4)An order authorising the trustee to control a debtor's business may not extend beyond what, in the Court's opinion, is necessary to conserve the debtor's property.
(5)The Official Receiver and any authorised insolvency practitioner are suitably qualified persons for the purpose of subsection (1).
(6)In this section, "debtor's business" includes any business in which the debtor has a financial interest.

37. Additional orders after appointment of interim trustee

(1)After the appointment of an interim trustee under section 36, the Court may, on an application made under subsection (2), make additional orders under that section.
(2)An application for the purpose of subsection (1) made by a creditor or the interim trustee or, with the approval of the Court, by any other person.

38. Notice of appointment of interim trustee to be published

(1)As soon as practicable after the appointment of an interim trustee, the trustee shall publish a notice of the appointment—
(a)in one or more newspapers circulating in Kenya; and
(b)in such other publication as may be prescribed by the insolvency regulations for the purposes of this section.
(2)The appointment of the interim trustee does not take effect until subsection (1) has been complied with.

39. Execution process not to be issued after notice of appointment of trustee is published

(1)A creditor of the debtor may not issue an execution process under section 23 after notice of the appointment of the interim trustee has been published.
(2)A creditor may not continue an execution process already issued before notice of the appointment of the interim trustee has been published.
(3)A creditor or any other interested person may apply to the Court for an order allowing the issue or continuation of an execution process, and the Court may make an order on such terms as it considers appropriate.
(4)Any action taken in contravention of subsection (1) or (2) is void.

40. Effect of staying execution

If execution is stayed under section 39, sections 109, 110, 111, 112, 113, 114 and 116 apply as if the order staying execution were a bankruptcy order.

Division 5 — Adjudication of bankruptcy applications

41. Bankruptcy commences on making of bankruptcy order

A bankruptcy under this Act commences on the date and at the time when a bankruptcy order is made in respect of the debtor.

42. Date and time of bankruptcy order to be recorded

(1)On making a bankruptcy order, the Court shall record the date and time when the order was made.
(2)If the debtor is adjudged bankrupt on the application of the debtor, the Official Receiver shall record on the application the date and time when the debtor made the application.

43. Registrar of the Court to notify trustee of bankruptcy order

As soon as practicable after the Court has made a bankruptcy order in respect of a debtor, the Registrar of the Court shall forward a copy of the order to the Official Receiver.

44. Official Receiver to nominate bankruptcy trustee

(1)As soon as practicable after receiving a copy of a bankruptcy order, the Official Receiver shall nominate a qualified person to be bankruptcy trustee in respect of the debtor's property.
(2)In this subsection (1), "qualified person" means the Official Receiver or an authorised insolvency practitioner.

45. Presumption that act was done, or transaction was entered into or made, after bankruptcy

If a doubt arises as to whether an act was done, or a transaction entered into or made, before or after the time when a bankruptcy commenced, it is to be presumed, until the contrary is proved, that the act was done, or the transaction was entered into or made, after that time.

46. Bankruptcy order to be binding on all persons

A bankruptcy order becomes binding on the bankrupt and all other persons—
(a)on the expiry of the time within which an appeal may be lodged against the order; or
(b)if an appeal is lodged in respect of the order within that period and the Court later confirms the order or the appeal is later withdrawn—on the confirmation of the order or the withdrawal of the appeal,
and the order can no longer be questioned on the ground that it was invalid or that a prerequisite for making it did not exist.

47. Official Receiver to maintain public register of undischarged and discharged bankrupts

(1)The Official Receiver shall establish and maintain a public register of undischarged and discharged bankrupts.
(2)The Official Receiver shall maintain the register in accordance with Division 2 of Part XIl.

Division 6 — What happens on and after bankruptcy commences

48. What happens or is to happen on and after bankruptcy commences

(1)When a bankruptcy order commences—
(a)all proceedings to recover the bankrupt's debts are stayed; and
(b)the property of the bankrupt (whether in or outside Kenya), and the powers that the bankrupt could have exercised in respect of that property for the bankrupt's own benefit, vest in the Official Receiver.
(2)Despite subsection (1), the Court may, on the application by a creditor or other person interested in the bankruptcy, allow proceedings that had already begun before the bankruptcy commenced to continue on such terms as the Court considers appropriate.
(3)Within thirty days after the date of the bankruptcy order, the Official Receiver shall, subject to subsection (4)—
(a)publish a notice advertising the order—
(i)once in the Gazette; and
(ii)once in a newspaper widely circulating in the area in which the bankrupt resides; or
(b)if the Court directs that the order be advertised in some other publication, publish such a notice in that other publication.
(4)If the bankrupt has appealed against the order or has applied for its annulment, the Court may order the Official Receiver not to advertise the bankruptcy order, but only if it is satisfied that there are compelling reasons for doing so.
(5)Subsection (1) is subject to section 106.

49. Official Receiver to serve notice on bankrupt requiring the bankrupt to lodge statement of the bankrupt's financial position

(1)Within thirty days after receiving notice of a bankruptcy order, the Official Receiver shall serve on the bankrupt a notice—
(a)stating that a bankruptcy order has been made in respect of the bankrupt;
(b)requiring the bankrupt to lodge with the Official Receiver a statement setting out the bankrupt's financial position; and
(c)specifying a deadline for lodging the statement with the Official Receiver.
(2)The Official Receiver shall serve the notice at the address of the bankrupt given in the bankruptcy application or at the bankrupt's address last known to the Official Receiver.
(3)This section does not apply if the bankrupt has already lodged a statement under section 32.

50. Bankrupt to lodge statement of financial position with bankruptcy trustee

(1)Within fourteen days after being served with the notice in accordance with section 49 (or within such extended period not exceeding sixty days as the Official Receiver may allow), the bankrupt shall lodge with the Official Receiver a statement of the bankrupt's financial position setting out—
(a)particulars of the bankrupt's assets;
(b)the bankrupt's debts and liabilities;
(c)the names, residences and occupations of the bankrupt's creditors;
(d)the securities held by the bankrupt's creditors;
(e)the dates when the securities were given; and
(f)such other information as may be prescribed by the insolvency regulations or as the bankruptcy trustee may reasonably require.
(2)At any time after lodging with the bankruptcy trustee a statement of the bankrupt's financial position, the bankrupt may lodge additional or amended statements or answers with the bankruptcy trustee.
(3)A bankrupt who fails to comply with a requirement of subsection (1) commits an offence and on conviction is liable to a fine not exceeding one million shillings or to imprisonment for a term not exceeding two years, or to both.
(4)If, after being convicted of an offence under subsection (2), a bankrupt, without reasonable excuse, continues to fail to comply with the relevant requirement, the bankrupt commits a further offence on each day during which the failure continues and on conviction is liable to a fine not exceeding one hundred thousand shillings for each such offence.

51. Creditors entitled to inspect and take copies of statement of bankrupt's financial position

(1)A person who in writing claims to be a creditor of the bankrupt is entitled, at all reasonable times (either personally or through an agent—
(a)to inspect the statement of the bankrupt's financial position; and
(b)to take a copy it or of part of it.
(2)A person who falsely claims to be a creditor is in contempt of the Court.

52. Official Receiver to convene first meeting of creditors

(1)The Official Receiver shall, subject to subsection (5), convene the first meeting of the bankrupt's creditors within the prescribed period, unless the Official Receiver decides, in accordance with section 53, not to hold the meeting.
(2)The Official Receiver shall convene the meeting by giving notice of the time, date and place of the meeting to—
(a)the bankrupt;
(b)each creditor named in the statement of the bankrupt's financial position; and
(c)any other creditors known to the bankruptcy trustee,
a notice advertising the time, date and place of the meeting.
(3)The Official Receiver shall publish a notice advertising the time, date and place of the meeting—
(a)in one or more newspapers circulating generally in Kenya; and
(b)in such other publications as the Official Receiver considers appropriate.
(4)For the purpose of subsection (1), the prescribed period is—
(a)thirty days after the statement of the bankrupt's financial position is lodged Receiver; or
(b)if the bankrupt is late in lodging the statement or fails to lodge a statement at all, thirty days after the date on which the bankruptcy order was made.
(5)The Official Receiver may delay convening the first meeting of creditors for a period not exceeding fourteen days if the Official Receiver considers that there are special circumstances justifying the delay.

53. Circumstances in which Official Receiver may decide not to convene first meeting of creditors

(1)The Official Receiver may decide not to convene a first creditors' meeting if the Official Receiver—
(a)has sent to each creditor named in the statement of the bankrupt's financial position, and to any other creditor known to the Official Receiver, a notice that complies with section 54; and
(b)has not, within fourteen days after sending the notice, received from a creditor a request to convene such a meeting.
(2)In deciding whether the meeting should or should be convened, the Official Receiver shall have regard to—
(a)the bankrupt's assets and liabilities;
(b)the likely result of the bankruptcy; and
(c)any other relevant matters.
(3)Within seven days after deciding not to convene a first meeting of creditors, the Official Receiver shall send to each creditor named in the statement of the bankrupt's financial position, and to any other creditor known to the Official Receiver, a notice stating—
(a)the Official Receiver's view that a first creditors' meeting need not be convened;
(b)the reasons for not convening the meeting; and
(c)that the Official Receiver will convene a meeting only if the Official Receiver receives from a creditor, within fourteen days after sending the notice, a request to convene such a meeting.

54. Documents to be sent with notice of meeting

(1)The Official Receiver shall send the following documents with the notice of the first meeting of creditors—
(a)a summary of the bankrupt's statement of assets and liabilities;
(b)extracts from, or a summary of, the bankrupt's explanation of the causes of the bankruptcy; and
(c)any comments on the bankruptcy that the Official Receiver chooses to make.
(2)Subsection (1) does not apply if the Official Receiver has not received the statement of the bankrupt's financial position when the notice is sent.
(3)A failure in sending or receiving the documents in subsection (1) does not affect the validity of the proceedings at the meeting.

55. Power of creditors to requisition meeting

(1)If, in the case of a bankruptcy, the Official Receiver has not yet convened a first meeting of creditors, or has decided not to convene such a meeting, any creditor of the bankrupt may request the Official Receiver to convene such a meeting.
(2)As soon as practicable after receiving a request under subsection (1), the Official Receiver shall convene a first meeting of creditors if the request appears to the Official Receiver to be made with the concurrence of not less than one-quarter in value of the bankrupt's creditors (including the creditor making the request).

56. Execution process not to be begin or continue after bankruptcy order advertised

(1)A creditor may not begin or continue an execution process in respect of the bankrupt's property or person for the recovery of a debt provable in the bankruptcy, after the Official Receiver—
(a)has published an advertisement notifying the bankruptcy; or
(b)has given notice of the bankruptcy to the creditor.
(2)After the notice of the bankruptcy notice has been advertised, or after being given notice of the bankruptcy by the Official Receiver, a creditor may not seize or sell any property by means of distress for rent owed by the bankrupt.
(3)If the distress procedure has already begun, such a creditor may continue with the procedure only with the approval of the Court and subject to such conditions as the Court may specify.

57. Effect of bankrupt's death after bankruptcy order

If a bankrupt dies after being adjudged bankrupt, the bankruptcy continues in all respects as if the bankrupt were still alive.

58. Creditors' role at creditors' meetings

The role of the creditors in the bankruptcy primarily—(a)to attend meetings of the creditors;(b)to submit proofs of the debts of the bankrupt; and(c)to examine the bankrupt at those meetings.

Division 7 — Appointment and functions of bankruptcy trustees

59. Power to appoint bankruptcy trustee

(1)The power to appoint a person as a bankruptcy trustee in respect of a bankrupt's estate, or to fill a vacancy in such an appointment, is exercisable—
(a)except as provided by paragraph (b) or (c), by a creditors' meeting;
(b)under section 60 or 61, by the Official Receiver;
(c)under section 62, by the Court.
(2)A power to appoint a person as bankruptcy trustee includes power to appoint two or more persons as joint bankruptcy trustees, but such an appointment is not effective unless it makes provision for the circumstances in which the trustees are required to act together and the circumstances in which one or more of them may act on behalf of the others.
(3)The appointment of a person as bankruptcy trustee takes effect only if the person accepts the appointment.
(4)The appointment of a person as a bankruptcy trustee takes effect at the time specified in the document by which the person is appointed.
(5)This section does not affect the provisions of this Part under which the Official Receiver is, in specified circumstances, to be, or required to act as, the bankruptcy trustee in respect of a bankrupt's estate.

60. Consequences of failure of creditors' meeting to appoint bankruptcy trustee

(1)If a meeting convened under section 52 or 55 is held but no one is appointed as bankruptcy trustee, the Official Receiver shall decide whether or not there is a need to make such an appointment.
(2)If the Official Receiver decides there is a need to make such an appointment, the Official Receiver shall make an appointment accordingly.
(3)If the Official Receiver decides that there is no need to make such an appointment, the Official Receiver shall notify the decision to the Court.
(4)On giving notice of the decision to the Court in accordance with subsection (3), the Official Receiver becomes bankruptcy trustee in respect of the bankrupt's estate.

61. Power of Official Receiver acting as bankruptcy trustee to appoint another person to act instead

(1)The Official Receiver may, at any time while acting as bankruptcy trustee in respect of a bankrupt's estate under a provision of this Division (other than section 62), appoint another qualified person to act as the bankruptcy trustee instead.
(2)Immediately after making such an appointment, the Official Receiver shall notify the appointment to the Court.
(3)The person appointed shall, as soon as practicable (and not later than seven days) after being appointed—
(a)give notice of the appointment to each of the bankrupt's creditors; or
(b)if, on application made to the Court, the Court so allows, advertise the appointment in accordance with the directions of the Court.
(4)In the notice or advertisement, the person appointed shall state—
(a)whether the person proposes to convene a general meeting of the bankrupt's creditors for the purpose of establishing a creditor's committee under section 100; and
(b)if the person does not propose to convene such a meeting, that the creditors are entitled under this Division to require one to be convened.

62. Special case in which the Court may appoint bankruptcy trustee

(1)If a bankruptcy order is made when there is a supervisor of a summary instalment order approved in relation to the bankrupt under Division 2 of Part IV, the Court may, if it considers it appropriate to do so on making the order, appoint the supervisor of the order as bankruptcy trustee in respect of the bankrupt's estate.
(2)If an appointment is made under subsection (1), the Official Receiver is not required to decide under section 60(1) whether or not to convene a creditors' meeting.
(3)Section 61(4) and (5) apply to a bankruptcy trustee appointed under this section.

63. Powers of bankruptcy trustee

(1)A bankruptcy trustee may—
(a)with the approval of the creditor's committee, exercise of any of the powers specified in Part 1 of the First Schedule; and
(b)without that approval, exercise any of the general powers specified in Part 2 of that Schedule.
(2)With the approval of the creditors' committee or the Court, a bankruptcy trustee may appoint the bankrupt—
(a)to superintend the management of the bankrupt's estate or any part of it;
(b)to carry on the bankrupt's business (if any) for the benefit of the bankrupt's creditors; or
(c)in any other respect to assist in administering the estate in such manner and on such terms as the bankruptcy trustee may direct.
(3)An approval given for the purposes of subsection (1)(a) or (2) is required to be a specific one and to relate to a particular exercise of the relevant power.
(4)A person dealing with the bankruptcy trustee in good faith and for value is not required to ascertain whether an approval required by subsection (1)(a) or (2) has been given.
(5)If a bankruptcy trustee has done anything without the approval required by subsection (1)(a) or (2), the Court or the creditor's committee (if any) may, for the purpose of enabling the bankruptcy trustee to meet the bankruptcy trustee's expenses out of the bankrupt's estate, ratify what that trustee has done.
(6)Part 3 of the First Schedule has effect with respect to the things that the bankruptcy trustee is able to do for the purposes of, or in connection with, the exercise of any of the bankruptcy trustee's powers under this Act.
(7)If, in exercising a power conferred by this Act, a bankruptcy trustee who is not the Official Receiver—
(a)disposes of property comprised in the bankrupt's estate to an associate of the bankrupt; or
(b)employs an advocate,
the bankruptcy trustee shall, if there is a creditor's committee, give notice to the committee of that exercise of that power.
(8)A bankruptcy trustee may use his or her discretion in administering a bankrupt's property, but, in doing so, is required to have regard to the resolutions passed by the creditors at creditors' meetings.

64. Bankruptcy trustee not to sell bankrupt's property before first creditors' meeting

(1)A bankruptcy trustee may sell property of the bankrupt before the first meeting of creditors only if—
(a)it is perishable or is likely to rapidly diminish in value;
(b)in that trustee's opinion, its sale could be prejudiced by delay; or
(c)expenses would, in that trustee's opinion, be incurred by the delay and, before sale, the bankruptcy trustee has consulted the creditors.
(2)The bankruptcy trustee shall ensure that the proceeds of the sale of a bankrupt's property in accordance with subsection (1) are in every case invested in accordance with section 66.

