Previous Provision

Amendment Act

Section 3 (6): Definition of ‘sign’

Signage by a body corporate (company) in the form of affixing a mark or using an electronic signature was valid if done:

a.    By their attorney duly appointed by a power of attorney under the Register of Documents Act; or

b.    By affixing of the company seal on the document pursuant to the Company’s articles of association with no attestation requirement.

Section 3 (6) is amended to expand the definition of sign to include a valid signature on behalf of a company by:

a.    Two authorised signatories; or

b.    A director of the company in the presence of a witness who attests the signature.

This is in line with section 37 of the Companies Act, 2015.

Previous Provision

Amendment Act

Section 117: Exemptions from stamp duty

This section lists express items for which stamp duty is not payable.

The Amendment Act adds to the list of exemptions the following item:

a.    Sale agreements for transfer of any property from payment of stamp duty. Previously, a fixed duty of Ksh 100 was payable on the transfer of property.

Previous Provision

Amendment Act

 Section 3: Interpretation provision Definition of “general meeting”

 The Act defines a general meeting to mean a general meeting of a company

Section 3 is amended to extend the definition of a general meeting to include a physical, virtual or hybrid meeting.

“Hybrid meeting” means a meeting where some participants are in the physical location while others join through electronic means including video conference, wen conference or such other electronic means.

“Virtual means” means a meeting where all members join and participate in the meeting through electronic means including video conference, wen conference or such other electronic means.

 Section 283: Publication of notice of general meeting on company’s website

 Section 283(2)

This section invalidated any notice of a general meeting on the company’s website except where the notice:

a.    Stated that it concerned a notice of a company meeting;

b.    Specified the place, date and time of the meeting; and

c.    Stated whether the meeting was an annual general meeting where a public company.

The Company must ensure the availability of such notice from the date of posting till after the conclusion of the meeting.

Section 283(2) is amended to require any notice of a general meeting to specify the means of joining and participating in a hybrid or virtual meeting.

 Section 285: Contents of notices of general meetings

 This section dictates the contents of a notice to include:

a.    Time and date of a meeting;

b.    venue; and

c.    Agenda of the meeting i.e. general nature of the business.

Section 285 is amended by adding specification of the means of joining a hybrid or virtual meeting to the list of contents of a notice of general meetings.

The sixth Schedule: Transitional and Saving Provisions.

Paragraph 11: Official seal of existing company

This paragraph was nullified by the deletion of Section 42 of the Companies Act through an amendment by the Business Laws (Amendment) Act, 2019

The Amendment Act deletes Paragraph 11 altogether.

This deletion ensures consistency in the Companies Act given that Section 42 (deleted) was an anchor for Paragraph 11 hence the paragraph could not be enforced without section 42 (deleted).

Previous Provision

Amendment Act

 Section 34: Expeditious disposal of cases

Section 34(1) anticipates, where practicable, the hearing and conclusion of a case on the same day or on a day to day basis until it the case is finally concluded.

Section 34 (1) now gives a timeline of a maximum of sixty (60) days to conclude a matter which has not been concluded on the same day of filing it in court.

The new provision will therefore read: “All proceedings before the Court on any particular day, so far as is practicable, shall be heard and determined on the same day or on a day to day basis until final determination of the matter which shall be sixty days from the date of filing the claim”.

Previous Provision

Amendment Act

 Multiple sections

Definition of provisional supervisor:

 The Insolvency Act defined a provisional supervisor to mean a person willing to act in relation to a debtor’s proposal and had been duly appointed to act by a provisional court order.

(A debtor’s proposal is an offer made to the creditors by a debtor outlining a strategy to pay their debts. The strategy will include payment period and a mode of payment)

 The Amendment Act substitutes “provisional supervisor” with “monitor”.

A monitor refers to a person appointed by directors as an insolvency practitioner and who has consented to supervise the company.

In this case, the company must be qualified to obtain a moratorium.

This amendment means that the role of a provisional supervisor ceases to exist.

 Section 474: Share of assets to be made available for unsecured creditors where floating charge relates to company’s property.

