The bankruptcy Act, Chapter 53 of the laws of Kenya is a moribund and archaic Statute that has long defied

change, till global change is liberating it through the provisions of Individual/Personal insolvency contained in the Kenyan Insolvency Bill 2010. Critically analyze and evaluate the validity of the above assertion with reference to the Statute and the bill. INTRODUCTION Insolvency refers to the inability of a debtor to pay for his debts, as and when they fall due. Insolvency is generally a term that is used to classify the inability of companies as well as individuals to discharge their financial obligations as and when they fall due. 1Insolvency is a term which encompasses both companies and individuals, though the term bankruptcy is generally reserved for individuals in the Kenya. Of particular concern to this essay is that of individual insolvency law otherwise commonly referred to as Bankruptcy. Bankruptcy is defined as the legal status of an individual against whom an adjudication order has been made by the court primarily because of his inability to meet his financial liabilities. Key to note is that the Adjudication Order is a judicial declaration that the debtor is insolvent and it has the effort of imposing certain disabilities upon him and divesting him from his property for the benefit of his creditors.2Bankruptcy must be distinguished from insolvency. Whether or not a person is insolvent is purely a question of fact, thus a person can be insolvent without being bankrupt but he cannot be bankrupt without being insolvent. Similarly, if a number of these institutions and other creditors who are owed money all arbitrarily and individually pursued the contractual rights and remedies available to them such as the rights to enforce security interests, rights to set off the debt against other obligations, proceedings for delivery and even foreclosure or sale, a chaotic race to protect interests would take place and this might produce inefficiencies and unfairness. This is also expensive unlike in a situation where the creditors pursue the debtor as a unit. Individual insolvency law is now recognised as a separate body of law from corporate insolvency law, also liquidation or winding up, although they both share the same historical background. INDIVIDUAL INSOLVENCY The original insolvency laws in common law concerned individual insolvency, or bankruptcy, and date back to medieval and mercantilist periods.3 The law was quiet as to the procedure to be employed when managing a debtors estate but any creditor who was owed by the debtor could seize either his body or the debtors effects, but never both. Creditors acted individually and the property was divided on a first come first served basis. This was quite chaotic, so much so that learned authors at the time contrasted the situation as a wild goose chase terming the practice as barbaric as each creditor was entitled to a pound of your flesh; bankrupts were known to languish in jails.
1 2

Oxford Dictionary of Law Blacks Law Dictionary; Oxford Dictionary of Law; Cap 53 Laws of Kenya (Bankruptcy Act)
I. F. Fletcher, The Law of Insolvency (2nd edition, Sweet &Maxwell, London, 1996) pp. 6 ff.

When the debtor was seized, detention of the person was at the creditors pleasure; provided for where he (debtor) could not pay up. Insolvency was thus seen as a criminal offence little less than a felony as was evidenced by Lord Kenyons statement in Fowler v Padget4 when he reasserted the old sentiment that, "Bankruptcy is considered a crime and a bankrupt in the old laws is called an offender." The debtors were put in prisons such as the Marshal Sea debt prison of the 18th century, where bankrupts were sent until their debts were discharged. They were also sanctions such as the death penalty available in the event the bankrupt committed an act of fraud5. The Lord Chancellor (court of equity) was given power to discharge bankrupts, once disclosure of all assets and various procedures had been fulfilled. It was this discharge that perhaps pioneered development to the current insolvency laws. During this time, insolvency law was dominated by punitive approaches and it was not until the early eighteenth century that notions of rehabilitation gained force. The idea that creditors might act collectively was recognised in the first English Bankruptcy Act of 1542 which largely dealt with fraudulent traders and historically commenced insolvency law as we know it. The enactment of this King Henry VIII statute, which dealt with absconding debtors, empowered any affected creditor to procure seizure of the debtors property, its sale and distribution to creditors according to the quantity of their debts. 6 The statute basically secured the debtors property for the creditors. It did not in any way relieve the obligations of the debtor in the event his liabilities exceeded his assets and in the event this was the case, the debtor remained liable to his creditors. Neither did it provide for rehabilitation of the bankrupt in so far as it did not discharge the bankrupts liability for claims that were not fully paid. The law was there solely to protect the creditors. This led to traders complaining against the unfairness of the law but their outcry for protection led only to piecemeal reforms and amendments such as Elizabethan legislation of 1570 which drew an important distinction between traders and others including, within the definition of a bankrupt, only traders and merchants: those who earned their living by buying and selling7 From the foregoing, the punishment of debtors was not alleviated or mitigated in any way. Non-traders who could not pay their debts were subject to another set of statutes relating to insolvent debtors since they could not be declared bankrupt. As for distribution, this statute again provided for equal distribution of assets among creditors. Discharge of a bankrupts liabilities came into the law in the beginning of the eighteenth century with a 1705 act which relieved traders of liability but only as far as existing debts were concerned. The main distinction between laws relating to traders and the non traders is that the bankrupts liabilities to creditors could be discharged on surrender of the assets on hand, whereas the
4 5