65. Title of purchaser from bankruptcy trustee

The title of a purchaser of the bankrupt's property from a bankruptcy trustee under a document that is made in the exercise of the bankruptcy trustee's power of sale in the First Schedule may not be questioned except on account of fraud.

66. Bankruptcy trustee to bank money and power to invest surplus

(1)A bankruptcy trustee shall establish and maintain a bank account in respect of each bankrupt estate administered by that trustee and shall pay into the relevant account all money that that trustee receives in that capacity.
(2)If money held by a bankruptcy trustee in respect of a bankrupt's estate is not immediately required to be paid in connection with the administration of the estate, the bankruptcy trustee may invest the money in an investment of a kind prescribed by the insolvency regulations for the purposes of this section.
(3)A bankruptcy trustee who invests money in accordance with subsection (2) shall credit to the bankrupt's estate the interest, dividends or other money that accrues in respect of the investment.

67. Bankruptcy trustee may assign right to sue under this Act

(1)A bankruptcy trustee may, if the Court has first approved it, assign a right to sue that is conferred on the bankruptcy trustee by this Act.
(2)An application for such an approval may—
(a)be made only by the bankruptcy trustee or the person to whom it is proposed to assign the right to sue; and
(b)be opposed only by a person who is a defendant to the bankruptcy trustee's action, if already begun, or a proposed defendant.

68. Proceedings by bankruptcy trustee when bankrupt is partner in business partnership

(1)If a member of a business partnership is adjudged bankrupt, the Court may authorise the bankruptcy trustee to bring proceedings in the names of the bankruptcy trustee and the bankrupt's partner.
(2)The bankruptcy trustee shall serve notice of the application on the partner for authority to bring the proceedings, and the partner may oppose the application.
(3)The partner may apply to the Court for a direction that—
(a)the partner is to be paid the partner's proper share of the proceeds of the proceedings; or
(b)the partner is to be indemnified by the bankruptcy trustee against any costs incurred in the proceedings on the condition that the partner does not claim any benefit from them.
(4)Any purported release by the partner of the debt or demand to which the proceedings relate is void.

69. Discharge or transfer of indenture of apprenticeship or articles of agreement on bankruptcy of employer

(1)If a person is apprenticed or is an articled clerk to an employer who is adjudged bankrupt, either of them may give notice to the bankruptcy trustee or the Official Receiver requesting that the indenture of apprenticeship or articles of agreement be discharged.
(2)On receiving a notice under subsection (1), the bankruptcy trustee or Official Receiver shall discharge the indenture of apprenticeship or articles of agreement, but only if satisfied that it would be in the interests of the apprentice or clerk to do so.
(3)If money has been paid to the bankrupt by or on behalf of the apprentice or clerk as a fee, the bankruptcy trustee may, on the application of the apprentice or clerk, or of the agent of the apprentice or clerk, pay from the bankrupt's estate such amount as the trustee considers reasonable to or for the use of the apprentice or clerk.
(4)In deciding whether to make a payment under subsection (3), the bankruptcy trustee shall take into consideration—
(a)the amount paid by or on behalf of the apprentice;
(b)the time during which the apprentice or clerk served with the bankrupt under the indenture or articles before the commencement of the bankruptcy; and
(c)any other relevant circumstance.
(5)On the application of any apprentice or articled clerk to the bankrupt, or an agent of the apprentice or articled clerk, the bankruptcy trustee or Official Receiver may, instead of acting under subsection (2), transfer the indenture of apprenticeship or articles of agreement to some other person.
(6)Subsection (5) is subject to section 12 of the Industrial Training Act (Cap. 237).
(7)Any person dissatisfied with a decision of the bankruptcy trustee under subsection (3) may apply to the Court for an order quashing or varying the decision.
(8)On the hearing of an application made under subsection (7), the Court may make the order sought by the applicant or such other order as it considers appropriate.

70. Bankruptcy trustee may apply for directions by the Court

(1)A bankruptcy trustee may apply to the Court for directions on any question concerning the operation of this Part.
(2)A bankruptcy trustee who acts under a direction of the Court discharges the bankruptcy trustee's duty in relation to the matter for which the direction was sought, and it does not matter that the direction is later invalidated, overruled, or set aside or otherwise becomes ineffective.
(3)However, the bankruptcy trustee is not protected by subsection (2) if, in obtaining or following the Court's direction, the bankruptcy trustee was guilty of—
(a)fraud; or
(b)deliberate concealment or misrepresentation.

71. Application to the Court to reverse or modify bankruptcy trustee's decision

(1)A person (including the bankrupt or a creditor) whose interests, monetary or otherwise, are detrimentally affected by an act or decision to which this section applies may apply to the Court to reverse or modify the act or decision.
(2)This section applies to—
(a)an act or decision of the bankruptcy trustee; or
(b)a decision of the Court in carrying out an examination under section 170.
(3)The application may be entertained only if is made—
(a)within twenty-one days after the act or decision; or
(b)within such extended period as the Court allows.
(4)On the hearing on an application made under subsection (1), the Court shall—
(a)confirm the bankruptcy trustee's act or decision, with or without such modifications as it considers appropriate; or
(b)if it is of the opinion that the act or decision was unfair or unreasonable, quash it.

72. Bankruptcy trustee to keep proper accounting records

(1)A bankruptcy trustee shall—
(a)keep proper accounting records for each bankruptcy in the form and manner prescribed by the insolvency regulations; and
(b)if required by the Court to do so, verify those records by statutory declaration.
(2)A creditor or other person who has an interest in a particular bankruptcy is entitled to inspect the bankruptcy trustee's accounting records relating to the particular bankruptcy.
(3)After the end of three years from the discharge of a bankrupt, the bankruptcy trustee may dispose of the accounting records deposited with the bankruptcy trustee for the purposes of the bankruptcy by—
(a)delivering them to the bankrupt or the bankrupt's personal representative, if requested; or
(b)destroying or otherwise disposing of them.

73. Bankruptcy trustee’s final statement of receipts and payments

(1)The bankruptcy trustee shall prepare a final statement of receipts and payments that complies with subsection (2)—
(a)as soon as practicable after the distribution of the final dividend has been determined; or
(b)when the whole of the bankrupt's property has been realised, if there are insufficient assets to pay all the proofs of debt.
(2)A final statement of receipts and payments complies with this subsection if it—
(a)shows in detail the receipts and payments in respect of the bankrupt's estate; and
(b)can be inspected without fee by any creditor or other person who has an interest in it.
(3)The bankruptcy trustee shall publish the final statement of receipts and payments in the prescribed form, and advertise in the prescribed manner that it has been published.

74. Audit of bankruptcy trustee's accounts

(1)If, in relation to a bankruptcy, the Official Receiver is not the bankruptcy trustee, the Official Receiver may from time to time audit—
(a)the bankruptcy trustee's accounting records for any particular bankruptcy;
(b)any statement of accounts and statement of financial position prepared by the bankruptcy trustee under section 73; and
(c)the account (if any) maintained by the bankruptcy trustee for the purposes of this Act.
(2)If, in relation to a bankruptcy, the Official Receiver is the bankruptcy trustee, the Auditor-General may from time to time audit the records, statements and account referred to in subsection (1)(a) to (b).

75. Removal of bankruptcy trustee and vacation of office

(1)Except as otherwise provided by this section, a bankruptcy trustee appointed in respect of a bankrupt’s estate may be removed from office only by—
(a)an order of the Court; or
(b)a creditor's meeting convened specially for that purpose in accordance with the insolvency regulations.
(2)If the Official Receiver is the bankruptcy trustee, or the bankruptcy trustee is appointed by the official Receiver or by the Court (otherwise than under section 62), a creditors meeting may be convened for the purpose of replacing the bankruptcy trustee, but only if—
(a)the Official Receiver or that trustee considers it appropriate to do so;
(b)the Court so directs; or
(c)the meeting is requested by one of the bankrupt’s creditors with the concurrence of not less than one-quarter, in value, of the creditors (including the creditor making the request).
(3)A bankruptcy trustee who is not also the Official Receiver vacates office on ceasing to be authorised as an insolvency practitioner.
(4)A bankruptcy trustee who is not also the Official Receiver may resign office by giving to the Court not less than thirty days' notice of the resignation.
(5)A bankruptcy trustee vacates office—
(a)on giving notice to the Court that a final meeting has been held in accordance with section 253 and of the decision (if any) of that meeting; or
(b)if the relevant bankruptcy order is annulled, on the annulment of the order.

76. When Official Receiver is released from obligations as bankruptcy trustee

(1)If a person has been appointed by the Court to replace the Official Receiver on his or her ceasing to hold office as bankruptcy trustee in respect of a bankrupt's estate, the Official Receiver is released from such time as the Court orders.
(2)If a person has been appointed by a general meeting of a bankrupt’s creditors to replace the Official Receiver on his or her ceasing to hold office as bankruptcy trustee in respect of the bankrupt’s estate, the Official Receiver is released from office from the time at which the Official Receiver gives notice to the Court that another person has been appointed as a replacement.
(3)If the Official Receiver, while acting as bankruptcy trustee, gives notice to the Cabinet Secretary that the administration of the bankrupt's estate is for practical purposes complete, the Official Receiver's release takes effect from such time as the Cabinet Secretary determines in writing.
(4)On being released under this section, the Official Receiver is, from the time specified in accordance with this section, discharged from all liability both in respect of acts or omissions occurring in the course of, or in relation to, administering the estate of the bankrupt concerned.

77. When bankruptcy trustee, not being the Official Receiver, is released from obligation

(1)This section applies when a person other than the Official Receiver ceases hold office as a bankruptcy trustee.
(2)If the person has been removed from office by a meeting of the bankrupt’s creditors that has not resolved against the person's release or who has died, the person is released from the time at which a notice is given to the Court in accordance with the insolvency regulations that the person has ceased to hold office.
(3)If the person has been removed from office—
(a)by a general meeting of the bankrupt's creditors that has resolved against the bankrupt's release;
(b)by the Court, the person is released from such time as the Official Receiver determines, on an application made by that person.
(4)If the person has vacated office under section 75(3), the person is released from such time as the Official Receiver determines, on an application made by that person.
(5)If the person has resigned office under section 75(4), the person is released from such time as may be determined in accordance with the insolvency regulations.
(6)If the person has vacated office under section 75(5)(a), the person is released—
(a)if the final meeting referred to in that subsection has resolved against that person's release, such time as the Official Receiver determines, on an application made by that person; but
(b)if that meeting has not so resolved, the time at which the person vacated office.
(7)When a bankruptcy order is annulled, the person is released from such time as the Court determines.
(8)On being released under this section, a bankruptcy trustee is, from the time specified in accordance with this section, discharged from all liability both in respect of acts or omissions occurring in the course of, or in relation to, administering the estate of the bankrupt concerned.
(7)Nothing in this section prevents the Court from exercising its powers under section 74 in relation to a person who has been released under this section.

78. Vacancy in office of bankruptcy trustee

(1)This section applies to a vacancy in the office of bankruptcy trustee that has arisen because—
(a)the appointment of a person as bankruptcy trustee has failed to take effect; or
(b)when such an appointment has taken effect, the person appointed has died, resigned or otherwise ceased to hold the office.
(2)When this section applies to a vacancy, the Official Receiver holds office as bankruptcy trustee until the vacancy is filled.
(3)The Official Receiver may at any time convene a creditors' meeting for the purpose of filling such a vacancy.
(4)If the Official Receiver has not convened, and does not propose to convene, a creditors' meeting for the purpose of filling such a vacancy, any creditor of the bankrupt may request the Official Receiver to convene such a meeting.
(5)If such a request appears to the Official Receiver to be made with the concurrence of not less than one-quarter in value of the bankrupt's creditors (including the creditor making the request), the Official Receiver shall convene the requested meeting.
(6)A reference in this section to a vacancy includes a case in which it is necessary, in relation to particular property that is or may be included in a bankrupt's estate, to revive the trusteeship of the estate after the holding of a final meeting convened under section 253 or after the Official Receiver has given notice under section 76(2) or 77(2).

79. General control of bankrupt trustee by the Court

(1)If, in relation to the bankruptcy trustee in respect of a bankrupt's estate, a person (including the bankrupt or a creditor of the bankrupt) is dissatisfied with any act, omission to act or decision of that trustee, the person may apply to the Court for an order under subsection (2).
(2)On the hearing of such an application, the Court may—
(a)confirm, reverse or modify the act, omission or decision concerned; or
(b)give the bankruptcy trustee directions; or
(c)make such other order as it considers appropriate.
(3)The Court may, on the application of a bankruptcy trustee, give directions in respect of the bankrupt's estate in relation to any particular matter arising under the bankruptcy.

80. Liability of bankruptcy trustee for misapplication of money, etc.

(1)Any of the following persons make an application to the Court for an order under this section relating to a bankruptcy trustee's administration of a bankrupt's estate—
(a)the Official Receiver;
(b)the Attorney-General;
(c)a creditor of the bankrupt;
(d)the bankrupt (whether or not there is, or is likely to be, a surplus available at the end of the bankruptcy).
(2)Approval of the Court is required for the making of such an application if it is to be made by the bankrupt or if it is to be made after the bankruptcy trustee has been released in accordance with section 77.
(3)If, on hearing an application made under subsection (1), the Court is satisfied that the bankruptcy trustee in respect of a bankrupt’s estate has misapplied or retained, or become accountable for money or other property comprising the estate; the Court shall make either or both of the following orders—
(a)an order directing the bankruptcy trustee, for the benefit of the bankrupt’s estate, to repay, restore or account for the relevant money or other property, together with interest at such rate as the Court considers appropriate;
(b)an order directing the bankruptcy trustee to be disqualified from acting as such for such period as may be specified in the order.
(4)If, on hearing an application made under subsection (1), the Court is satisfied that the bankrupt's estate has sustained a loss as a result of misfeasance or a breach of fiduciary or other duty by the bankruptcy trustee in performing that trustee's functions, the Court shall make either or both of the following orders:

Division 8 — Creditor’s' meetings and creditors’ committee

81. Kinds of creditors' meetings

There are two kinds of creditors' meetings—
(a)the first meeting of creditors; and
(b)subsequent creditors' meetings.

82. Subsequent meetings of creditors

(1)The bankruptcy trustee may at any time convene a meeting of creditors after the first meeting of creditors.
(2)The bankruptcy trustee shall convene such a meeting if—
(a)requested to do so by a creditor of the bankrupt; and
(b)the request is made with the concurrence of not less than one-quarter in number and value of the creditors who have proved their debts.
(3)The bankruptcy trustee shall convene the meeting by giving notice of the time, date and place of the meeting to—
(a)the bankrupt; and
(b)each creditor named in the statement of the bankrupt's financial position; and
(c)any other creditors known to the bankruptcy trustee.
(4)The bankruptcy trustee shall advertise the time, date and place of the meeting in the manner prescribed by the insolvency regulations for the purpose of this section.
(5)Nothing in this section limits the general effect of section 63(5) or Part 3 of the First Schedule.

83. Meeting and resolution not defective for lack of notice

A meeting of creditors convened by notice to creditors, and a resolution passed at the meeting, is valid even if some creditors may not have received the notice, unless the Court orders otherwise.

84. Appointment of Chairperson to conduct creditor’s' meetings

(1)The Chairperson of a creditors' meeting is the bankruptcy trustee or a person appointed by the bankruptcy trustee to be the Chairperson.
(2)However, if neither the bankruptcy trustee nor the person (if any) appointed by the bankruptcy trustee to be the Chairperson attends the meeting, the creditors may appoint one of them to act as Chairperson for the purpose of the meeting, but only if that person is entitled to vote at the meeting.
(3)A person appointed by the bankruptcy trustee or elected by the creditors to act as Chairperson may administer any oath that the bankruptcy trustee could have administered if the bankruptcy trustee had attended the meeting.

85. Power of Chairperson to adjourn creditors' meeting

The Chairperson of a creditors' meeting may adjourn the meeting from time to time and place to place.

86. Bankruptcy trustee to report to creditors' meeting

If the bankruptcy trustee attends a creditors' meeting or an adjournment of the meeting, the bankruptcy trustee shall—
(a)report on the administration of the bankrupt's estate;
(b)give any creditor any further information that the creditor may properly require; and
(c)on being reasonably required to do so, produce for the meeting or its adjournment all documents in the bankruptcy trustee's possession that relate to the bankrupt's property.

87. Who can attend creditors' meeting

(1)A person may attend a creditors' meeting—
(a)by being physically present at the time, date and place appointed for the meeting; or
(b)if the bankruptcy trustee makes it available, by means of an audio or audio-visual link, so that all those participating in the meeting can hear and be heard by each other.
(2)A creditor may also attend—
(a)by voting by postal or electronic vote under section 94; or
(b)by proxy on any resolution to be put to the meeting.