 Subsection 5

This section empowers a liquidator, a provisional liquidator or an administrator to set aside twenty percent of the net assets of a company for satisfaction of unsecured debts where the company property is subject to a floating charge.

The property set aside cannot be distributed to a proprietor of a floating charge except where an application by an administrator, a liquidator or a provisional liquidator is made to the high court that distribution to unsecured creditors would not be feasible.

Subsection 5 is amended to allow a holder of a floating charge to also apply to the high court stating that setting aside property to satisfy unsecured debts would be prejudicial to the holder’s interests.

 Section 642: Companies with large outstanding liabilities ineligible

A company did not qualify for a moratorium if its outstanding liabilities exceeded Kshs. one (1) billion in an agreement.

The Amendment Act repeals this section.

This repeal reverses the previous provision. It makes companies with outstanding liabilities exceeding Kshs. one (1) billion in an agreement eligible for a moratorium

 Section 643: What steps company’s directors could take to obtain a moratorium

A company need be first eligible to make a proposal for a voluntary arrangement before obtaining a moratorium.

Sub-section 2 (a)

Requirements for a moratorium:

a.    Document outlining the terms of the proposal; and

b.    A statement of the company’s financial statement.

(to be prepared by the directors)

Sub-section 2 (b)

The directors could appoint a provisional supervisor to act as an authorised insolvency practitioner. The practitioner must consent to supervise the company.

Subsection 2 (a) is amended by deleting the first requirement for a moratorium and substituting it with:

a.    A document stating why a moratorium is desirable.

Subsection 2(b) is amended by empowering directors to appoint a monitor to act as an authorised insolvency practitioner. Similarly, the monitor must consent to supervise the company.

 Section 644: What directors have to do to obtain moratorium

 Subsection 1(d)

To obtain a moratorium, directors of a company were required to lodge with the court a statement from the provisional supervisor demonstrating that:

a.    The proposal had a reasonable prospect of being approved and implemented; and

b.    A meeting of the company and its creditors could be convened to consider the proposal.

Section 1(d) is amended to require the directors to lodge a statement from the monitor stating that in their opinion, the moratorium has a reasonable prospect of achieving its aims.

 Section 647(1)(b): Duty of provisional supervisor to publish and give notice that moratorium has taken effect

Where a moratorium had commenced, a provisional supervisor was obligated to notify all creditors whose claim s/he was aware of.

Section 647 (1)(b) is amended by deleting and substituting it.

The amendment requires a monitor to notify a creditor who previously applied for a liquidation order that a moratorium has been ended.

However, the application for a liquidation order must have been made before the moratorium came into effect.

 Section 648(1)(b):  Notification of end of moratorium to be given by provisional supervisor

Where a moratorium had ended, a provisional supervisor was obligated to notify all creditors whose claim s/he was aware of.

Section 648(1)(b) is amended by deleting and substituting it.

The amendment requires a monitor to notify a creditor who previously applied for a liquidation order that a moratorium has been ended.

However, the application for a liquidation order must have been made before the moratorium came into effect.

 Section 657: Circumstances in which company may dispose of property and goods that are subject to a security or held under credit purchase transaction

Sub-section 2:

Any property which was not subject to a security could be transferred by a company only if:

a.    The court approved the transfer; OR

b.    The security holder approved the transfer.

 Sub-section 3:

In a credit purchase transaction, a company could dispose goods as if it were the owner only if:

a.    The rightful owner had consented to the disposal; OR

b.    The court approved the disposal of goods.

 A credit purchase agreement may be in the form of a:

1.     Hire purchase agreement;

2.     Conditional sale agreement;

3.     Chattel leasing agreement; OR

4.     Retention of title agreement.

Sub-section 2 permits a company to transfer property only if it is subject to a security and if the circumstances listed in the previous provision have been met.

Sub-section 3 permits a company to dispose goods under a credit purchase agreement only if the goods are in its possession and if the circumstances listed in the previous provision have been met.

 Section 663: Provisional supervisor to convene meetings of the company and its creditors.

When a moratorium commenced, a provisional supervisor could convene a creditors’ meeting and a meeting of the company.