(1798) 101 ER 1103; 7 Term Rep 509 Fletcher, Law of Insolvency, pp. 8 9. 6 Law of Insolvency, p. 7; W. J. Jones, the Foundations of English Bankruptcy: Statutes and Commissions in the Early Modern Period (1979) 69(3) Transactions of American Philosophical Society 69. 7 J. Cohen, History of Imprisonment for Debt and its Relation to the Development of Discharge in Bankruptcy (1982) 3

insolvent non trader was still indebted and had to repay the remainder of his judgment debt even in circumstances where he had suffered seizure of his goods or served his term of imprisonment. These new laws however were still wanting as the state of the law was deficient in many respects. Non traders who could not pay their debts were still subject to other statutes. They were subject to the severities of common law procedures of seizures and impounding of property and persons. It should be noted that all these processes were not collective as to all the creditors. Debtors were in most cases imprisoned at the behest of single creditors without regard to the interests of the other creditors. Unlike as is the case currently, traders could not make applications to court, of their own accord, to be made bankrupt. Bankruptcy was also, predisposed to manipulation by unscrupulous creditors. In 1839, cases were reported of small traders being taken to the Insolvent Debtors Court by creditors who were owed too little to justify bankruptcy proceedings. 8 In other cases, traders were not punished within bankruptcy proceedings. The increase in the availability of credit and also pressure for reform compelled further changes which occurred in the 18th and 19th centuries. This prevalent outcry was due to the fact that bankruptcy was confined to traders. This was the era of the formation of Joint Stock Companies which preceded the modern limited liability companies. Debtors were therefore on the increase due to the historical development of capitalism as a mode of production where competition is emphasised culminating in monopoly capitalism hence those who cannot compete within the system fallout and many become debtors. However, it was discovered that people did not become debtors of their own free will. A distinction is sought to be made between dishonest debtors who should be punished and the honest but unfortunate ones who should somewhat be protected. In 1834 the bankruptcy law was extended to none traders. Some land owners had become debtors and had to be catered for by the law. The other reforms included a depersonalization of business and credit which was facilitated by Parliaments enactment of the Joint Stock Companies Act 1844 which established the company as a distinct legal entity, although it retained unlimited liability for the shareholders. The distinction between traders and non-traders was finally abolished in 1861 when bankruptcy proceedings became available for non-traders. Soon afterwards The Debtors Act 1869 abolished imprisonment for debt. The 1869 act amended and consolidated the existing law. The broad principle of the Act was that the Bankrupt should be a free person, freed not only from his debts, but also from every possible claim or liability except for personal torts committed by him. All creditors were grouped together for purposes of proceeding against the debtor thereby organising the efficient administration of their assets so that competing creditors were treated fairly.
8
Cornish and Clark, Law and Society, p.234

The 1869 Act contained many of the substantive bankruptcy law principles which are now in operation today it also provided for the administration of bankruptcy law and matters in the London Bankruptcy District by Judges of the High Court specially appointed by the Lord Chancellor and in the Counties by County Court Judges. There was no separation between the judicial and administrative functions both of which were exercised by the court. The administration of bankruptcy matters under the 1869 Act did not work well due to the lack of official control over the Trustees in Bankruptcy which was a new office created by the Act in the place of the former system of Official Assignees. In 1883 another Act was passed in England which repealed the 1869 Act and amended and consolidated the law. This is the Act that laid the basis of modern Bankruptcy administration. It separated the judicial and administrative functions. The judicial functions remained vested in the High Court and County Courts while the administrative functions were transferred to a Board of Trade. The 1883 Act also introduced the present day law on the following The public investigation by the Court into the debtors conduct; Punishment for Bankruptcy offences committed by the bankrupt; strict investigation and prove of debt; General supervision of proceedings including the control of funds and independent audits of trustees accounts.