88. Bankrupt may be required to attend creditors' meeting and be questioned

(1)The bankrupt shall, if required by the bankruptcy trustee, attend all creditors' meetings by being physically present or present by an audio or audio-visual link.
(2)The following persons may question the bankrupt about the bankrupt's property, conduct or dealings—
(a)the bankruptcy trustee;
(b)the Chairperson of the meeting;
(c)a creditor or a representative of a creditor.
(3)The Chairperson of the meeting may allow only questions that relate to the bankrupt's property, conduct or dealings.
(4)The questioning may be on oath.
(5)The bankrupt shall sign a statement of the bankrupt's evidence given under the questioning, if required to do so by the bankruptcy trustee or the Chairperson of the meeting.
(6)A bankrupt who, without reasonable excuse, fails to comply with subsection (5) commits an offence and on conviction is liable to a fine not exceeding two hundred thousand shillings.

89. Attendance at creditors' meeting by non-creditors

A person who is not a creditor of the bankrupt may attend a creditors' meeting with the consent of—
(a)the bankruptcy trustee; or
(b)the creditors attending the meeting, voting by ordinary resolution.

90. Minutes and record of creditors' meeting

(1)The bankruptcy trustee shall ensure that minutes are kept of each creditors' meeting.
(2)The minutes are invalid unless signed by the bankruptcy trustee or the Chairperson of the meeting.
(3)The bankruptcy trustee may record the meeting, but only with the consent of each person attending the meeting.

91. Number of persons required for creditors' meeting to be valid

(1)A creditors' meeting is not valid unless at least the following persons attend—
(a)the bankruptcy trustee or a person who represents the bankruptcy trustee;
(b)a creditor or a person who represents a creditor.
(2)The meeting lapses if those persons do not attend, in which case the bankruptcy trustee may convene another creditors' meeting.

92. Who can represent creditors and bankrupt at creditors' meeting

(1)Any of the following persons may represent a creditor at a creditors' meeting—
(a)an advocate;
(b)a certified public accountant;
(c)a person who keeps the creditor's or bankrupt's accounting records;
(d)in the case of a creditor, a person who is the creditor's authorised agent under a power of attorney;
(e)a person who satisfies the bankruptcy trustee that the person represents the creditor or bankrupt;
(f)in the case of a partnership, a partner.
(2)If the bankrupt attends a creditors' meeting, any of the following persons may represent the bankrupt—
(a)an advocate;
(b)a certified public accountant;
(c)a person who keeps the creditor's or bankrupt's accounting records;
(d)a person who satisfies the bankruptcy trustee that the person represents the creditor or bankrupt;
(e)in the case of a partnership, a partner.
(3)In addition to the persons listed in subsection (1), a creditor may be represented—
(a)in the case of the State, by any officer of the appropriate government department or agency;
(b)in the case of a public body,by an officer of that body;
(c)in the case of a company, by a director, or its chief executive or secretary or by a person authorised in writing by one of those persons.

93. Passing of resolutions at creditors' meetings

(1)At a creditors' meeting—
(a)an ordinary resolution is passed if a majority in number and value of the creditors, or their proxies, who attend and who vote on the resolution vote in favour of it; and
(b)a special resolution is passed if three-quarters in number and value of the creditors or their proxies who attend and who vote on the resolution vote in favour of it.
(2)For the purposes only of deciding whether the requisite majority by value has voted in favour of a resolution, the following provisions apply—
(a)the bankruptcy trustee may admit or reject proofs of debt;
(b)the Chairperson of the meeting may adjourn the meeting in order to admit or reject proofs of debt;
(c)a person whose debt has been admitted is a creditor.
(3)If a bankruptcy trustee or creditor alleges that a resolution of the creditors—
(a)conflicts with this or any other Act or any rule of law; or
(b)is unfair,
the bankruptcy trustee or creditor may apply to the Court for an order under subsection (4).
(4)If, on the hearing of an application made under subsection (3), the Court finds that the allegation is substantiated, it may make such order, and give such directions, as it considers appropriate to address the conflict or unfairness.
(5)This section is subject to section 311.

94. What votes can be counted for passing of resolutions at creditors' meeting

(1)A creditor who is entitled to vote at a creditors' meeting may vote on a resolution to be put to the meeting—
(a)by postal vote; or
(b)by electronic vote, if the voting paper for the resolution allows it, in accordance with the procedure specified in the voting paper.
(2)A postal or electronic vote can be counted only if it reaches the bankruptcy trustee at least seventy-two hours before the meeting begins.
(3)A voting paper for each resolution to be put to a creditors' meeting is required to accompany the notice of the meeting, together with instructions for returning the voting paper or electronic vote (if allowed by the voting paper under subsection (1)(b) to the bankruptcy trustee at least two working days before the meeting begins.

95. Who may vote at creditors' meeting

Creditors of the bankrupt who are entitled to vote, or their representatives, may vote at a creditors' meeting, but this rule is subject to sections 96 to 98.

96. When secured creditor may vote at creditors' meeting

A debt that is secured only entitles the creditor to vote at a creditors' meeting if the creditor has—
(a)surrendered the charge;
(b)valued the charge; or
(c)realised the charge.

97. When creditor under bill of exchange or promissory note may vote at creditors' meeting

(1)A debt on, or secured by, a current bill of exchange or promissory note entitles the creditor to vote only if the creditor is willing to take the following steps—
(a)to treat a qualifying liability as a charge in the creditor's hands;
(b)to estimate the value of the charge;
(c)to deduct the value of the charge from the creditor's claim for the purposes of voting (but not for the purposes of distribution under this Part);
(d)to show the bill or note to the bankruptcy trustee when the bankruptcy trustee requires it.
(2)In this section, "qualifying liability" means the liability to the creditor on the bill or note of every person who—
(a)is liable on the bill or note antecedently to the debtor; and
(b)is not a bankrupt.

98. Person disqualified from voting at creditor's meeting through preferential effect

(1)A person is not entitled to vote in favour of a resolution that would, if passed, directly or indirectly enable that person or any of the following persons to receive remuneration from the bankrupt's estate except as a creditor sharing rateably with the other creditors. Those persons are—
(a)that person's business partner, employer or employee;
(b)a creditor that that person represents; and
(c)a business partner, employer, or employee of a creditor whom that person represents.
(2)A vote cast in contravention (1) is invalid.

99. Entitlement of partner's creditor to prove debt at creditors' meeting

The bankruptcy of a partner of a firm who is indebted to a creditor jointly with one or more of the other partners entitles the creditor to prove the debt for the purpose of voting at any creditors' meeting, and to vote.

100. Creditors may appoint expert or committee to assist bankruptcy trustee

(1)A creditors' meeting may pass an ordinary resolution—
(a)appointing an expert to assist the bankruptcy trustee in the administration of the bankrupt's estate; and
(b)providing for the expert's remuneration out of that estate.
(2)A creditors' meeting may, by ordinary resolution, appoint a committee of persons to assist the bankruptcy trustee in the administration of the bankrupt's estate, but if it does so, the members of such a committee are entitled to receive remuneration from the bankrupt's estate in their capacity as members of the committee only if it has been approved by an order of the Court.

101. Creditors' right to inspect documents

A creditor who has lodged a creditor's claim, or an advocate or a certified public accountant who is acting for the creditor, is entitled at any reasonable time to inspect or take copies of—
(a)the bankrupt's accounting records;
(b)the bankrupt's answers to questions under section 88;
(c)the statement of the bankrupt's financial position;
(d)all proofs of debt; or
(e)the minutes of a creditors' meeting.

102. Committee of creditors may be established

(1)A general meeting of the creditors of a bankrupt may establish a creditors' committee to perform the functions conferred on it by or under this Part.
(2)A general meeting of the creditors of a bankrupt may not establish such a committee, or impose functions on such a committee, while the Official Receiver is the bankruptcy trustee in respect of the bankrupt's estate, except in relation to appointing a person to be bankruptcy trustee instead of the Official Receiver.

103. Exercise by Cabinet Secretary of functions of creditor's committee

(1)A creditors' committee may not perform its functions if at any time the Official Receiver is bankruptcy trustee in respect of the bankrupt's estate.
(2)If, in the case of a bankruptcy, no creditors' committee exists and the bankruptcy trustee in respect of the bankrupt's estate is a person other than the Official Receiver, the functions of the creditors committee are to be performed by the Cabinet Secretary, except in so far as the insolvency regulations otherwise provide.

Division 9 — Bankrupt's property after bankruptcy

104. Status of property acquired during bankruptcy

(1)Until the bankrupt is discharged—
(a)all property (whether in or outside Kenya) that the bankrupt acquires or that passes to the bankrupt vests in the bankruptcy trustee without that trustee having to intervene or take any other step in relation to the property, and any rights of the bankrupt in the property are extinguished; and
(b)the powers that the bankrupt could have exercised in, over, or in respect of that property for the bankrupt's own benefit vest in the bankruptcy trustee.
(2)This section is subject to sections 106 and 124.
(3)This section does not apply to property that is vested in the bankrupt under an order made under section 120(3).

105. Property vests in replacement bankruptcy trustee

If the bankruptcy trustee is replaced, the property and powers vested in the former bankruptcy trustee under this Act vest in the replacement bankruptcy trustee.

106. Property held in trust by bankrupt

Property held by the bankrupt in trust for another person vests in the bankruptcy trustee, who shall assume control of the property and deal with it for the benefit of the beneficiaries of the trust.

107. Court may order money due to bankrupt to be assigned to bankruptcy trustee

(1)If a bankruptcy trustee considers it necessary to do so, the bankruptcy trustee may apply to the Court for an order under subsection (2).
(2)On the hearing of an application made under subsection (1), the Court may order that any money due to the bankrupt, or any money to become due or payable to the bankrupt, is assigned or charged to, or in favour of, the bankruptcy trustee.
(3)The assignment or charge is a discharge to the person who pays the bankruptcy trustee.

108. Certain payments to be applied in accordance with the Second Schedule

The bankruptcy trustee shall apply the following payments in accordance with the Second Schedule (Priority of payments to preferential creditors—
(a)any amount paid by the bankrupt under section 150; and
(b)any amount paid to the bankruptcy trustee under an order made under section 107.

109. When execution creditor may retain execution proceeds

(1)This section applies if a bankruptcy order has been made in respect of a debtor but, before the order was made, a creditor has—
(a)issued execution against the debtor's property; or
(b)attached a debt payable by the debtor.
(2)If this section applies, the creditor may retain the benefit of the execution or attachment (including the proceeds) only if the creditor completed the execution or attachment—
(a)before the bankruptcy order was made; and
(b)before the creditor had notice that an application for such an order had been lodged.
(3)The creditor may retain as against the bankruptcy trustee a payment made by the bankrupt in the course of the execution or attachment to avoid the execution or attachment as if—
(a)the payment was the proceeds of the execution or attachment; and
(b)the execution or attachment was completed when the payment was made.
(4)The right of a creditor under this section to retain the benefit of an execution or attachment is subject to Division 19.

110. Effect of notice to judicial enforcement officer of bankruptcy

(1)This section applies if a judicial enforcement officer who has taken the property of a debtor in execution is served with notice of the debtor's bankruptcy—
(a)before the property is sold; or
(b)before the execution is completed by the receipt or recovery of the full amount derived from the execution.
(2)If required to do so by the bankruptcy trustee, the judicial enforcement officer shall deliver to the bankruptcy trustee all money and goods seized or received in satisfaction or part satisfaction of the execution.
(3)The costs of the execution are a first charge on the money or goods delivered to the bankruptcy trustee, who may sell all or any of the goods to satisfy the charge.

111. Judicial enforcement officer to retain proceeds of execution for fourteen days after sale

(1)This section applies if, under execution of a judgment for an amount exceeding ten thousand shillings, the judicial enforcement officer—
(a)sells property of the debtor; or
(b)is paid money in order to avoid a sale.
(2)The judicial enforcement officer is entitled to—
(a)deduct the costs of the execution from the proceeds of sale or the money paid; and
(b)retain the balance for the requisite period, to be applied in accordance with subsection (3) or (4).
(3)If the judicial enforcement officer is served with notice within the requisite period that a debtor's application has been made, the judicial enforcement officer shall pay the balance to the bankruptcy trustee, who is entitled to retain it as against the execution creditor.
(4)If the judicial enforcement officer is served with notice within the requisite period that a creditor's application has been made in respect of a debtor—
(a)the judicial enforcement officer shall retain the balance until the application, and any other application of which notice is served on the judicial enforcement officer pending disposal of the first application, has been disposed of; and
(b)the judicial enforcement officer shall—
(i)if a bankruptcy order is made in respect of the debtor, pay the balance to the bankruptcy trustee; or
(ii)if such an order is not made, pay the balance to the execution creditor, who is entitled to retain it as against the bankruptcy trustee (subject to section 113).
(5)If the judicial enforcement officer is not served with notice within the requisite period that a bankruptcy application has been made in respect of the debtor, that officer shall pay the balance to the execution creditor, who is entitled to retain it as against the bankruptcy trustee.
(6)The requisite period for the purpose of this section is fourteen days from the date of the sale or payment to avoid sale.

112. Purchaser under sale by judicial enforcement officer acquires good title

On the sale by the judicial enforcement officer of a debtor's property on which execution has been levied, the purchaser, if acting in good faith, acquires a good title to the property as against the bankruptcy trustee.

113. Court may set aside rights conferred on bankruptcy trustee

(1)An execution creditor may make an application to the Court for an order setting aside the rights of the bankruptcy trustee under section 110 or 111.
(2)On the hearing of an application made under subsection (1), the Court may make an order setting aside those rights in favour of the execution creditor to the extent and on such terms (if any) as the Court considers appropriate.
(3)The Court may not make an order under subsection (2) unless satisfied that the bankruptcy trustee has been served with a copy of the application.
(4)The bankruptcy trustee is entitled to appear as respondent at the hearing of the application.

114. Transaction in good faith and for value after bankruptcy

(1)This section applies to a transaction between a person and the bankrupt in relation to property that the bankrupt has acquired, or that has passed to the bankrupt, after the bankruptcy has commenced.
(2)The transaction is valid as against the bankruptcy trustee if—
(a)the person concerned deals with the bankrupt in good faith and for value; and
(b)the transaction is completed without an intervention by the bankruptcy trustee.
(3)If the person concerned is a bank of which the bankrupt is a client, a transaction by that person dealing with the bankrupt for value includes—
(a)the receipt by that person of any money, charge, or negotiable instrument from the bankrupt or by the bankrupt's order or direction;
(b)a payment by that person to the bankrupt or by the bankrupt's order or direction; and
(c)the delivery by that person of a charge or negotiable instrument to the bankrupt or by the bankrupt's order or direction.
(4)A payment of money or delivery of property by a legal personal representative to, or by the direction of, the bankrupt is a transaction for value.

115. Executions and attachments in good faith

If a bankrupt acquires property, or property passes to a bankrupt, after the bankruptcy has commenced, an execution or attachment against the property is valid as against the bankruptcy trustee if it—
(a)is made in good faith;
(b)is made in respect of a debt or liability incurred by the bankrupt after the bankruptcy commenced; and
(c)is completed before an intervention by the bankruptcy trustee.

116. When execution or attachment completed for purposes of sections 109 and 115

For the purposes of sections 109 and 115
(a)an execution against goods is completed by seizure and sale;
(b)an attachment of a debt is completed by receipt of the debt; and
(c)an execution against land is completed by sale or, in the case of an equitable interest, by the appointment of a receiver.

117. Bankruptcy trustee's interest in property passes to transferee

If the bankruptcy trustee's interest in property is acquired by or passes to a bankrupt after bankruptcy has commenced—(a)the bankruptcy trustee's interest in the property ends; and(b)that interest passes in the manner, and to the extent necessary, to give effect to a transaction, execution, or attachment to which section 114 or 115 applies.

Division 10 — Disclaimers of bankrupt's property

118. Bankruptcy trustee may disclaim onerous property

(1)The bankruptcy trustee may disclaim onerous property, subject to section 121.
(2)Subsection (1) applies even if the bankruptcy trustee has taken possession of the property, tried to sell it, or otherwise exercised rights of ownership in relation to it.
(3)Within fourteen days after the disclaimer, the bankruptcy trustee shall send a notice of the disclaimer to every person whose rights are, to the bankruptcy trustee's knowledge, affected by it.
(4)Property is onerous for the purposes of this section if it is or comprises—
(a)an unprofitable contract;
(b)property of the bankrupt that is unsaleable, or not readily saleable, or that may give rise to a liability to pay money or perform an onerous act; or
(c)a litigation right that, in the opinion of the bankruptcy trustee, has no reasonable prospect of success or cannot reasonably be funded from the assets of the bankrupt's estate.

119. Effect of disclaimer

A disclaimer by the bankruptcy trustee—
(a)terminates, on and from the date of the disclaimer, the rights, interests, and liabilities of the bankruptcy trustee and the bankrupt in relation to the property disclaimed; and
(b)does not affect the rights, interests, or liabilities of any other person, except in so far as is necessary to release the bankruptcy trustee or the bankrupt from a liability.