Only creditors whose claim the provisional supervisor was aware of could attend the meeting of the company’s creditors.  

Directors of a company could bring a proposal for approval at the company meeting. The directors could also modify the proposal before a meeting was held upon issuing a notice of the modification to the provisional supervisor.

Section 664: Conduct of meetings of company and its creditors.

The following could be done in a meeting:

a.    Elect a chairperson of the meeting or reinstate a creditor elected as chairperson in a previous meeting;

b.    For voting purposes, the chairman could divide the meeting into:

i)    secured creditors (if any);

ii)   preferential creditors (if any); and

iii)  unsecured creditors (if any);

c.    Approve modifications to the proposal for a voluntary arrangement, should the company consent to it.

Thereafter, the chairperson was obligated to report the results of the meeting to the court and serve a notice of the same to all persons previously served a notice of the meeting.

All meetings were to be conducted pursuant to the rules (if any) prescribed by the Insolvency Regulations.

 Section 665: Approval of proposal for voluntary arrangement.

A proposal (including with modifications) for a voluntary arrangement was considered approved if:

a.    Approved by a majority present at the company meeting or majority of the creditors present in the creditors meeting; OR

b.    Approved by a majority of members of each of the groups of creditors.

Any member or creditor who was dissatisfied with the approval could apply to the high court for an order. The court could make an order approving the application or any other order it deemed appropriate.

Section 666: Voluntary arrangement binding on company and creditors.

A proposal commenced a day after a court order was issued under section 665 or a date specified in the order.

The arrangement bound all members of the company and every person who was entitled to vote at the meeting or could have been entitled if they had received notice of the meeting.

 Section 667: Right to challenge decisions relating to approved voluntary arrangement.

The following persons could make an application for a court order challenging a voluntary arrangement:

a.    A person entitled to vote at the meeting;

b.    A person who would have been entitled to vote had they had notice of the meeting; or

c.    A provisional supervisor or voluntary arrangement supervisor where a voluntary arrangement has taken effect.

The above application could be made only in two (2) circumstances:

a.    Where an irregularity had occurred at or in relation to a meeting; OR

b.    Where an approved voluntary arrangement detrimentally affected the interests of a creditor, member or contributory of a company.

A court could issue a revocation/suspension order or issue directors to the provisional supervisor.

 Section 668: Implementation of voluntary arrangement.

A provisional supervisor became a supervisor once a voluntary arrangement commenced. However, s/he could be removed and replaced through a order sought by a creditor subject to the arrangement.

A court’s exercise of its power, in this regard, was discretionary.

The Amendment Act repeals all these sections without replacement.

This repeal effectively weakens the place of meetings in insolvency matters and the role of a provisional supervisor.

This repeal also translates to incapacity of creditors with respect to voting rights and challenging proposals (with or without modifications) for a voluntary arrangement.

 Section 669:  Circumstances in which moratorium may be extended

In a meeting convened between the company and its creditors, a decision to extend or further extend a moratorium could be made.

The extension may be conditional or unconditional.

The Amendment Act repeals and replaces this section.

The amendment anticipates that a court may extend a moratorium on application for extension by the directors of a company. The extension will be for at least thirty (30) days.

An extension is conditional on the court’s belief that the extension is desirable to achieve the aims for which the moratorium was initially obtained.

 Section 671: Decision to extend or further extend moratorium

 Subsection 1:

After a decision to extend or further extend a moratorium commenced, a provisional supervisor could:

a.    Give the court an extension notice; and

b.    Lodge an extension notice with the Registrar within seven (7) days of informing the court.

Subsection 2:

Where a member was dissatisfied with a decision made in the creditors’ meeting to extend or further extend a moratorium, s/he could apply to the high court for an order.

Where an order was granted, the provisional supervisor was obligated to lodge a notice of the extension with the Registrar for registration.

A court would grant such order only if it satisfied itself that the order was in the company’s best interests.

Sub-section 1 is amended by deleting and substituting it.

The amendment requires a monitor to lodge a copy of a court order to extend a moratorium with the Registrar for registration. This must be done within seven (7) days of the order.

The Amendment Act repeals sub-section 2 without replacement.