COMMON LAW OBJECTS AND PRINCIPLES OF INDIVIDUAL INSOLVENCY Three main objects of Bankruptcy Laws within the common law jurisdiction have been identified as follows: 1. 2. 3. To secure an equitable distribution of the property of the debtor among his creditors according to their respective rights against him; To relieve the debtor of his liability to his creditors and to enable him to make a fresh start in life free from the burden of his debts and obligations; To protect the interests of the creditors and the public by providing for the investigation of the conduct of the debtor in his affairs and for the imposition of punishment where there has been fraud or other misconduct on his part.

Professor Friedman9 has given some reasons for the growth of Bankruptcy. He says that the alleviation of the plight of the debtor by a more merciful though rigorous provision of Bankruptcy Law has several causes (a) The rise in importance of trading on credit and the need to encourage such trading for commercial purposes thus increasing chances for financial

in Bankruptcy Law and Practice

embarrassment for traders which would make trading more difficult if the harshness of the older law of debt still remained in force; (b) (c) (d) (i) The change in outlook of society towards those who fail to pay their debts from regarding them as criminals to looking at them only as unfortunate; The need to protect creditors by giving them some relief though not as great as they are justly entitled to expect rather than punishing the debtor; The benefit to the community as a whole in that The creditors should get something rather than lose all if the debtor could escape with the assets he has or is imprisoned so as to be unable to obtain any assets in the future and In that an opportunity is afforded to the debtor to make a fresh start.

(ii)

Professor Friedman thus asserts that the modern law of bankruptcy is a compromise which is intended to benefit all the parties. In essence he was trying to conceptualize the notion that individual insolvency should not be construed in a criminal or uncouth manner as the changes in the economic society have justified living in debt as a way of life and that once in debt one is not always in control of his/her future. This comes in as a great positivist jurisprudential approach which justifies UNDERLINED PRINCIPLES AND PROCEDURE IN COMMON LAW The Debtor must surrender all his properties to the creditors; After payment of a percentage of his liabilities, the debtor may obtain a full discharge from his past debt; The creditors may grant a debtor a discharge even where the debtor pays them less than what is prescribed by the law; The court is the arbitrator in all matters relating to the Bankruptcy; Once discharged, a debtor is freed from his financial obligations and reverts to his former status in society.

PROCEEDINGS IN BANKRUPTCY IN KENYA The current statutory regime is governed under the Bankruptcy Act,10 which is traced back to 1948. In Kenya proceedings in bankruptcy are begun by the presentation to the court of a Bankruptcy Petition. This petition asks the court for a Receiving Order to be made in respect of a debtors property. The petition may be presented either by the Debtor himself or by a Creditor. If it is presented by a creditor the petition must be founded or based on an alleged act of Bankruptcy which has occurred within 3 months before the presentation of the petition. Indeed the acts of Bankruptcy are in effect statutory tests of insolvency.
10