120. Position of person who suffers loss as result of disclaimer

(1)A person who sustains loss or damage as a result of disclaimer by the bankruptcy trustee may—
(a)claim as a creditor in the bankruptcy for the amount of the loss or damage, taking account of the effect of an order made by the Court under paragraph (b); or
(b)apply to the Court for an order that the disclaimed property be delivered to, or vested in, the person.
(2)The bankrupt may also apply to the Court for an order that the disclaimed property be delivered to, or vested in, the bankrupt.
(3)On the hearing of an application made under subsection (1)(b) or (2), the Court may make the order sought if satisfied that it is fair and reasonable that the property should be delivered to, or vested in, the applicant.

121. Bankruptcy trustee may be required to elect whether to disclaim

The bankruptcy trustee loses the right to disclaim onerous property if—
(a)a person whose rights would be affected by the disclaimer has sent the bankruptcy trustee a notice requiring the bankruptcy trustee to elect whether to disclaim that property;
(b)the notice specifies a deadline for the disclaimer that is not less than twenty-one days after the bankruptcy trustee has received the notice; and
(c)the bankruptcy trustee does not disclaim that property before that deadline.

122. Liability for rentcharge on bankrupt's land after disclaimer

(1)If land disclaimed by the bankruptcy trustee is subject to a rentcharge, the vesting of that land in any other person (including the State), or the person's successors in title, does not make any of them personally liable for the rentcharge.
(2)Subsection (1) does not affect the liability of a person for a rentcharge accruing after the person has taken possession or control of the land.

123. Transmission of interest in land

(1)This section applies to an interest in land that—
(a)is owned by the bankrupt;
(b)is subject to a mortgage or a charge; and
(c)is not disclaimed by the bankruptcy trustee.
(2)The bankruptcy trustee shall—
(a)arrange for the transmission of the interest in the land to the bankruptcy trustee to be registered under the Land Registration Act (Cap. 300); or
(b)give notice to the mortgagee or other person entitled under charge that the bankruptcy trustee cannot, or does not intend to, register transmission of the interest in the land.
(3)A notice given under subsection (2)(b) is notice that—
(a)the interest has vested in the bankruptcy trustee; and
(b)the mortgagee or holder of the charge is, on taking possession of, or selling, the interest, liable to account to the bankruptcy trustee as if that trustee were the proprietor of the interest.

124. Bankruptcy trustee cannot claim interest in land if bankrupt remains in possession until discharge

(1)The bankruptcy trustee cannot, after the bankrupt's discharge, claim an interest in land to which section 123(1) applies and for which the bankruptcy trustee has not registered a transmission if the bankrupt—
(a)was in possession of the interest when the bankruptcy commenced; and
(b)remained in possession until discharge from bankruptcy.
(2)Subsection (1) applies whether or not the bankruptcy trustee gave a notice under section 123(2)(b).
(3)However, the bankruptcy trustee may apply to the Court for an order that the bankruptcy trustee is entitled, after discharge, to claim the bankrupt's interest in the land.
(4)In deciding whether or not to make an order on the hearing of an application made under subsection (3), the Court shall have regard to—
(a)the good faith of the bankrupt;
(b)the time that has elapsed since the bankruptcy commenced;
(c)the value of any improvements made by the bankrupt; and
(d)all other relevant matters.

125. Bankruptcy trustee may transfer shares and other securities

(1)The bankruptcy trustee may transfer the following property belonging to the bankrupt in the same way as the bankrupt could have transferred it but for the bankruptcy—
(a)securities of a company;
(b)securities of the Government of Kenya;
(c)securities issued by a local authority;
(d)shares in ships;
(e)any other property transferable in the records of a company, office or person.
(2)A person whose act or consent is necessary for the transfer of the property shall, on being requested to do so by the bankruptcy trustee, do whatever is necessary for the transfer to be completed.
(3)If the bankruptcy trustee proposes to transfer shares of a company, a shareholder—
(a)to whom the shares are required to be offered for sale in accordance with the company's constitution; and
(b)who agrees to purchase them,
shall pay a fair price for the shares, whether or not that constitution provides a procedure for fixing the price.

126. Bankruptcy trustee may disclaim liability under shares

A bankruptcy trustee may disclaim any liability under shares owned by the bankrupt in any company by disclaiming the shares as onerous property under section 118, but sections 120 and section 121 do not apply to a disclaimer of liability under shares.

127. Bankruptcy trustee may disclaim liability under shares

(1)The bankruptcy trustee may disclaim a liability under shares owned by the bankrupt in a company by disclaiming them as onerous property in accordance with section 118.
(2)Neither section 120 nor section 121 applies to a disclaimer of liability under shares.

128. Bankruptcy trustee may be required to elect whether to disclaim liability under shares

The bankruptcy trustee loses the right to disclaim liability under shares if—
(a)the company or a person who has an interest in the shares has sent the bankruptcy trustee a notice requiring that trustee to elect whether to disclaim liability under the shares;
(b)the notice specifies a deadline for the disclaimer that is not less than twenty-one days after the bankruptcy trustee has received the notice; and
(c)the bankruptcy trustee does not disclaim liability under the shares before that deadline.

129. Transfer of shares after disclaimer

(1)After disclaimer, the bankruptcy trustee may, subject to any other written law and to the company's constitution, transfer the relevant shares to any person who has an interest in them.
(2)If that person refuses to accept the transfer, or if no person has an interest in them, the bankruptcy trustee may transfer the shares to the bankrupt if the bankrupt consents, and in that case the bankrupt is entitled as against the bankruptcy trustee to retain the shares and the proceeds if the bankrupt sells them.
(3)If the bankruptcy trustee does not transfer the shares to a person who has an interest in them or to the bankrupt, the directors of the company may—
(a)sell the shares; or
(b)with the Court's approval and whatever any other written law may provide, cancel the shares if they believe it is in the company's best interests to do so.
(4)The bankruptcy trustee is a director of the company for the purposes of transferring, selling, or cancelling the shares under this section if—
(a)immediately before the bankruptcy commenced, the bankrupt was a director of the company; and
(b)the number of directors is fewer than the minimum number of directors required by the Companies Act (Cap. 486) or the company's constitution as a result of the bankrupt's disqualification as a director.

130. Company may prove for unpaid calls

(1)This section applies if the bankruptcy trustee has disclaimed liability under shares and the company is not in liquidation.
(2)The company may prove in the bankruptcy for—
(a)the amount of unpaid calls made before the bankruptcy commenced in respect of the bankrupt's shares; and
(b)the value of calls to be made in respect of the bankrupt's shares within one year after the bankruptcy commenced.
(3)If the bankruptcy trustee and the company cannot agree, the Court, may on the application of either of them, make an order determining the value of the calls to be made.

Division 11 — Goods held by bankrupt under credit purchase transaction

131. Interpretation: Division 11

In this Division—"cash price", in relation to a sale of goods, means—
(a)the lowest price at which a person could have bought those goods from the creditor on the basis of payment in full at the time the sale was made; or
(b)if there is no such price, the fair market value of those goods at the time the sale was made;
"creditor", in relation to a credit purchase transaction, means—
(a)the person disposing of the goods under the transaction; and
(b)if the rights of that person are transferred by assignment or by operation of law, means the person for the time being entitled to those rights;
"debtor", in relation to a credit purchase transaction, means—
(a)the person to whom goods are disposed of under the transaction; and
(b)if the rights of that person are transferred by assignment or by operation of law, means the person for the time being entitled to those rights;
"hirer", in relation to a credit purchase transaction, means—
(a)the person who is entitled to the use of the goods under the transaction; and
(b)if the rights of that person are transferred by assignment or by operation of law, means the person for the time being entitled to those rights.

132. Restrictions on creditor dealing with goods

(1)If a bankrupt acquired goods under a credit purchase transaction before the bankruptcy commenced and the creditor either—
(a)took possession of the goods within the twenty-one days immediately before the time when the bankruptcy commenced, and after that time still possesses them; or
(b)takes possession of the goods after that time,
the creditor may not sell or dispose of the goods or part with possession of them until the expiry of thirty days from and including the date when the creditor serves a post-possession notice on the bankruptcy trustee.
(2)Subsection (1) does not apply if the creditor, with the consent of the bankruptcy trustee, sells or parts with possession of the goods before the end of the thirty-day period.
(3)A sale or disposal in contravention of subsection (1) is void as against the bankruptcy trustee.

133. Bankruptcy trustee's powers in relation to goods that are subject to a credit purchase transaction

(1)In the case of goods to which section 131 applies, the bankruptcy trustee may—
(a)within the thirty-day period referred to in that section, exercise any right conferred by any relevant written law to introduce a buyer for the goods; or
(b)at any time before the creditor sells or agrees to sell the goods under a power conferred by any such law or by the relevant credit purchase transaction, settle the bankrupt's obligations as debtor in accordance with that law or that transaction.
(2)This section applies irrespective any other written law to the contrary.

134. Creditor in possession of goods may prove in bankruptcy if bankruptcy trustee has not exercised powers

(1)A creditor may prove in a bankruptcy for the amount (not exceeding that limited by any relevant written law) that the creditor was entitled to recover from the bankrupt as a debtor if—
(a)the creditor has taken possession of consumer goods purchased under a credit purchase transaction (whether before or after the bankruptcy of the debtor); and
(b)the bankruptcy trustee has not acted under section 133 in relation to the goods.
(2)If a creditor has proved in a bankruptcy in accordance with under subsection (1)—
(a)the creditor shall submit with the creditor's claim form the documents (if any) prescribed by the insolvency regulations for the purpose of this section; and
(b)the bankruptcy trustee may exercise the rights conferred on the debtor by any relevant written law that applies after the creditor takes possession of goods in accordance with that law.

135. Creditor may assign goods to bankruptcy trustee

If—(a)the bankrupt purchased goods under a credit purchase transaction before the time the bankruptcy commenced; and(b)at that time the creditor either—(i)has not taken possession of the goods; or(ii)has taken possession of them and has not sold or disposed of, or parted with possession of them,the creditor may assign the goods to the bankruptcy trustee, and, if the creditor does so, may prove in the bankruptcy for the net balance due to the creditor under the transaction.

Division 12 — Second bankruptcies

136. Status of bankrupt's property on second bankruptcy

(1)This section applies to and in respect of a bankrupt who, before discharge, is adjudged bankrupt for a second time.
(2)Property that is acquired by, or has passed to, the bankrupt since the first bankruptcy (including property acquired or that has passed since the second bankruptcy) vests in the bankruptcy trustee in the second bankruptcy.
(3)Despite subsection (2), the Court may, if it considers it appropriate to do so, order that all or part of the following assets or their proceeds vest in the bankruptcy trustee in the first bankruptcy—
(a)assets in the second bankruptcy that, in the Court's opinion, were acquired independently of the creditors in the second bankruptcy;
(b)assets in the second bankruptcy that devolved on the bankrupt.
(4)A surplus in the second bankruptcy is an asset in the estate in the first bankruptcy, and is payable to the bankruptcy trustee in the first bankruptcy.
(5)This section has effect despite section 104.

137. Effect of notice to bankruptcy trustee of application for bankruptcy

(1)This section applies if the bankruptcy trustee in respect of a bankrupt's estate receives notice that a creditor has lodged an application for another bankruptcy.
(2)The bankruptcy trustee shall hold property in that trustee's possession that has been acquired by, or passed to, the bankrupt since the first bankruptcy until the application for the other bankruptcy has been dealt with.
(3)The bankruptcy trustee shall transfer the property and its proceeds, less any deduction for the bankruptcy trustee's costs and expenses, to the bankruptcy trustee in the other bankruptcy if—
(a)the creditor's application results in another bankruptcy; or
(b)the bankrupt is automatically adjudged bankrupt on the bankrupt's own application.

Division 13 — Persons jointly adjudged bankrupt

138. Separate accounts to be kept for each bankrupt

If two or more persons are adjudged bankrupt jointly, the bankruptcy trustee shall keep distinct accounts in respect of—
(a)the joint estate; and
(b)the separate estate of each bankrupt.

139. How joint and separate estates are to be applied

(1)When two or more persons have been adjudged bankrupt jointly, the bankruptcy trustee shall first apply—
(a)the joint estate to the debts due by the bankrupts jointly; and
(b)the separate estate of each bankrupt to the debts of that bankrupt.
(2)The bankruptcy trustee shall then—
(a)apply any surplus in the joint estate to the separate estate of each bankrupt in proportion to the interest of each bankrupt in the joint estate; and
(b)credit any surplus in the separate estate of a bankrupt to the joint estate.

Division 14 — Duties of bankrupt

140. General duty of bankrupt

(1)A bankrupt shall, to the best of the bankrupt's ability, assist in the realisation of the bankrupt's property and the distribution of the proceeds among the creditors.
(2)The duty imposed by subsection (1) is in addition to any other duty imposed on the bankrupt by this Act or by any other written law.

141. Bankrupt to disclose property acquired before discharge

(1)As soon as practicable after acquisition, the bankrupt shall notify the bankruptcy trustee of any property that—
(a)was acquired by, or passed to, the bankrupt before discharge; and
(b)is divisible among the creditors.
(2)A bankrupt who, without reasonable excuse, fails to comply with subsection (1) commits an offence and on conviction is liable to a fine not exceeding two hundred thousand shillings or to imprisonment for a term not exceeding six months, or to both.

142. Bankrupt to deliver property to bankruptcy trustee on demand

(1)On demand by the bankruptcy trustee, the bankrupt shall deliver to the bankruptcy trustee, or to a person authorised by the bankruptcy trustee to receive it, all of the bankrupt's property that—
(a)is divisible among the creditors; and
(b)is under the bankrupt's control.
(2)On demand by the bankruptcy trustee, the bankrupt shall deliver to the bankruptcy trustee, or to a person authorised by the bankruptcy trustee to receive it, all property that is acquired by, or passes to, the bankrupt before the bankrupt's discharge.
(3)A bankrupt shall take all the steps (including the steps specified in subsection (4)) in relation to the bankrupt's property, and the distribution of the proceeds to the creditors, that are—
(a)required by the bankruptcy trustee;
(b)prescribed by the insolvency regulations for the purposes of this section;
(c)directed to be taken by the Court by an order made in reference to the bankruptcy; or
(d)directed to be done by the Court on an application by the bankruptcy trustee or a creditor.
(4)The steps referred to in subsection (3) include the execution by the bankrupt of powers of attorney, transfers, and other relevant documents.
(5)A bankrupt who, without reasonable excuse, fails to comply with a requirement imposed by or under this section is guilty of contempt of the Court and is liable to be punished accordingly, in addition to any other punishment to which the bankrupt may be subject.

143. Court may impose charge on bankrupt's property

(1)If—
(a)any property consisting of an interest in a dwelling house that is occupied by the bankrupt or by the bankrupt's spouse or former spouse is comprised in the bankrupt's estate; and
(b)the bankruptcy trustee is, for any reason, unable for the time being to realise that property,
that trustee may apply to the Court for an order imposing a charge on the property for the benefit of the bankrupt's estate.
(2)lf, on the hearing of an application under this section the Court imposes a charge on any property—
(a)the benefit of that charge is included in the bankrupt's estate; and
(b)is enforceable up to the charged value from time to time, for the payment of any amount that is payable otherwise than to the bankrupt out of the estate and of interest on that amount at the rate prescribed by the insolvency regulations for the purposes of this section.
(3)In subsection (2), the charged value means the—
(a)the amount specified in the charging order as the value of the bankrupt's interest in the property at the date of the order; and
(b)interest on that amount from the date of the charging order at the prescribed rate.
(4)In determining the value of an interest for the purposes of this section, the Court shall disregard any matter that it is required to disregard by the insolvency regulations.
(5)In making an order under this section in respect of property vested in the bankruptcy trustee, the Court shall provide, in accordance with the insolvency regulations, for the property—
(a)to cease to be included in the bankrupt's estate; and
(b)to vest in the bankrupt subject to the charge and any prior charge.

144. Bankrupt to give bankruptcy trustee accounting records and other documents

(1)As soon as practicable after being adjudged bankrupt, the bankrupt shall—
(a)deliver to the bankruptcy trustee relevant documents that are in the bankrupt's possession or control; and
(b)notify that trustee of relevant documents that are in the possession or control of any other person.
(2)In subsection (1), "relevant documents" means all accounting records and other documents relating to the bankrupt's estate.

145. Bankrupt to give bankruptcy trustee information relating to property

A bankrupt shall—
(a)as soon as practicable after being adjudged bankrupt—
(i)give the bankruptcy trustee a complete and accurate list of the bankrupt's property and of the bankrupt's creditors and debtors, and update the lists as necessary;
(ii)give the bankruptcy trustee any other information relating to the bankrupt's property that that trustee requires;
(b)attend before the bankruptcy trustee at all reasonable times whenever required by that trustee to so; and
(c)verify any statement by statutory declaration when required by that trustee to do so.