Cap.53 Laws of Kenya

If it is the debtor himself who presents the petition that in itself constitutes an act of bankruptcy. Upon hearing the petition the court may dismiss it, if it has no merit or make a receiving order if it is found to be with merit. This order does not make the debtor bankrupt all it does is to place his property in safe custody pending the outcome of the proceedings. The first meeting of creditors is then held at which it is determined whether a composition or scheme of arrangement if one is submitted by the debtor shall be accepted or whether application shall be made to the court to adjudicate the debtor bankruptcy. If the court decides to adjudicate the debtor bankrupt it makes an Adjudication Order and the debtor will then become bankrupt. The debtors property will then vest in his trustee in bankruptcy that will collect in the property and distribute it among those creditors who have proved their debts. The bankrupt must also submit himself to a Judicial Public Examination and at any time after conclusion of this public examination the bankrupt can apply for his Discharge. If the court makes an order of discharge the bankrupt is released from all his debts with certain exceptions provable in bankruptcy and is freed from disabilities against some exceptions which were imposed upon him by the bankruptcy. CRITICAL ANALYSIS OF THE PROCEDURE It is apparent that the current procedure favours the creditor as compared to debtor, in the sense that a creditor can easily enforce his right as compared to debtor. This has issue has raised concern as it is generally accepted that there is need for reforms in that there should be a balance between the rights of a debtor and that of a creditor. Concern has been directed tocompanies that could be nursed back to health and thereafter continue to create wealth and employment. Key to note is that the business climate is uncertain in recent economic times. The fact that one is insolvent does not necessarily mean that one cannot pay his or her debts eventually.This has seen the campaign by many advocates in the country advocating for the implementation of the Insolvency Bill which is still pending in parliament. The bill seeks to balance between debtors rights as well as that of a creditor with the aim of minimising liquidation by encouraging it to be among the last causes of action especially to companies that can be reunited. Key to note is that the bill seeks to amalgamate both corporate insolvency law as well as individual insolvency law under one Act. Currently corporate insolvency is governed by the winding up procedure as stipulated in Company Law Act. The provision requiring a debtor to with 7 days pay up his debts to a particular creditor upon being served with a bankruptcy notice is in a sense handicapping the debtor. The law ought to be cognizant of the fact that financial difficulty is often experienced in trade nowadays especially due to increased competition and sudden changes in the market. Steps are required to be undertaken to minimise the ease of individual insolvency, in fact it should be a principle or a general rule of law for the option of bankruptcy be a matter of last resort with preference on trying to amicably resolve the debt crisis rather than punishing an individual yet given ample opportunity he would be able to turn around the fortunes available to him.

REFERENCES i. ii. iii. iv. v. vi. Class notes Insolvency bill Oxford dictionary of law Commercial law in east Africa Daily nation Charles worths mercantile law

Some key policy considerations and principles guiding new insolvency law: Encourage the dissolution of non-viable and inefficient businesses and the survival of efficient ones. Maximize the value of liquidated assets. Introduce independent administrators who take control of the business at the point of insolvency and responsible for winding it up and selling the assets for maximum value if it cannot be returned to viability. Provides for equitable distribution of liquidated assets amongst creditors (e.g. employees, subcontractors, suppliers, financial creditors) based on the requirement to honor the contracts associated with each one. Minimize the incentives and the opportunity for debtors to run down unsecured assets as the point of insolvency approaches. Reduce transactions costs and disputes associated with the insolvency procedures by establishing clear and predictable processes and by providing all stakeholders with information about how the insolvency regime will operate. Provide effective mechanisms for identifying and prosecuting any managers or directors whose illegal actions contributed to the insolvency of the firm or the extent of the losses suffered by creditors. The Insolvency Bill, 2010: Rationalizes (amends, consolidates) law relating to receiverships, insolvency, provisional supervision, winding up and individual bankruptcy, provides for corporate and individual insolvency, provides for rehabilitation of insolvent debtor etc

Is a unified insolvency law covering both corporate and individual insolvency -provisions for winding up removed from Companies Act and placed in new Bill; repeals and replaces Bankruptcy Act and Deeds of Arrangement Act; Applies to winding up of all companies, partnerships, cooperative societies, banks, insurance companies etc. Introduces and defines who is an insolvency practitioner, sets out qualifications, functions, and conditions where a person may act as an insolvency practitioner; registration by the Official Receiver

Introduces concept and procedures for corporate rescue, at the corporate level and proposes timelines within which companies that cannot be rescued must be wound up.

Revises procedure for individual and corporate insolvency with creditors given a central role in the process Introduces No Asset Procedure for persons without any property; simplifies procedures for declaring one bankrupt; introduces concept of business rescue Official Receiver has powers to deal with No Asset Procedure process Provides for voluntary winding up or winding up by the court Judiciary still plays role in settling insolvency cases Provides for cross-border insolvency based on UNCITRAL Model Law on Cross-border Insolvency **************************************************************************** Under the Bankruptcy Act, Acts of Bankruptcy include as provided for in: Section 3 (1) A debtor commits an act of bankruptcy in each Ad of the following cases(a) If in Kenya or elsewhere he makes a conveyance or assignment of his property to a trustee or trustees for the benefit of his creditors generally; (b) If in Kenya or elsewhere he makes a fraudulent conveyance, gift, delivery or transfer of his property, or of any part thereof; (c) If in Kenya or elsewhere he makes any conveyance or transfer of his property, or of any part thereof, or creates any charge thereon, which would under this or any other Act be void as a fraudulent preference if he were adjudged bankrupt;