146. Bankrupt to give bankruptcy trustee information relating to income and expenditure

(1)Whenever the bankruptcy trustee requires it, the bankrupt shall provide the bankruptcy trustee with details of the bankrupt's income and expenditure since the bankruptcy commenced.
(2)A bankrupt who, without reasonable excuse, fails to comply with a requirement of the bankruptcy trustee under subsection (1) commits an offence and on conviction is liable to a fine not exceeding two hundred thousand shillings or to imprisonment for a term not exceeding twelve months, or to both.

147. Bankrupt to notify bankruptcy trustee of change in personal information

(1)A bankrupt shall, within seven days after any change occurs in the bankrupt's name, address, employment or income, notify the bankruptcy trustee of the change.
(2)A bankrupt who, without reasonable excuse, fails to comply with subsection (1) commits an offence and on conviction is liable to a fine not exceeding two hundred thousand shillings or to imprisonment for a term not exceeding six months, or to both.
(3)If, after being convicted of an offence under subsection (2), a bankrupt, without reasonable excuse, continues to fail to notify the relevant change to the bankruptcy trustee, the bankrupt commits a further offence on each day during which the failure continues and on conviction is liable to a fine not exceeding twenty thousand shillings for each such offence.

148. Bankrupt to give bankruptcy trustee financial information

(1)The bankrupt shall give the bankruptcy trustee (or any person employed by the bankruptcy trustee) the information and details that are necessary to prepare a financial statement that shows the financial position of the bankrupt's estate.
(2)If required to do so by the bankruptcy trustee, the bankrupt shall, before the deadline, prepare and deliver to the bankruptcy trustee a full, true, and detailed financial statement that shows—
(a)details of the bankrupt's trading and stocktaking; and
(b)details of the bankrupt's profit and losses during any period within the three years immediately preceding the date on which the bankruptcy commenced.
(3)To enable the bankrupt to prepare the financial statement referred to in subsection (2)—
(a)the bankruptcy trustee shall give the bankrupt full access to the bankrupt's accounting records that are in the bankruptcy trustee's possession; and
(b)if the bankruptcy trustee believes it necessary to do so, that trustee shall provide the bankrupt with the assistance of a certified public accountant at the expense of the bankrupt's estate.
(4)A bankrupt who, without reasonable excuse, fails to comply with a requirement of this section commits an offence and on conviction is liable to a fine not exceeding two hundred thousand shillings or to imprisonment for a term not exceeding six months, or to both.
(5)If, after being convicted of an offence under subsection (4), a bankrupt, without reasonable excuse, continues to fail to comply with the relevant requirement, the bankrupt commits a further offence on each day during which the failure continues and on conviction is liable to a fine not exceeding twenty thousand shillings for each such offence.
(6)For the purposes of this section, the deadline is the expiry of twenty-one days after the bankruptcy commenced or of such extended period as the bankruptcy trustee may allow.

148A. Principles of Data Protection

The principles of personal data protection set out in the Data Protection Act (Cap. 411C) shall apply with necessary modifications to the processing and handling, by the bankruptcy trustee, of the bankrupt's personal data.[Act No. 24 of 2019, 2nd Sch.]

Division 15 — Restrictions on bankrupt during bankruptcy

149. Interpretation: Division 15

In this Division—"building", in relation to a bankrupt, includes a reference to a part of a building in which the bankrupt holds a proprietorial interest;"place" includes building, premises, aircraft, ship, or other means of transporting people or goods;"relevant property", in relation to a bankrupt, means—
(a)property of the bankrupt; or
(b)a document relating to the bankrupt's property, conduct, or dealings.

150. Bankrupt can be required to contribute to payment of debts

(1)If required by the bankruptcy trustee to do so, the bankrupt shall pay an amount or periodic amounts during the bankruptcy as a contribution towards payment of the bankrupt's debts.
(2)The bankruptcy trustee may impose conditions with respect to the payments, including conditions as the dates on which and the manner in which they are to be made, and may from time to time amend any such conditions or substitute new conditions for existing ones.
(3)In deciding whether to require the bankrupt to make the payment or payments, the bankruptcy trustee shall—
(a)have regard to all the circumstances of the bankruptcy and the bankrupt's conduct, earning power, responsibilities, and prospects; and
(b)make reasonable allowance for the maintenance of the bankrupt and the bankrupt's relatives and dependants.
(4)If the bankrupt fails to comply with a requirement made under subsection (1), or with a condition imposed in respect of such a requirement under subsection (2), the bankruptcy trustee may make an application to the Court for an order under subsection (5).
(5)On the hearing of an application made under subsection (4), the Court may order the bankrupt to pay the amount or amounts required by the bankruptcy trustee under subsection (1), or to comply with any condition imposed in respect of the requirement under subsection (2).
(6)On the hearing of an application made to the Court by the bankruptcy trustee, the bankrupt, or a creditor, the Court may—
(a)amend, suspend, or cancel the bankrupt's obligations to make payments under this section:
(b)amend, suspend or discharge an order made under subsection (5); or
(c)remit any arrears owing by the bankrupt.

151. Onus of proof if bankrupt defaults in making payment

If a bankrupt fails to make a payment required under section 150, the onus is on the bankrupt in any proceedings arising out of the failure to show that the failure was not deliberate.

152. Prohibition of bankrupt entering business

(1)An undischarged bankrupt shall not, without the consent of the bankruptcy trustee or the Court (either directly or indirectly)—
(a)enter into, carry on, or take part in the management or control of any business;
(b)be employed by a relative of the bankrupt or
(c)be employed by a company, trust, trustee, or incorporated body that is owned, managed, or controlled by a relative of the bankrupt.
(2)A bankrupt who contravenes subsection (1) commits an offence and on conviction is liable to a fine not exceeding five hundred thousand shillings or to imprisonment for a term not exceeding two years, or to both.

153. Warrant to search for and seize bankrupt's property

(1)The Court may issue a search warrant to the bankruptcy trustee or any other person if it reasonably believes that any relevant property is concealed in a specified place.
(2)The warrant may authorise the bankruptcy trustee or other person named in the warrant, together with any assistants that may be necessary—
(a)to enter and search the place;
(b)to seize and take possession of relevant property;
(c)if necessary, to use force to enter the place (including by breaking open doors); and
(d)to open any container found in the place, by force if necessary.

154. Seizure of bankrupt's property

(1)If authorised by a warrant issued by the Court, the bankruptcy trustee or (if not the bankruptcy trustee) the Official Receiver, with such assistants as are considered necessary—
(a)may seize any part of the bankrupt's property that is under the control of the bankrupt or of any other person; and
(b)with a view to seizing the bankrupt's property, may—
(i)break open any building or room of the bankrupt where the bankrupt is believed to be;
(ii)break open any building, room, or receptacle of the bankrupt where the bankrupt's property is believed to be; and
(iii)seize and take possession of the bankrupt's property found in the building, room, or receptacle.
(2)For the purposes of this section and section 153, if the execution of a warrant takes place without the bankrupt being present, the person executing the warrant shall leave in a prominent place at the place searched a notice that—
(a)states the date and time when the warrant was executed; and
(b)states the name of the person who executed it.
(3)For the purposes of this section and section 153, the person executing the warrant shall leave with the bankrupt, or leave in a prominent place at the place searched if the bankrupt is not present, a list of any property seized during the course of the search.
(4)Subsection (3) does not apply if it is impractical to leave a list of property seized or if the bankrupt consents to receiving a list sent in accordance with subsection (5).
(5)If subsection (4) applies, the person executing the search shall leave with the notice referred to in subsection (2), or with the bankrupt if the bankrupt is present, a notice stating that—
(a)relevant property has been seized in the course of the search; and
(b)within seven days after the execution of the warrant, a list of the property seized will be delivered or sent to the bankrupt or left in a prominent position at the place searched.
(6)If subsection (5) applies, the person executing the warrant shall ensure that within seven days after the execution of the warrant there is delivered or sent to the bankrupt, or left in a prominent position at the place searched, a notice listing the property seized and identifying the place where the property was seized.

155. Bankrupt to vacate land or buildings if required to do so

(1)The bankruptcy trustee may require the bankrupt and relatives of the bankrupt to vacate any land or building that is part of the property vested in the bankruptcy trustee under the bankruptcy.
(2)If the bankruptcy trustee's demand is not complied with, the bankruptcy trustee may apply to a court of competent jurisdiction for an order for possession of the land or building.
(3)On the hearing of an application made under subsection (2), the court may make an order for the possession of the land or building if it believes that the bankrupt or relatives of the bankrupt have no justification for remaining there.
(4)The bankrupt or the bankrupt's relatives concerned are entitled to appear and be heard as respondents at the hearing.

156. Bankrupt's right to inspect documents

A bankrupt is entitled at any reasonable time to inspect and to take copies of—
(a)the bankrupt's accounting records;
(b)the bankrupt's answers to questions put to the bankrupt in the course of an examination under this Act;
(c)the statement of the bankrupt's financial position;
(d)all proofs of debt;
(e)the minutes of any creditors' meeting; and
(f)the record of any examination of the bankrupt.

157. Restrictions on bankrupt dealing with property

(1)After the bankruptcy commences, the bankrupt, and any person (other than the bankruptcy trustee) who claims through or under the bankrupt, ceases to be entitled—
(a)to recover property that is part of the bankrupt's estate; or
(b)to give a release or discharge in relation to that property.
(2)Subsection (1) applies subject to sections 114 and 115 and whether or not the bankruptcy trustee has intervened.

158. Bankrupt prohibited from taking steps to defeat beneficial interests of others in bankrupt's property

(1)After the bankruptcy has commenced, the bankrupt may not execute a power of appointment, or any other power vested in the bankrupt, if the result would be to defeat or destroy any contingent or other estate or interest in any property to which the bankrupt may otherwise be beneficially entitled at any time before the bankrupt's discharge.
(2)The restriction on the bankrupt in subsection (1) applies—
(a)both before and after the bankrupt obtains a discharge; and
(b)subject to sections 114 and 115 (transactions entered into in good faith).

159. Responsibility of bank to notify bankruptcy trustee of bankrupt's account

(1)As soon as practicable after becoming aware or formings reasonable suspicion that a customer is an undischarged bankrupt, a bank shall—
(a)notify the bankruptcy trustee of any account that the customer holds with the bank; and
(b)not pay any money from the account, unless subsection (2) applies.
(2)The bank may pay money out of the account if—
(a)the bank is authorised by an order of the Court or instructed by the bankruptcy trustee to do so; or
(b)the bank has notified the bankruptcy trustee of the account and has not, within one month after the notification, received any instructions from the bankruptcy trustee.
(3)At the same time as the bank notifies the bankruptcy trustee under subsection (1)(a), it shall inform the customer that it has notified the bankruptcy trustee in accordance with subsection (1).
(4)A bank that—
(a)without reasonable excused, fails to comply with subsection (1)(a) or (3); or
(b)contravenes subsection (1)(b), commits an offence and on conviction is liable to a fine not exceeding two million shillings.

160. Official Receiver entitled to require bank to search records relating to bankrupt's account

(1)The Official Receiver may, by notice, require a bank to search its account records by comparing the names of its customers with the names (including any aliases) of undischarged bankrupts specified in the notice or in a list that is attached to it.
(2)Within seven days after receiving the notice, the bank shall search its account records and provide the Official Receiver with written results of the search in so far as the search reveals the names of undischarged bankrupts specified in the notice or list.
(3)If a bank fails to comply with subsection (2), the Official Receiver may make an application to the Court for an order under subsection (4).
(4)On the hearing of an application made under subsection (3), the Court shall, unless it considers that the Official Receiver's requirement was unjustified, make an order directing the bank to comply with the requirement.
(5)The bank is entitled to be served with a copy of the application and to appear and be heard as respondent at the hearing of the application.

Division 16 — Provision allowed for bankrupt during bankruptcy

161. Bankrupt entitled to retain certain assets

(1)A bankrupt may choose and retain as the bankrupt's own property assets of a description specified in subsection (2) up to a maximum value determined in accordance with subsection (3).
(2)The assets are—
(a)the bankrupt's necessary tools of trade;
(b)necessary household furniture and personal effects (including clothing) for the bankrupt and the bankrupt's relatives and dependants; and
(c)a motor vehicle.
(3)The maximum value of those assets are—
(a)in the case of the bankrupt's necessary tools of trade, the value fixed by the bankruptcy trustee;
(b)in the case of necessary household furniture and personal effects, the value fixed by the bankruptcy trustee; and
(c)a motor vehicle, one million shillings or, if a greater amount is prescribed by the insolvency regulations, that amount.

162. Bankrupt may retain certain assets with consent of creditors

A bankrupt may retain necessary tools of trade and necessary household furniture and effects that are worth more than the maximum value fixed in accordance with section 161, if the bankrupts' creditors consent to it by an ordinary resolution passed at a creditors' meeting.

163. Retention of assets not to affect rights under charge or credit purchase transaction

(1)Subject to subsection (2), the retention of an asset by the bankrupt under section 161 or 162 does not affect rights arising under a valid charge, bailment contract or credit purchase transaction in respect of the asset.
(2)In relation to goods that that are in the possession of the bankrupt under a bailment contract or credit purchase transaction, the Court may make an order authorising the bankruptcy trustee to dispose of the goods as if all the rights of the owner under the contract or agreement were vested in the bankrupt.
(3)An order under subsection (2) may be made—
(a)only on the application of the bankruptcy trustee; and
(b)only if the Court is satisfied that disposal of the goods would be in the overall best interests of the bankrupt's creditors.
(4)An order under subsection (2) is subject to the condition that—
(a)the net proceeds of disposal of the goods; and
(b)any additional money required to be added to the net proceeds so as to produce the amount determined by the Court as the net amount that would be realised on a sale of the goods at market value, be applied towards discharging the amounts payable under the bailment contract or credit purchase transaction.

164. Retention provisions not to confer rights to other assets

The fact that the net value of the assets that the bankrupt retains is less than the maximum values specified in section 161 does not give the bankrupt any rights in relation to other assets in the bankrupt's estate.

165. Relative or dependant entitled to exercise bankrupt's right to retain assets

If the bankrupt has died, a relative or dependant of the bankrupt, who has been approved for this purpose by the bankruptcy trustee or the Court, may exercise the right to retain assets under section 161 or 162 for the benefit of the bankrupt's relatives and dependants.

166. Bankruptcy trustee may make allowance to bankrupt

The bankruptcy trustee may make an allowance out of the property of the bankrupt to the bankrupt, or to any relative or dependant of the bankrupt, for the support of the bankrupt and the bankrupt's relatives and dependants.

167. Bankruptcy trustee may allow bankrupt to retain money

(1)The bankruptcy trustee may allow the bankrupt to retain, for the immediate maintenance of the bankrupt and the bankrupt's relatives and dependants, money up to the prescribed limit that the bankrupt has in the bankrupt's possession or in a bank account when the bankruptcy commenced.
(2)For the purpose of subsection (1), the prescribed limit is one hundred thousand shillings or, if a greater amount is prescribed by the insolvency regulations for the purposes of this section, that amount.

Division 17 — Powers of bankruptcy trustee and the Court to examine bankrupt and others

Subdivision 1 — Examination by bankruptcy trustee

168. Bankruptcy trustee may summon bankrupt and others to be examined

(1)The bankruptcy trustee may, at any time before or after a bankrupt's discharge—
(a)serve on any of the persons listed in subsection (2) a summons to appear before the bankruptcy trustee or the Court to be examined on oath in relation to the bankrupt's conduct, affairs or property; and
(b)require that person—
(i)to produce and surrender to the bankruptcy trustee or the Court any document under that person's control that relates to the bankrupt's conduct, affairs or property; or
(ii)to answer any question put to that person relating to the bankrupt's conduct, affairs or property.
(2)The following are the persons referred to in subsection (1)—
(a)the bankrupt;
(b)the bankrupt's spouse;
(c)a person known or suspected to be in possession any of the bankrupt's property or any document relating to the bankrupt's conduct, affairs or property;
(d)a person believed to owe the bankrupt money;
(e)a person believed by the bankruptcy trustee to be able to provide information regarding—
(i)the bankrupt; or
(ii)the bankrupt's conduct, affairs or property;
(f)a trustee of a trust of which the bankrupt is a settlor or of which the bankrupt is or has been a trustee.

169. Conduct of examination of person summoned by bankruptcy trustee

(1)The bankruptcy trustee may examine on oath the persons summoned for examination in accordance with section 168.
(2)The bankruptcy trustee shall ensure that the examination is recorded in writing, and that the person summoned signs the written record unless excused from doing so.
(3)If person, without reasonable excuse, refuses to sign the refusal to sign the written record of the person's examination before the bankruptcy trustee, the bankruptcy trustee may report the person's conduct to the Court, in which case the Court may, if satisfied that the refusal was unjustified, find the person to be in contempt of the Court.
(4)If a person summoned for examination by the bankruptcy fails to appear at the appointed time and has no reasonable excuse, the Court—
(a)may, on the bankruptcy trustee's application, by warrant, have the person arrested and brought before the Court for examination; and
(b)if it does so, may order the person to pay all the expenses arising out of the arrest and examination before the Court if it believes that that person's evidence was required for the purpose of ascertaining the bankrupt's estate.