(d) If with intent to defeat or delay his creditors he does any of the following things, namely, departs out of Kenya, or being out of Kenya remains out of Kenya, or departs from his dwellinghouse, or otherwise absents himself, or begins to keep house; (e) If execution against him has been levied by seizure of his goods in any civil proceeding in any court, and the goods have been either sold or held by the bailiff for twenty-one days: Provided that, where an interpleaded summons has been taken out in regard to the goods seized, the time elapsing between the date at which the summons is taken out and the date at which the proceedings on the summons are finally disposed of, settled or abandoned shall not be taken into account in calculating the period of twenty-one days; (f) If he files in the court a declaration of his inability to pay his debts or presents a bankruptcy petition against himself; (g) If a creditor has obtained a final decree or final order against him for any amount, and, execution thereon not having been stayed, has served on him in Kenya, or, by leave of the court, elsewhere, a bankruptcy notice under this Act, and he does not within seven days after service of the notice, in case the service is effected in Kenya, and in case the service is effected elsewhere then within the time limited in that behalf by the order giving leave to effect the service, either comply with the requirements of the notice or satisfy the court that he has a counter-claim, set-off or crossdemand which equals or exceeds the amount of the decree or sum ordered to be paid, and which he could not set up in the action in which the decree was obtained, or the proceedings in which the order was obtained; and for the purposes of this paragraph and of section 4, any person who is, for the time being, entitled to enforce a final decree or final order shall be deemed to be a creditor who has obtained a final decree or final order; (h) If the debtor gives notice to any of his creditors that he has suspended, or that he is about to suspend, payment of his debts. PART III NATURE OF BANKRUPTCY AND RELATED PROCESSES Nature of bankruptcy as per clause 12 (1) Bankruptcy affects the legal status of a person and has the following consequences (a) The property of the person who is bankrupt vests in the trustee in bankruptcy or where there is no trustee, the official receiver; (b) The person who is a bankrupt is limited in the business activities he can undertake; and (c) The official receiver may be entitled to recover assets that the bankrupt transferred within two years before bankruptcy. Alternatives to bankruptcy include as provided for in clause 13 A debtors who is insolvent may as an alternative to bankruptcy (a) Make a proposal to creditors in accordance with the provisions of this Act; (b) Pay creditors in installments under a summary installment order; or (c) Enter the no asset procedure. 5. Subject to the conditions hereinafter specified, if a debtor commits an act of bankruptcy the court may, on a bankruptcy petition being presented either by a creditor or by the debtor, make an order, in this Act called a receiving order, for the protection of the estate.

6 (1) A creditor shall not be entitled to present a bankruptcy petition against a debtor unless(a) The debt owing by the debtor to the petitioning creditor, or, if two or more creditors join in the petition, the aggregate amount of debts owing to the several petitioning creditors, amounts to one thousand shillings; and (b) The debt is a liquidated sum, payable either immediately or at some certain future time; and (c) The act of bankruptcy on which the petition is grounded has occurred within three months before the presentation of the petition; and (d) The debtor is domiciled in Kenya, or within a year before the date of the presentation of the petition has ordinarily resided, or had a dwelling-house or place of business, or has carried on business, in Kenya, personally or by means of an agent or manager, or is or within that period has been a member of a firm or partnership of persons which has carried on business in Kenya by means of a partner or partners, or an agent or manager, nor, where a deed of arrangement has been executed, shall a creditor be entitled to present a bankruptcy petition founded on the execution of the deed, or on any other act committed by the debtor in the course or for the purpose of the proceedings preliminary to the execution of the deed, in cases where he is prohibited from so doing by any law for the time being in force relating to deeds of arrangement. 8 (1) A debtor's petition shall allege that the debtor is unable to pay his debts, and the presentation thereof shall be deemed an act of bankruptcy without the previous filing by the debtor of any declaration of inability to pay his debts and the court shall thereupon make a receiving order: Provided that an order shall be refused unless the debtor has filed with the official receiver his statement of affairs prepared in accordance with the provisions of section 16. (2) A debtor's petition shall not, after presentation, be withdrawn without the leave of the court. Public Examination of the Debtor 17. (1) Where the court makes a receiving order, it shall, save as provided in this Act, hold a public sitting on a day to be appointed by the court, for the examination of the debtor, and the debtor shall attend thereat and shall be examined as to his conduct, dealings and property. (2) The examination shall be held as soon as conveniently may be after the expiration of the time for the submission of the debtor's statement of affairs. (3) The court may adjourn the examination from time to time. (4) A creditor who has tendered a proof, or his representative authorized in writing, may question the debtor concerning his affairs and the causes of his failure. (5) The official receiver shall take part in the examination of the debtor, and for the purpose may employ an advocate if he so desires. (6) If a trustee is appointed before the conclusion of the examination he may take part therein. (7) The court may put such questions to the debtor as it may think expedient. (8) The debtor shall be examined upon oath and it shall be his duty to answer all such questions as the court may put or allow to be put to him; such notes of the examination as the court thinks proper shall be taken down in writing and shall be read over either to or by the debtor and signed by him and may thereafter, save as provided in this Act, be used in evidence against him; and they shall also be open to the inspection of any creditor at all reasonable times.

(9) If a debtor or witness, on being examined before a judge, refuses to answer or does not answer to the satisfaction of the judge any question which he may allow to be put, the debtor or witness shall be guilty of a contempt of court and may be punished accordingly. (10) When the court is of opinion that the affairs of the debtor have been sufficiently investigated, it shall by order declare that his examination is concluded, but the order shall not be made until after the day appointed for the first meeting of creditors. (11) Where the debtor is a lunatic or suffers from any such mental or physical affliction or disability as in the opinion of the court makes him unfit to attend his public examination, the court may make an order dispensing with the examination or directing that the debtor be examined on such terms, in such manner and at such place as to the court seems expedient. (12) The advocate of the debtor may attend the examination but shall not question the debtor or address the court. Components and schemes of arrangement 18 (1) Where a debtor intends to make a proposal for Compositions a composition in satisfaction of his debts, or a proposal for a scheme of arrangement of his affairs, he shall, within four days of submitting his statement of affairs, or within such time thereafter as the official receiver may fix lodge with the official receiver a proposal in writing, signed by him or by an agent specifically authorized by him for the purpose, embodying the terms of the composition or scheme which he is desirous of submitting for the consideration of his creditors, and setting out particulars of any sureties or securities proposed. (2) In such case the official receiver shall hold a meeting of creditors, before the public examination of the debtor is concluded, and send to each creditor, before the meeting, a copy of the debtors proposal, with a report thereon; and, it at that meeting a majority in number and three-fourths in value of all the creditors who have proved resolve to accept the proposal, it shall be deemed to be duly accepted by the creditors, and when approved by the court shall be binding on all the creditors. Appointment of trustee 50 of 1956, s.6 21 (1) Where a debtor is adjudged bankrupt, or the creditors have resolved that he be adjudged bankrupt, the creditors may by ordinary resolution appoint some fit person, whether a creditor or not to fill the office of trustee of the property of the bankrupt; or they may resolve to leave his appointment to the committee of inspection hereinafter mentioned; but a person shall be deemed not fit to act as trustee of the property of a bankrupt where he has been previously removed from the office of trustee of a bankrupt's property for misconduct or neglect of duty. (2) The person so appointed, other than the official receiver, shall give security in manner prescribed to the satisfaction of the court, and the court, if satisfied with the security, shall certify that his appointment has been duly made, unless the court objects to the appointment on the ground that it has not been made in good faith by a majority in value of the creditors voting, or that the person appointed is not fit to act as trustee, or that his connexion with or relation to the bankrupt or his estate or any particular creditor makes it difficult for him to act with impartiality in the interests of the creditors generally. (3) The appointment of a trustee shall take effect as from the date of the certificate.