170. Expenses of person summoned by bankruptcy trustee or the Court

A person who is summoned for examination by the bankruptcy trustee—
(a)is entitled to be paid the expenses incurred in attending the examination, not exceeding the amount prescribed by the insolvency regulations for the purposes of this section; and
(b)is not obliged to attend the examination if those expenses have not been paid or tendered to the person before the examination.

171. Entitlement of examinee to be represented

(1)A person who is examined or questioned at an examination by the bankruptcy trustee is entitled to be represented by an advocate.
(2)Such a person may be questioned by the bankrupt's advocate, and any answers given by the person form part of the examination.

172. Creditor may inspect record of examination

A creditor, or the creditor's advocate, is entitled at any reasonable time to inspect the record of the examination of a person conducted in accordance with section 169.

173. Report of examination not to be published without court's consent

(1)A person shall not, without the approval of the Court, publish a report of—
(a)any examination of a person summoned for examination by the bankruptcy trustee; or
(b)any matter arising in the course of the examination.
(2)A person who wishes to publish a report of such an examination or matter may make an application to the Court for approval to publish it.
(3)On the hearing of an application made under subsection (2), the Court may give approval for the publication of a report subject to such conditions (if any) as the Court may specify.
(4)A person who contravenes subsection (1) commits an offence and on conviction is liable to a fine not exceeding five hundred thousand shillings or to imprisonment for a term not exceeding three months, or to both.

174. Examination provisions also apply when bankruptcy trustee appointed interim trustee in respect of debtor's property

Sections 168 to 173 also apply when the bankruptcy trustee has been appointed as interim trustee in respect of all or part of a debtor's property under section 36 and, for that purpose, references in sections 168 to 173 to the bankrupt are to be read with as if they were references to the debtor.

175. No lien over bankrupt's documents and other records

(1)A person is not entitled as against the bankruptcy trustee to withhold possession of, or claim a lien over—
(a)a document that belongs to the bankrupt; or
(b)the bankrupt's business records.
(2)However, a person may claim as a preferential creditor under paragraph 3(1)(f) of the Second Schedule if the person—
(a)has performed services in connection with the bankrupt's business records or a document belonging to the bankrupt;
(b)has not been paid, or has not been paid in full, for those services; and
(c)would, but for subsection (1), ordinarily have had a lien over the business records or document.
(3)The limit to which the person can claim as a preferential creditor under paragraph 3(1)(f) of the Second Schedule is ten percent of the total value of the services specified in subsection (2), up to a maximum amount of two hundred thousand shillings.

176. Offences relating to conduct of examinations by bankruptcy trustee

(1)A person who, without reasonable excuse—
(a)fails to comply with a summons attend the public examination of a bankrupt as required by section 168(1);
(b)fails without reasonable excuse to produce a document that the person is required to produce as required by section 168(1)(b)(i);
(c)fails to answer a question as required by section 168(1)(b)(ii); or
(d)in purporting to answer such a question, gives an answer that the person knows, or ought reasonably to know, is false or misleading in a material respect.
commits an offence and on conviction is liable to a fine not exceeding one million shillings or to imprisonment for a term not exceeding twelve months, or to both.
(2)A person who is questioned under section 168(1)(b)(ii) shall answer all questions put to the person in relation to the bankrupt's conduct, affairs and property to the extent that the person is able to do so.
(3)A person is not excused from answering a question because the question may incriminate or tend to incriminate the person.
(4)Except as provided by subsection (5), a statement made by a person examined or questioned under section 168(1)(b)(ii) in response to a question put to the person in the exercise of a power conferred by this Part is not admissible in criminal proceedings against the person.
(5)Such a statement is admissible in any such proceedings if—
(a)the person was examined or questioned under oath and is charged with an offence under section 108 or 114 of the Penal Code (which respectively relate to perjury and subornation of perjury and to false swearing); or
(b)the statement was made by the bankrupt and the bankrupt is charged with an offence under subsection (1)(c) or (d).

Subdivision 2 — Public examination before the Court

177. Court to hold public examination if bankruptcy trustee or creditors require

(1)At any time before an absolute order for a bankrupt's discharge is made—
(a)the bankruptcy trustee; or
(b)if a ordinary resolution has been passed at a creditor's meeting seeking the public examination of the bankrupt before the Court, any of the creditors concerned,
may make an application to the Court for an order that the bankrupt be publicly examined before the Court.
(2)On the hearing of an application made under subsection (1), the Court shall, subject to subsection (3), make an order directing the bankrupt to be publicly examined before the Court and shall fix a time and date for the holding of the examination. The date fixed may not be earlier than fourteen days from the date of the order unless the Court is of the opinion that there are compelling reasons for holding the examination sooner.
(3)The Court shall reject a copy of a creditors' ordinary lodged under subsection (1) unless it is authenticated by either the bankruptcy trustee or the Chairperson of the meeting at which the resolution was passed.

178. Bankruptcy trustee to serve notice of examination on bankrupt

(1)As soon as practicable after the Court has made an order under section 177, the bankruptcy trustee shall serve a copy of the order on the bankrupt.
(2)At least seven days before the date fixed for holding the examination, the bankruptcy trustee shall—
(a)publish a notice advertising the examination—
(i)once in the Gazette; and
(ii)once in at least two newspapers circulating in the area in which the bankrupt resides; and
(b)send a notice to each creditor a notice giving details of the time, date and place of the examination.

179. Bankruptcy trustee to lodge report with the Court before start of examination

Before the public examination of a bankrupt before the Court begins, the bankruptcy trustee shall lodge with the Court a report on—
(a)the bankrupt's estate;
(b)the bankrupt's conduct; and
(c)all other matters of which the Court should be informed.

180. Conduct of public examination before the Court

(1)At the time and date fixed by the Court for holding the public examination of a bankrupt, the bankrupt shall attend the examination, and may be examined as to the bankrupt's conduct, affairs and property.
(2)At the examination, the following persons may examine the bankrupt—
(a)the bankruptcy trustee, or an advocate for the bankruptcy trustee;
(b)a creditor who has proved a claim, or an advocate for the creditor.
(3)A person examining the bankrupt shall examine the bankrupt on oath.
(4)At the examination, the bankrupt shall—
(a)produce all documents relevant to the examination that the person conducting the examination requires the bankrupt to produce; and
(b)answer all questions that that person asks the bankrupt or that the Court allows the bankrupt to be asked.
(5)The bankrupt is not entitled to advance notice of who will ask the questions or what the questions will be.

181. Bankruptcy trustee to ensure record of examination is kept

(1)On the holding of a public examination of a bankrupt before the Court, the Court shall ensure that a written record is made of the examination.
(2)The Court shall also ensure that the record of the examination—
(a)is read over to the bankrupt; and
(b)is made available for inspection at all reasonable times by the bankrupt's creditors or their advocates.
(3)If required by the Court to do so, the bankrupt shall sign the record of the examination.
(4)A bankrupt who, without reasonable excuse, fails to comply with a request made under subsection (3) is in contempt of the Court.

182. When examination ends

(1)The public examination of a bankrupt ends when the Court makes an order declaring that the examination is ended.
(2)The Court may make an order declaring that the examination has ended only if it is satisfied that the bankrupt's conduct, affairs and property have been sufficiently investigated and that the investigation is complete.

183. Consequence of bankrupt's failing to attend examination

If the bankrupt does not appear for the examination at the appointed time and has no reasonable excuse—
(a)the Court may, either on the bankruptcy trustee's application or its own initiative, by warrant, have the bankrupt arrested and brought before the Court for examination; and
(b)the Court may order the bankrupt to pay all the expenses arising out of the arrest and examination before the Court, if it believes that the bankrupt's evidence was necessary for the purposes of ascertaining the bankrupt's estate.

184. Bankrupt entitled to be paid expenses for attending examination

(1)A bankrupt is entitled to be paid such expenses for attending a public examination before the Court as are prescribed by the insolvency regulations for the purposes of this section.
(2)It the relevant expenses have not been paid or tendered to the bankrupt, the bankrupt person is not obliged to attend the examination.

185. Power to extend examination companies controlled by bankrupt and bankrupt's associates

(1)If authorised by the Court, the bankruptcy trustee or a person appointed by that trustee may exercise the powers specified in subsection (2) in relation to a company with which the bankrupt is associated or a partnership of which the bankrupt is a member.
(2)The powers referred to in subsection (1) are the powers—
(a)to examine the documents of the company or partnership; and
(b)to examine—
(i)any past or present officer, employee or member of the company about the affairs of that body; or
(ii)any past or present member or employee about the affairs of the partnership.
(3)The bankruptcy trustee shall ensure that a record of the examination of a person under subsection (2)(b) is recorded in writing, and the person examined signs the written record unless for good reason the bankruptcy trustee excuses the person from doing so.
(4)For the purposes of this section, a company is associated with the bankrupt if the bankrupt is an officer or employee of the company or is in a position to appoint or control the appointment of its directors.

186. No privilege against self-incrimination, but statements not generally admissible in criminal proceedings against their maker

(1)A person (including the bankrupt) who is examined or questioned at a public examination of a bankrupt shall answer all questions put to the person in relation to the bankrupt's conduct, affairs and property to the extent that the person is able to do so.
(2)A person is not excused from answering a question because the question may incriminate or tend to incriminate the person.
(3)Except as provided by subsection (4), a statement made by a person examined or questioned under this Part in response to a question put to the person in the course of the public examination of a bankrupt is not admissible in criminal proceedings against the person.
(4)Such a statement is admissible in any such proceedings if—
(a)the person was examined or questioned under oath and is charged with an offence under—
(i)section 108 of the Penal Code (Cap. 63) (which deals with perjury and subornation of perjury); or
(ii)section 114 of that Code (which deals with false swearing); or
(b)the statement was made by the bankrupt and the bankrupt is charged with an offence under section 187(1) (c) or (d).

187. Offences relating to examinations of bankrupts

(1)A person who, without reasonable excuse—
(a)fails to attend an examination as required by section 180(1);
(b)fails to deliver a document as required under section 180(4)(a);
(c)fails to answer a question as required under section 180(4)(b); or
(d)in purporting to answer such a question, gives an answer that the person knows, or ought reasonably to know, is false or misleading in a material respect,
commits an offence and on conviction is liable to a fine not exceeding one million shillings or to imprisonment for a term not exceeding twelve months, or to both.
(2)The fact that a bankrupt may be charged with, tried for and convicted of an offence under subsection (1) does not prevent the Court from punishing the bankrupt for contempt of the Court.

188. Entitlement of examinee to be represented

(1)A person (including the bankrupt) who is examined or questioned at a public examination of a bankrupt is entitled to be represented by an advocate.
(2)Such a person may be questioned by the bankrupt's advocate, and any answers given by the person form part of the examination.

Division 18 — Status of bankrupt's contracts

189. Bankruptcy trustee may continue or disclaim bankrupt's contracts entered into before bankruptcy commenced

If a bankrupt is a party to a contract, the bankruptcy trustee may—
(a)continue the contract, subject to the terms of the contract and all relevant rules of law; or
(b)disclaim the contract if it is onerous property for the purposes of section 118.

190. Contract terminated by other contracting party

(1)This section applies if the other party to a contract to which the bankrupt is a party, in accordance with a term of the contract, terminates the contract in consequence of the bankruptcy.
(2)Irrespective of what the contract provides, the bankruptcy trustee may recover such amount from the other contracting party as the Court considers to be fair and reasonable, but that amount may not be greater than the amount calculated in accordance with the formula in subsection (3).
(3)The formula is as follows:A = B - C, where—A is the amount to be calculated for the purpose of subsection (2);B is the amount payable to the bankrupt under the contract; andC is the total of—
(a)the amount paid to the bankrupt;
(b)the cost to complete the contract; and
(c)a reasonable amount as a penalty for delay in completing the contract.

191. Transaction with bankrupt made in ignorance of bankruptcy

(1)This section applies to a payment of money or a delivery of property to a person who is adjudged bankrupt, whether the payment or delivery is made—
(a)on the order of the person; or
(b)from the person to an assignee or to the order of an assignee.
(2)The payment or delivery is a good discharge to the person who made the payment or delivery if—
(a)the payment or delivery was made before the bankruptcy of the person referred to in subsection (1) was advertised; and
(b)the person making the payment or delivery satisfies the Court that—
(i)that person had no knowledge of the bankruptcy or that an application for a bankruptcy order had been made; and
(ii)the payment or delivery was made in the ordinary course of business or was otherwise made in good faith.

192. Bankrupt's co-contractor may sue and be sued if there is a joint contractual liability

If the bankrupt is jointly liable under a contract with another person, that other person may sue and be sued on the contract without the bankrupt being joined as a party to the proceeding.

193. Bankruptcy trustee may recover advocate's costs

(1)The bankruptcy trustee may recover money paid by a bankrupt to the bankrupt's advocate for costs in obtaining a bankruptcy order, except for those (if any) prescribed for the purpose of this section by the insolvency regulations.
(2)Subsection (1) applies whether the relevant payment was made before or after the bankruptcy commenced.

Division 19 — Irregular transactions involving bankrupt

194. Application of Division 19

(1)This Division applies to the following irregular transactions by the bankrupt before the bankruptcy commenced—
(a)an insolvent transaction;
(b)an insolvent charge;
(c)an insolvent gift;
(d)a transaction at undervalue;
(e)a contribution by the bankrupt to the property of another person.
(2)The general effect of this Division is—
(a)to enable irregular transactions of the kinds listed in subsection (1)(a) to (c) to be cancelled on the initiative of the bankruptcy trustee; and
(b)to enable that trustee, in appropriate cases, to recover property or money from a party to an irregular transaction with the bankrupt.

195. Power to extend certain periods specified in this Division

For the purposes of this Division, a two year period or a six months period referred to in this Division can be extended—
(a)in the case of a bankruptcy order made on a creditor's application, by the period between the time when the application was served on the bankrupt and the time when the bankruptcy order was made; and
(b)in the case of a bankruptcy order made on the bankrupt's own application while a creditor's application was pending, by the period between the time when the creditor's application was served on the bankrupt and the time when the bankruptcy order was made.

196. Insolvent transactions may be cancelled by bankruptcy trustee

A transaction by a bankrupt can be cancelled on the bankruptcy trustee's initiative if it—
(a)is an insolvent transaction; and
(b)was made within two years immediately before the bankruptcy commenced.

197. Meaning of insolvent transaction for purposes of sections 196

(1)For the purposes of section 196, a transaction is an insolvent transaction by a bankrupt if it—
(a)is entered into or made at a time when the bankrupt is unable to pay the bankrupt's debts; and
(b)enables a creditor to receive more towards satisfaction of a debt by the bankrupt than the creditor would receive, or would be likely to receive, in the bankruptcy.
(2)Any of the following actions by a bankrupt is a transaction for the purpose of subsection (1)—
(a)conveying or transferring the bankrupt's property;
(b)giving a charge over the bankrupt's property;
(c)incurring an obligation;
(d)undergoing an execution process;
(e)paying money (including money paid in accordance with a judgment or an order of a court);
(f)any other act done or omitted to be done for the purpose of entering into such a transaction or giving effect to it.

198. Insolvent transaction presumed

For the purposes of section 196, a transaction that was entered into within the six months before a bankrupt is adjudged bankrupt is presumed, until the contrary is proved, to have been made at a time when the bankrupt is unable to pay the bankrupt's debts.

199. When series of transactions are to be regarded as single transaction

(1)This section applies if a series of transactions made for commercial purposes forms an integral part of a continuing business relationship (such as a running account) between a bankrupt and a creditor in circumstances in which, during the course of the relationship, the level of the bankrupt's net indebtedness to the creditor is increased and reduced from time to time.
(2)For the purposes of subsection (1), it does not matter whether persons other than the bankrupt or the creditor are parties to any of the transactions.
(3)When this section applies—
(a)section 196 applies in relation to all of the transactions forming part of the relationship as if they together formed a single transaction; and
(b)any particular transaction of the series referred to in subsection (1) may be treated as an insolvent transaction that can be cancelled by the bankruptcy trustee only if the effect of applying that section as provided by paragraph (a) is that the single transaction referred to in that paragraph is treated as an insolvent transaction that can be cancelled by the bankruptcy trustee.

200. Insolvent charges can be cancelled on bankruptcy trustee's initiative

A charge over any property of a bankrupt can be cancelled on the bankruptcy trustee's initiative if—
(a)the charge was created within the two years immediately before the bankruptcy commenced; and
(b)immediately after the charge was given, the bankrupt was unable to pay the bankrupt's due debts.