23 (1) Where a debtor is adjudged bankrupt the creditors may at any time after the adjudication by a majority in number and three fourths in value of all the creditors who have proved, resolve to accept a proposal for a composition in satisfaction of the debts due to them under the bankruptcy, or for a scheme of arrangement of the bankrupt's affairs; and thereupon the same proceedings shall be taken and the same consequences shall ensue as in the case of a composition or scheme accepted before adjudication. (2) If the court approves the composition or scheme, it may make an order annulling the bankruptcy and vesting the property of the bankrupt in him or in such other person as the court may appoint, on such terms, and subject to such conditions as the court may declare. CONTROL OVER PERSON AND PROPERTY OF DEBTOR 24 (1) Every debtor against whom a receiving order is made shall, unless prevented by sickness or other sufficient cause, attend the first meeting of his creditors, and shall submit to such examination and give such information as the meeting may require. (2) He shall give such inventory of his property, such list of his creditors and debtors, and of the debts due to and from them respectively, submit to such examination in respect of his property or his creditors, attend such other meeting of his creditors, wait at such times on the official receiver, special manager or trustee, execute such powers of attorney, conveyances, deeds and instruments and generally do all such acts and things in relation to his property and the distribution of the proceeds amongst his creditors as may be reasonably required by the official receiver, special manager or trustee, or as may be prescribed, or as may be directed by the court by any special order or orders made in reference to any particular case or made on the occasion of any special application by the official receiver, special manager or trustee or any creditor or person interested. (3) He shall, if adjudged bankrupt, aid, to the utmost of his power, in the realization of his property and the distribution of the proceeds amongst his creditors. (4) If a debtor willfully fails to perform the duties imposed on him by this section, or to deliver up possession of any part of his property which is divisible amongst his creditors under this Act and which is for the time being in his possession or under his control to the official receiver or to the trustee, or to any person authorized by the court to Duties of debtor as to discovery and realization of property take possession of it, he shall, in addition to any other punishment to which he may be subject, be guilty of a contempt of court, and may be punished accordingly. 29 (1) Where an order of adjudication is made, the bankrupt shall, at the expiration of the period specified by the court, apply to the court for an order of discharge, and the court shall appoint a day for hearing the application, but the application shall not be heard until the public examination of the bankrupt is concluded; and an application for an order of discharge shall, except where the court in accordance with rules made under this Act otherwise directs, be heard in open court. Failure to apply for discharge 31. If the bankrupt does not appear on the day fixed for the hearing of his application for discharge or on such subsequent day as the court may direct, or if the bankrupt does not apply for an order of discharge within the period specified under subsection (1) of section 29, he shall be guilty of a contempt of court and may be punished accordingly.

32 (1) an order of discharge shall not release the bankrupt(a) From any debt on a recognizance or from any debt with which the bankrupt may be chargeable at the suit of the Government or of any person for any offence against any law relating to any branch of the general revenue of Kenya, or at the suit of the bailiff or other public officer on a bail bond entered into for the appearance of any person prosecuted for any such offence; and he shall not be discharged from such excepted debts unless the Permanent Secretary to the Treasury certifies in writing his consent to the bankrupt being discharged there from; or (b) From any debt or liability incurred by means of any fraud or fraudulent breach of trust to which he was a party, nor from any debt or liability whereof he has obtained forbearance by any fraud to which he was a party; or (c) From any liability under a judgment against him in an action for seduction or affiliation, or under a judgment against him as a correspondent in a matrimonial cause, except to such an extent and under such conditions as the court expressly orders in respect of that liability. Power of court to annul adjudication 33 (1) Where in the opinion of the court a debtor ought not to have been adjudged bankrupt, or where it is proved to the satisfaction of the court that the debts of the bankrupt are paid in full, the court may, on the application of any person interested, by order annul the adjudication. Bankrupt not to manage business with relative 50 of 1956, s.10. 34 (1) No person who has boon adjudged a bankrupt shall manage, or assist or take part in the management of, any trade or business with any person who is a relative by consanguinity or affinity unless he has first made application to the court for permission so to do, and obtained that permission.

**************************************************************************** The Insolvency Bill 2010 is an Act of Parliament to amend and consolidate the law relating to receiverships, insolvency, provisional supervision, winding up and individual bankruptcy, to provide for corporate and individual insolvency, to provide for the rehabilitation of the insolvent debtor and for connected purposes. Insolvent person means a person who is not bankrupt and who resides, carries on business or has property in Kenya, whose liabilities to creditors provable as claims under this Act amount to not less than one hundred thousand shillings. 3. This Act shall apply to individuals, partnerships, limited liability partnership, companies and other corporate bodies established by any written law.