201. Charge for new consideration or replacement charge not affected

(1)A charge may not be cancelled under section 200 if it secures—
(a)money actually advanced or paid;
(b)the actual price or value of property sold or transferred; or
(c)any other valuable consideration given,
in good faith by the secured creditor to the bankrupt at the time when, or at any time after, the charge was created.
(2)A charge may not be cancelled under section 200 if the charge is a replacement for an earlier charge that was given by the bankrupt more than two years before the bankruptcy commenced, except to the extent that—
(a)the amount secured by the substituted charge is greater than the amount that was secured by the earlier charge; or
(b)the value of the property that was subject to the substituted charge at the date of substitution was greater than the value of the property subject to the earlier charge at that date.

202. Presumption that bankrupt unable to pay due debts

A bankrupt who gave a charge within the six months immediately preceding the commencement of the bankruptcy is presumed, until the contrary is proved, to have been unable to pay the bankrupt's debts immediately after the charge was created.

203. Charge for unpaid purchase price given after sale of property

(1)If, in relation to property purchased by a bankrupt, the bankrupt has given to the seller a charge over the property within the two years immediately preceding the bankruptcy, section 200 does not affect the charge to the extent that it secures unpaid purchase money, but only if the charge was given not more than fourteen days after the date of the sale of the property to the bankrupt.
(2)Money is unpaid purchase money for the purpose of subsection (1) whether it is unpaid in relation to the property over which the charge is given or some other property.

204. Appropriation of payments by bankrupt to secured creditor

(1)This section applies if the bankrupt has made a payment or payments to a secured creditor after the bankrupt has given a charge to which section 202 or 203 applies.
(2)The bankruptcy trustee shall credit the bankrupt's payment or payments (as far as is necessary) towards—
(a)repayment of the money actually advanced or paid by the secured creditor to the bankrupt when or after the bankrupt gave the charge;
(b)payment of the actual price or value of property sold or supplied by the secured creditor to the bankrupt when or after the bankrupt gave the charge; or
(c)payment of any other liability of the bankrupt to the secured creditor in respect of any other valuable consideration given in good faith when or after the bankrupt gave the charge.
(3)This section does not apply to payments received by a bank in good faith in the ordinary course of business and without negligence.

205. Charge agreed before specified period not to be cancelled

A charge or a security right given by the bankrupt under an agreement to give the charge or create a security right that was made or made effective against third parties before the two years immediately before the bankruptcy is not liable to be cancelled under section section 200.[Act No. 13 of 2017, Sch.]

206. Cancellation of gifts made within two years before bankruptcy

A gift made by a bankrupt to another person can be cancelled on the bankruptcy trustee's initiative if the bankrupt made the gift within the two years immediately preceding the commencement of the bankruptcy.

207. Cancellation of gifts made by bankrupt made within five and two years before bankruptcy

(1)A gift by a bankrupt to another person can be also cancelled on the bankruptcy trustee's initiative if—
(a)the bankrupt made the gift during the period beginning five years and ending two years before the commencement of the bankruptcy; and
(b)at the time when the gift was made, the bankrupt was unable to pay the bankrupt's debts.
(2)A bankrupt is presumed to have been unable to pay the bankrupt's debts for the purpose of subsection (1)(b) unless the person claiming the gift proves that—
(a)immediately after the gift was made; or
(b)at any later time before the commencement of the bankruptcy,
the bankrupt was able to pay the bankrupt's debts without the aid of the property of which the gift was composed.

208. Procedure for cancelling irregular transactions

(1)The procedure set out in this section applies to the following irregular transactions—
(a)an insolvent transaction;
(b)an insolvent charge;
(c)an insolvent gift;
(d)any other transaction of a class prescribed by the insolvency regulations for the purposes of this section.
(2)A bankruptcy trustee who wishes to cancel an irregular transaction to which this section applies shall—
(a)lodge a notice with the Court that complies with subsection (3); and
(b)serve the notice on—
(i)the other party to the transaction; and
(ii)any other party from whom the bankruptcy trustee intends to recover.
(3)A notice complies with this subsection if it—
(a)is in writing;
(b)states the bankruptcy trustee's postal and street addresses and e-mail address (if any);
(c)specifies the irregular transaction to be cancelled;
(d)describes the property, or states the amount, that the bankruptcy trustee wishes to recover;
(e)includes a statement that the person named in the notice may object to the cancellation of the transaction by sending to the bankruptcy trustee a notice of objection to be received by the bankruptcy trustee at that trustee's postal, street or email address within twenty-one days after service on that person of that trustee's notice;
(f)states that a person making an objection is required to specify the reasons for the objection;
(g)states that the transaction will be cancelled as against the person named in the notice if that person does not object; and
(h)states that if the person named in the notice does object, the bankruptcy trustee may apply to the Court for the transaction to be cancelled.
(4)An irregular transaction is automatically cancelled in relation to a person on whom the bankruptcy trustee has served a bankruptcy trustee's notice, if the person has not objected by sending to the bankruptcy trustee a notice of objection that is received by the bankruptcy trustee at that trustee's postal, street or email address within twenty-one days after the bankruptcy trustee's notice has been served on that person.
(5)The bankruptcy trustee may disregard a notice of objection that fails to specify the reasons for the objection.
(6)The Court may, on the application of the bankruptcy trustee, cancel an irregular transaction that is not automatically cancelled by subsection (4).

209. Court may order retransfer of property or payment of an equivalent value

(1)On the cancellation of an irregular transaction under which property of the bankrupt, or an interest in property of the bankrupt, was transferred, the Court may make an order—
(a)for the retransfer to the bankruptcy trustee of the property or interest in the property; or
(b)for payment to the bankruptcy trustee of such amount as the Court considers appropriate, but the amount may not be greater than the value of the property, or interest in the property, at the time when the transaction was cancelled.
(2)The Court may make any other order for the purpose of giving effect to an order under subsection (1).
(3)An order under subsection (1) is in addition to any other rights and remedies available to the bankruptcy trustee, and this section does not affect those rights and remedies.

210. Limits on what can be recovered

The Court may not make an order under section 209 against a person if the person proves that when the person received the property or interest in the property—
(a)the person acted in good faith;
(b)a reasonable person in the same position would not have suspected that—
(i)in the case of an insolvent gift, the bankrupt was, or would become, unable to pay the bankrupt's debts without the aid of the property that the gift is composed of; or
(ii)in the case of any other irregular transaction of a kind to which section 208 applies, the bankrupt was, or would become, unable to pay the bankrupt's due debts; and
(c)the person gave value for the property or interest in the property or altered the person's position in the reasonably held belief that the transfer of the property or interest in the property to the person was valid and would not be cancelled.

211. Bankruptcy trustee may recover difference in value if transaction is found to be under value

(1)Under section 212, the bankruptcy trustee may recover from a party to a transaction with the bankrupt an amount calculated in accordance with the following formula:A = B - Cwhere—A is the amount to be calculated;B is the value that the party received from the bankrupt under the transaction; andC is the value (if any) that the bankrupt received from the party under the transaction.
(2)In this section and in section 212, "transaction" includes the giving of a guarantee by the bankrupt.
(3)The bankruptcy trustee may recover from the party the amount calculated under subsection (1) if—
(a)the bankrupt entered into the transaction with the party within the two years immediately before the bankruptcy commenced; and
(b)either—
(i)the bankrupt was unable to pay the bankrupt's debts when the transaction was entered into; or
(ii)the bankrupt became unable to pay the bankrupt's debts as a result of having entered into the transaction.

212. Court may order recipient of bankrupt's contribution to property of another to pay value to bankruptcy trustee

(1)The bankruptcy trustee may make an application to the Court for an order directing the recipient of a contribution by the bankrupt to the recipient's property to pay the value of the contribution to the bankruptcy trustee.
(2)On the hearing on an application made under subsection (1), the Court may make the order sought but only if satisfied that—
(a)the bankrupt was not paid an adequate amount in money or money's worth for the contribution;
(b)the value of the bankrupt's assets was reduced by the contribution; and
(c)the bankrupt made the contribution—
(i)within the two years immediately preceding the commencement of the bankruptcy; or
(ii)within the five years immediately before that commencement, and the recipient is not able to prove that the bankrupt, either at the time of the contribution or at any later time before that commencement, was able to pay the bankrupt's debts without the aid of the contribution.
(3)For the purposes of this section and section 213, a bankrupt has made a contribution to the recipient's property if the bankrupt has—
(a)erected buildings on, or otherwise improved, land or any other property of the recipient;
(b)bought land or any other property in the recipient's name;
(c)provided money to buy land or any other property in the recipient's name or on the recipient's behalf; or
(d)paid instalments for the purchase of, or towards the purchase of, land or any other property in the recipient's name or on the recipient's behalf.

213. Court's powers in relation to bankrupt's contribution to recipient's property

(1)The Court may—
(a)ascertain the value of the bankrupt's contribution for the purposes of section 212; and
(b)order the recipient to pay an amount equal to that value to the bankruptcy trustee.
(2)In subsection (1)(a), the bankrupt's contribution includes any payments for legal expenses, interest, rates, and other expenses or charges.
(3)The Court may order the recipient to pay less than the value of the contribution, or refuse to order the recipient to pay anything, if—
(a)the recipient acted in good faith and has altered the recipient's position in the reasonably held belief that the bankrupt's contribution was valid and that the recipient would not be liable to repay it in full or in part; or
(b)in the Court's opinion, it is unfair that the recipient should repay all or part of the contribution.
(4)If the Court orders the recipient to repay the bankrupt's contribution or a part of it, it may in the same order or in a subsequent order—
(a)direct the bankruptcy trustee to sell the whole or part of the relevant property, and to convey or transfer it to the purchaser; and
(b)make vesting and other orders that are necessary for the sale and transfer of the property.

214. How bankruptcy trustee is to use repayment of bankrupt's contribution to property

(1)The bankruptcy trustee shall apply—
(a)the money repaid under section 212 by the recipient of a contribution by the bankrupt to property; or
(b)the proceeds of sale of that property, by taking the steps specified in subsection (2) in the order specified in that subsection.
(2)The steps to be taken by the bankruptcy trustee are as follows:Step 1: The bankruptcy trustee shall keep as much of the proceeds as the bankruptcy trustee needs, when added to the other assets in the bankrupt's estate, to pay the creditors in full (including interest);Step 2: If there is a surplus after the creditors have been paid in full, the bankruptcy trustee shall pay as much of the surplus to the recipient of the property to which the bankrupt has contributed as was repaid under section 212;Step 3: The bankruptcy trustee may not pay anything to the bankrupt without having taken steps 1 and 2.

Division 20—Processing of creditors' claims against bankrupt's estate

215. Interpretation: Division 20

(1)For the purposes of this Division, a creditor's claim is a document that a creditor submits to the bankruptcy trustee for the purpose of proving the debt.
(2)A debt is proved when it is allowed by the bankruptcy trustee.

216. What debts are provable debts

(1)For the purpose of this Division, a provable debt is a debt or liability that the bankrupt owes—
(a)at the commencement of the bankruptcy; or
(b)after that commencement but before discharge, because of an obligation incurred by the bankrupt before that commencement.
(2)A fine, penalty or other order made by a court ordering the payment of money that has been made following a conviction—
(a)is not a provable debt; and
(b)is not discharged when the bankrupt is discharged from bankruptcy.

217. Procedure for proving debt: creditor to submit claim form

(1)A creditor (including a creditor who has a preferential claim) who wishes to claim in the bankruptcy shall submit a creditor's claim to the bankruptcy trustee before the deadline for submitting claims.
(2)The bankruptcy trustee may accept such a claim only if it is in the form prescribed by the insolvency regulations for the purposes of this section.
(3)For the purpose of subsection (1), the deadline is either—
(a)the time specified by the bankruptcy trustee in a notice given to the creditor; or
(b)the time specified in an advertisement published by the bankruptcy trustee in a newspaper widely circulating in the area in which the creditor normally resides or carries on business.
(4)In submitting a claim, a creditor shall comply with the procedure and formalities (if any) prescribed by the insolvency regulations.
(5)The creditor is required to bear the costs of proving the debt, unless the Court makes an order as to the creditor's costs under section 225.
(6)The creditor may amend or withdraw the claim, but an amended claim has to comply with the formalities prescribed for the original claim.

218. Bankruptcy trustee required to examine creditor's claim

(1)The bankruptcy trustee shall examine each creditor's claim and the grounds of the debt, unless of the opinion that no dividend will be paid to creditors.
(2)As soon as practicable after examining a claim, the bankruptcy trustee shall do one or more of the following—
(a)wholly or partly allow the claim;
(b)wholly or partly reject the claim;
(c)require further evidence in support of the claim or an item contained in it.

219. Bankruptcy trustee to give creditor notice of grounds of rejection

As soon as practicable after rejecting a creditor's claim, or a part of it, the bankruptcy trustee shall give the creditor a notice rejecting the claim or part and specifying the grounds for the rejection.

220. Bankruptcy trustee's power to obtain evidence of debt

(1)The bankruptcy trustee may summon for examination, and examine (on oath or otherwise), any of the following persons—
(a)a person who has submitted a creditor's claim;
(b)a person who has made a declaration or statement as part of a creditor's claim;
(c)a person who is capable of giving evidence concerning a creditor's claim or the debt to which the claim relates.
(2)If a person who has been summoned under this section fails to attend, or attends but refuses to be sworn or give evidence, and has no reasonable excuse for doing so, the Court, on the bankruptcy trustee's application may—
(a)may issue a warrant directing the person to be arrested and brought before the Court for examination; and
(b)if the Court believes that the person's evidence was relevant to deciding whether a creditor's claim should be allowed or rejected, make an order directing the person to pay all or a specified part of the expenses attributable to the arrest and examination.

221. Notice by bankrupt or creditor to bankruptcy trustee to allow or reject creditor's claim

(1)The bankrupt or any creditor may give the bankruptcy trustee notice to allow or reject a creditor's claim.
(2)It the bankruptcy trustee has not made a decision allowing or rejecting the creditor's claim within fourteen days after receiving the claim, the creditor or the bankrupt may apply to the Court for an order under subsection (3).
(3)On the hearing of an application made under subsection (2), the Court shall—
(a)if it finds the claim to be substantiated or partly substantiated, make an order allowing the claim or partly allowing the claim; or
(b)if it finds that the claim is wholly or partly unsubstantiated, make an order rejecting or partly it,
and in either case may make such other order of an ancillary nature as it considers appropriate.

222. Court may cancel creditor's claim

(1)The Official Receiver, the bankrupt or a creditor may make an application to the Court for an order under subsection (2) on the ground that the bankruptcy trustee improperly allowed a creditor's claim.
(2)On the hearing of an application made under subsection (1), the Court may make an order cancelling the creditor's claim or reducing the amount claimed, if it considers that the claim was improperly allowed or was improperly allowed in part.

223. Power of court to quash or vary bankruptcy trustee's decision rejecting creditor's claim

(1)A creditor whose claim has been rejected by the bankruptcy trustee may apply to the Court to make an order under subsection (3).
(2)An application can be made only within twenty-one days after the creditor receives the bankruptcy trustee's notice of rejection of the claim, or within such extended period as the Court may allow.
(3)On the hearing of an application made under subsection (1), the Court shall—
(a)if it considers that the bankruptcy trustee's decision was wholly justified, confirm the decision; or
(b)if it considers that the decision was only partly justified, confirm the decision as to that part and quash the rest of the decision, but if it considers that the decision was wholly unjustified, it shall quash the decision.
(4)A creditor has no right to prove for a debt that has been rejected by the bankruptcy trustee, unless the creditor has made an application under this section.

224. Parties to proceedings relating to creditor's claim

(1)This section applies to an application made under section 221, 222 or 223.
(2)If the applicant is not the bankruptcy trustee, the applicant shall serve a copy of the application on the bankruptcy trustee as a party to the proceeding.
(3)If the applicant is not the bankrupt or a creditor who is affected by the decision of the bankruptcy trustee, the applicant shall serve a copy of the application on the bankrupt or that creditor.
(4)On being served with a copy of the application, the bankrupt or creditor may give notice to the Court that the bankrupt or creditor wishes to appear and be heard at the hearing and, on doing so, becomes a party to the proceeding.

225. Court may make order as to costs

On the hearing of an application made under section 221, 222 or 223, the Court may, if it considers it appropriate to do so, make an order—
(a)directing specified costs of a creditor to be added to the creditor's claim;
(b)directing specified costs of a party to the proceeding to be paid out of the bankrupt's estate; or
(c)directing specified costs to be paid by a specified party to the proceedings (other than the bankruptcy trustee).

226. Secured creditor’s options in relation to property that is subject to a charge

(1)If the property of a bankrupt is subject to a charge, the creditor who holds the charge may choose an option specified in subsection (2).
(2)The options are as follows—
(a)Option 1: to realise the property by having it sold (but only if the creditor is entitled to do so under the terms of the charge); or
(b)Option 2: to have the property valued and prove in the bankruptcy as an unsecured creditor for the balance due (if any) after deducting the amount of the valuation;
(c)Option 3: to surrender the charge to the bankruptcy trustee for the general benefit of the creditors and prove in the bankruptcy as an unsecured creditor for the whole debt.
(3)The bankruptcy trustee may, at any time by notice, require a creditor who holds a charge over a bankrupt's property—
(a)within thirty days after receipt of the notice, to choose one of the options specified in subsection (2); and
(b)if the creditor chooses option 2 or option 3, to exercise the chosen option within that period.
(4)A creditor who, having been served with a notice under subsection (1), fails to comply with the notice is taken to have surrendered the charge to the bankruptcy trustee under option 3 for the general benefit of the creditors, in which case the creditor may prove as an unsecured creditor for the whole debt.
(5)This section is subject to section 227.

227. Power of Court to order disposal of property that is subject to a charge

(1)If property of a bankrupt is subject to a security, the bankruptcy trustee may make an application to the Court for an order under subsection (2).
(2)On the hearing of an application made under subsection (1), the Court may make an order enabling the bankruptcy trustee to dispose of the property as if it were not subject to the security, but only if it is satisfied that the disposal of the property would be likely to provide a better overall outcome for the creditors of the bankrupt.
(3)An order under subsection (2) is subject to the condition that the bankruptcy trustee apply towards discharging the amounts secured by the security—
(a)the net proceeds of disposal of the property, and
(b)any additional money required to be added to the net proceeds so as to produce the amount determined by the Court as the net amount that would be realised on a sale of the propefiy at market value.
(4)If an order under subsection (2) relates to more than one security, the bankruptcy trustee shall apply the money from the disposal in the order of the priorities of the securities.
(5)Within fourteen days after an order is made under subsection (2), the bankruptcy trustee shall lodge a copy of the order with the Official Receiver for recording in the public register kept under Division 2 of Part XII.
(6)A bankruptcy trustee who, without reasonable excuse, fails to comply with subsection (5) commits an offence and on conviction is liable to a fine not exceeding five hundred thousand shillings.

228. Realisation of property that is subject to a security

(1)A creditor who realises property that is subject to a charge may prove as an unsecured creditor for any balance due after deducting the net amount realised.
(2)However, subsection (1) does not apply if the bankruptcy trustee has accepted a valuation and creditor's claim under section 231.
(3)A secured creditor who realises property subject to a charge shall account to the bankruptcy trustee for any surplus remaining after the following amounts have been paid—
(a)the amount of the debt;
(b)interest payable on the debt up to the time when it is paid;
(c)any proper payments to the holder of any other charge over the property.

229. Valuation of charge held by creditor and claim for balance due

(1)This section applies if a creditor who holds a charge or security right over a bankrupt's property has the property valued and seeks to prove as an unsecured creditor for the balance due after deducting the amount of the valuation.
(2)The creditor shall ensure that the valuation and the claim for the balance—
(a)is made in the prescribed creditor's claim form;
(b)contains full particulars of the valuation and the debt;
(c)contains full particulars of the charge (including the date when it was given) or a copy of the registration with respect to a security right; and
(d)identifies the documents (if any) that substantiate the debt and the charge or security right.
(3)If required to do so by the bankruptcy trustee, the creditor shall produce for inspection the documents so identified.
(4)Failure to comply with subsection (2), or with a requirement of the bankruptcy trustee under subsection (3), renders the creditor's claim invalid.[Act No. 13 of 2017, Sch.]

230. Offence for secured creditor to make false claim

(1)A person who—
(a)makes, or authorises the making of, a claim under section 229 (1) knowing it to be false or misleading; or
(b)omits, or authorises the omission of, any matter from a claim under section 229 (1) knowing that the omission will make the claim false or misleading, commits an offence
(2)A person who is found guilty of an offence under subsection (1) is liable on conviction to a fine not exceeding two million shillings or to imprisonment for a term not exceeding five years, or to both.

231. Bankruptcy trustee's powers when secured creditor values property subject to charge and proves for balance

(1)If a creditor who holds a charge or security right over property of a bankrupt values the property and seeks to prove for the balance due, the bankruptcy trustee shall—
(a)accept the valuation and the creditor's claim; or
(b)reject the valuation and creditor's claim in whole or in part.
(2)Within fourteen days after receiving a notice of rejection of the creditor's valuation and claim, the creditor may submit to the bankruptcy trustee a revised valuation and creditor's claim.
(3)If the bankruptcy trustee subsequently finds that a decision rejecting a valuation and creditor's claim was wrong, the bankruptcy trustee may revoke or amend the decision.
(4)It the bankruptcy trustee accepts the valuation and creditor's claim, the bankruptcy trustee may, at any time before the creditor realises the property, redeem the charge or collateral subject to a security right by paying the amount of the valuation to the creditor.
(5)For the purpose of subsection (4), the bankruptcy trustee accepts the valuation and creditor's claim if the bankruptcy trustee—
(a)accepts the original or an amended valuation and creditor's claim; or
(b)accepts a valuation and creditor's claim after amending or revoking a decision to reject a valuation and creditor's claim.
[Act No. 13 of 2017, Sch.]

232. Secured creditor who surrenders charge may with approval of the Court withdraw claim or submit a new claim

(1)This section applies to a creditor who has surrendered a charge under option 3 in section 226(2) or is taken to have surrendered the charge under section 226(4).
(2)The creditor may, with the approval of the Court or the bankruptcy trustee and subject to the terms that the Court or that trustee imposes—
(a)withdraw the surrender and rely on the charge; or
(b)submit a new creditor's claim under this Division.
(3)Subsection (2) does not apply if the bankruptcy trustee has already realised the property that is subject to the charge.

233. Bankruptcy trustee may estimate amount of uncertain creditor's claim

If a creditor's claim is subject to a contingency or is for damages, or if, for some other reason, the amount of the claim is uncertain, the bankruptcy trustee may estimate the amount of the claim.

234. Application to the Court to determine amount of uncertain creditor's claim

(1)If the bankruptcy trustee—
(a)chooses not to estimate the amount of a creditor's claim in accordance with section 233; or
(b)has estimated the amount of the claim but the creditor is dissatisfied with the estimate,
the creditor may apply to the Court to make an order under subsection (2).
(2)On the hearing of an application made under subsection (1), the Court shall make an order determining the amount of the creditor's claim.
(3)The bankruptcy trustee is entitled to be served with a copy of the application and, at the hearing of the application, to appear and be heard as respondent.

235. Creditor's claim payable six months or more after commencement of bankruptcy

(1)A creditor's claim that would, but for the bankruptcy, be payable six months or more after the commencement of the bankruptcy is taken to be a claim for the present value of the debt.
(2)The present value of the debt is to be calculated by deducting interest at the rate prescribed by the insolvency regulations for the period from the date on which the bankruptcy commenced to the date when the debt would be payable.

236. Bankruptcy trustee's duty when mutual dealings have occurred between the bankrupt and other persons

(1)If there have been mutual credits, mutual debts or other mutual dealings between a bankrupt and another person, the bankruptcy trustee shall—
(a)take an account of what is due from the one party to the other in respect of those credits, debts or dealings;
(b)set-off an amount due from one party to the other against an amount due from the other party; and
(c)allow only the balance of the account to be proved in the bankruptcy.
(2)However, a person may not claim the benefit of a set-off against an amount due from the bankrupt if, at the time when the credit was given to the bankrupt, the person knew or had reason to know that the bankrupt was insolvent.
(3)A creditor of the bankrupt who claims a set-off shall declare in the creditor's claim form that, at the time when the creditor gave the bankrupt credit, the creditor did not know and had no reason to know that the bankrupt was insolvent.
(4)The bankruptcy trustee shall reject a claim form that does not comply with subsection (3).

237. Creditor may claim pre-bankruptcy interest

A creditor may claim interest up to the date on which the bankruptcy commences—
(a)in the case of contract debt interest, at the rate specified in the contract that provides for interest on the debt; or
(b)in the case of judgment debt interest, at the rate payable on the debt.

238. Post-bankruptcy interest payable at prescribed rate if surplus remains

(1)The bankruptcy trustee shall pay interest on all allowed creditors' claims at the prescribed rate if surplus assets remain after the bankruptcy trustee has paid the claims.
(2)The bankruptcy trustee shall pay the interest from and including the date on which the bankruptcy commences to the date on which the debt is paid.
(3)If the surplus is not enough to pay the interest in full on all debts, payment of the interest is to abate rateably among those debts.Example:A and B are the only creditors of the bankrupt, C. A's contract with C provided for interest of 20 percent but B's contract did not provide for interest. C's bankruptcy commenced on 1 July 2015. At that date— (1) C owed K.Sh.100,000 plus $10,000 contractual debt interest; and (2) C owed B K.Sh.$200,000 but no interest. A can prove in the bankruptcy for $110,000 and B for KS200,000. The bankruptcy trustee pays their claims in full on 1 July 2014, twelve months after the commencement of the bankruptcy. If there are surplus assets after the bankruptcy trustee has paid the claims of A and B in full, the bankruptcy trustee has to use the surplus to pay interest on both debts for the period from 1 July 2015 to 1 July 2014. If there is enough, and assuming that the prescribed rate is 10 percent, the bankruptcy trustee has to pay A K.Sh11,000 and B KS20,000 in post-the bankruptcy interest. Assume that the bankruptcy trustee has a surplus of only K.Sh15,500. In that case A and B share pro rata, so that A is paid K.Sh5,500 in post-the bankruptcy interest, and B is paid $10,000.

239. Additional post-bankruptcy interest on contract or judgment debt if surplus remains

(1)If there is a surplus after the bankruptcy trustee has paid post-bankruptcy interest as provided by section 238, the bankruptcy trustee shall pay additional interest on allowed proofs for a contract debt or judgment debt, by making up—
(a)in the case of a contract debt, the difference between the prescribed rate and the rate specified in the contract; and
(b)in the case of a judgment debt, the difference between the prescribed rate and the rate payable on the debt.
(2)The bankruptcy trustee shall pay the additional interest from and including the date on which the bankruptcy commenced to the date on which the creditor's claim is paid.
(3)If the surplus is not enough to pay the additional interest in full on the creditors' claims that are eligible for that interest, payment of the interest is to abate rateably among those claims.

240. Meaning of prescribed rate for purposes of sections 238 and 239

For the purposes of sections 238 and 239, the prescribed rate of interest is the rate for the time being prescribed by the insolvency regulations for the purposes of those sections.

241. Creditor required to deduct trade discounts

A creditor shall deduct from the creditor's claim any trade discount that the creditor would have given a debtor if the debtor had not become bankrupt.

242. Secured creditor can prove as unsecured creditor if security is void or partly void

If a creditor's security over assets of the bankrupt is wholly or partly void under a provision of this or any other Act, the creditor may prove as an unsecured creditor—
(a)if the security is wholly void, for the whole of the debt; or
(b)if the security is partly void, to the extent that the debt is unsecured.

243. Judgment creditor may prove for costs

A person who obtained an order for costs against the bankrupt before the commencement of the bankruptcy may prove for the amount of those costs even if that amount is not fixed until after that commencement.

244. Company may prove for unpaid calls

(1)If a bankrupt is, at the commencement of the bankruptcy, a shareholder of a company (not being a company that is in liquidation), the company may prove for—
(a)the amount of unpaid calls on the bankrupt made before that commencement in respect of the bankrupt's shares; and
(b)the value of the liability to calls to be made during the twelve-month period after that commencement.
(2)The value referred to in subsection (1)(b) is to be estimated—
(a)as agreed by the bankruptcy trustee and the company; or
(b)if the bankruptcy trustee and the company cannot agree, as directed by the Court.

245. When guarantor for bankrupt may prove claim

(1)If, in relation to a bankruptcy—
(a)a person is, at the commencement of the bankruptcy, a guarantor of, or is otherwise liable for a debt of, the bankrupt; and
(b)the person discharges the debt or liability (before or after that commencement),
the person is entitled to the benefit to subsection (3) or (4), whichever is applicable to the person.
(3)If the creditor of the bankrupt has submitted a creditor's claim for the debt or liability, the person may stand in the creditor's place in respect of the claim.
(4)If the creditor has not submitted a creditor's claim form for the debt or liability—
(a)the person may prove for the payment that the person has made as if the payment were a debt, without disturbing dividends already paid to the creditor in the bankruptcy; and
(b)if the person does so, the person is entitled to receive dividends paid subsequently.

Division 21 — Distribution of Bankrupt's Estate

246. Interpretation: Division 21

In this Division, "preferential claim" means a claim in respect of a debt listed in paragraphs 2, 3 or 4 of the Second Schedule.

247. Preferential debts: priority of debts

(1)For the purpose of this Act, a bankrupt's preferential debts are those specified in paragraphs 2 to 4 of the Second Schedule and are payable as provided by that Schedule in priority to the bankrupt's other debts.
(2)Debts of the bankrupt that are neither preferential debts nor debts to which section 248 applies also rank equally between themselves and, after the preferential debts, are payable in full unless the bankrupt's estate is insufficient to satisfy them, in which case they abate in equal proportions among themselves.
(3)Any surplus remaining after the payment of the debts referred to in subsection (2) is to be applied in paying interest on those debts in respect of the periods during which they have been outstanding since the commencement of the bankruptcy.
(4)Interest on preferential debts ranks equally with interest on debts that are not preferential debts.
(5)The rate of interest payable under subsection (4) in respect of a debt is the rate for the time being prescribed by the insolvency regulations for the purposes of this section.
(6)Neither this section nor section 248 limits the effect of a provision of any written law under which the payment of any debt or the making of any other payment is, in the event of bankruptcy, given a particular priority or required to be postponed.
(7)If, before the commencement of the bankruptcy, a creditor agrees to accept a lower priority in respect of a debt than it would otherwise have under this section, nothing in this section or the Second Schedule prevents the agreement from having effect according to its terms.

248. Priority ranking of debts owed to bankrupt's spouse

(1)This section applies to bankruptcy debts owed in respect of credit provided by a person who was the bankrupt's spouse at the commencement of the bankruptcy and so applies even if the person was not the bankrupt's spouse at the time the credit was provided.
(2)Those debts—
(a)rank in priority after the debts and interest required to be paid in accordance with section 247(3) and (4); and
(b)are payable with interest at the rate specified in section 247(5) in respect of the period during which they have been outstanding since the commencement of the bankruptcy.
(3)The interest payable under subsection (2)(b) has the same priority as the debts on which it is payable.

249. Person who makes payment on account of preferential creditor to be subrogated to the rights of that creditor

If a payment has been made to a person on account of a preferential creditor out of money advanced by another person for that purpose, the other person has, in the bankruptcy, the same right of priority in respect of the money so advanced as the preferential creditor would have if the payment had not been made.

250. Priority given to landlord or other person who distrains on goods and effects of bankrupt

(1)If a landlord or other person has distrained on goods or effects of the bankrupt during the thirty day period before the bankruptcy commenced, the preferential claims are a first charge on the goods or effects so distrained, or the proceeds from their sale.
(2)However, if any money is paid to a claimant under that charge, the landlord or other person has the same rights of priority as that claimant.

251. Creditors to have priority over creditors of joint bankrupt

If a bankrupt is a partner of a firm, any creditor to whom the bankrupt is indebted jointly with the other partners of the firm is not entitled to receive money obtained from the realisation of the bankrupt's separate property until the claims of all of the other creditors have been paid in full.

252. Final distribution of bankrupt's estate

(1)On realising the bankrupt's estate or so much of it as can be realised without needlessly protracting the bankruptcy trusteeship, the bankruptcy trustee shall give notice either—
(a)of an intention to declare a final dividend; or
(b)that no dividend, or further dividend, will be declared.
(2)The bankruptcy trustee shall include in the notice the prescribed information and a statement that requires all claims against the bankrupt's estate to be established by a final date specified in the notice.
(3)The Court may, on the application of any person, the Court may make an order postponing the final date.
(4)After the final date, the bankruptcy trustee shall—
(a)pay any outstanding expenses of the bankruptcy out of the bankrupt's estate; and
(b)if the bankruptcy intends to declare a final dividend, declare and distribute that dividend without regard to the claim of any person in respect of a debt not already proved in the bankruptcy.
(5)After paying the interest referred to in section 238 and paying in full the claims referred to in section 237, the bankruptcy trustee shall pay any surplus to the bankrupt.
(6)Subsection (5) is subject to section 214.

253. Final meeting of creditors

(1)Subject to this section, if—
(a)it appears to the bankruptcy trustee that the administration of the bankrupt's estate in accordance with this Division is for practical purposes complete; and
(b)the bankruptcy trustee is not the Official Receiver, the bankruptcy trustee shall summon a final gener