A.

FUNCTIONSANDPOWERSOFADMINISTRATOR
An administrator in relation to a company means a person appointed to manage the
companys affairs and property, and, if the context requires, includes a former
administrator. A company is under administration while the appointment of an
administratorofthecompanycontinuestohaveeffect.
(a)Thecourt
(b)Abodycooperatesthroughitsdirectors
(c)Byapersonwhoholdsafloatingcharge
Whatweshouldnoteisthatanadministratorisanofficerofthecourtwhetherappointed
bythecourtornot.AnadministratorthereforeisinfactanInsolvencyPractitioner.
FunctionsandpowersofanAdministrator
TheadministratorofacompanyhasthefunctionsandpowersspecifiedintheFourth
Schedule.

Specialfunctions
Theadministratorofacompany
(a)Mayremoveadirectorofacompanyfromhisposition
(b) may appoint a person to be director of the company (whether or not to filI a
vacancy).

Theadministratorhasthepowertoconveneacreditorsmeeting.Thecourtinlight
ofthismaygivedirectionsinundertakingthis.Andinsodoingtheadministrator
willcomplytheretoo.

Generalpowers
Maytakeanyactioninthemanagementoftheaffairsofthecompany,includingthe
running and utilization of resources of the company. When a company is under

administration all management must undertake activities that are authorized by the
administrator
Theadministratormayalsochoosetopaycompaniescreditorsitwouldnotmatterifthey
weresecuredorunsecured.Suchdiscretionisexercisedongoodjudgmentinlinewith
thecorporationsstateofaffairs.Theadministratoractsalsoasanagentofthecompany
representingitinallmanneroftransactions.
ThepowersoftheAdministratorcanbechallenged.

An aggrieved court can ask the court to look into the conduct of the
Administratorsmoresotodowiththeexerciseofhispowersonthecompany.
Suchaggrievedpartiesinclude,creditorsanddirectorsoranyotherstakeholders.

Thepowersoftheadministratorcanalsobeexamined.

This is done with , official receiver, liquidator , contributory and another

appointedadministrator.

Thefunctionsandpowerofadministratorcanandshouldendwhen12monthshave
elapsed.Howeversuchatermmaybeextendedbythecourtorontheapplicationof
theappointeefornotmorethan6months.
B.TERMINATION AND REPLACEMENT OF AN ADMINISTRATOR.
The appointment of an administrator automatically ends after one year from the date it
takes effect. The period of administration may be extended by the court on the application
of the administrator, or for a period not exceeding one year with the consent of each
secured creditor and where there are unsecured debts, those creditors whose debts amount
to more than 50% of the unsecured liabilities (excluding those creditors who do not
respond) Any extension of this period must be made before the first anniversary of the
administration.
Further extension of the period of administration The administrators term of office can
only be extended once by the consent of the creditors.
Where an extended administration period by consent has been agreed further extensions
are only possible by order of the court. Once an extended administration period has

expired it cannot be further extended Creditors application to court to end the

administration
A creditor may apply to the court for an administrators appointment to cease from a
specified time. For the application to be considered by the court it must allege an
improper motive by the person presenting the application for an administration order or
by the person appointing the administrator. The court on hearing the application may
dismiss the application, adjourn the hearing, conditionally or unconditionally, make an
interim order or make any other order it considers appropriate. The administrator may
apply to the court to end the administration from a specified time
Where;
He/she thinks the purpose of the administration cannot be achieved,
He/she thinks the company should not have entered administration,
He/she is instructed to do so by a meeting of creditors, or
The purpose of the administration has been broadly achieved.
The court on hearing the application may dismiss the application, adjourn the hearing,
conditionally or unconditionally, make an interim order or make any other order it
considers appropriate.
Termination of administration - appointment by court order
Where the administrator believes his/her objective has been achieved or has been
sufficiently achieved he/she may take steps to end the administration. Where an
administration order was made the administrator can apply to the court for the
administration to end at a specified time. The court on hearing the application may
dismiss the application, adjourn the hearing, conditionally or unconditionally, make an
interim order or make any other order it considers appropriate.
Termination of administration - appointment other than by court order
Where an administrator who was appointed by the holder of a floating charge or the
company or directors considers the objective has been achieved or sufficiently achieved
he/she may file a notice of outcome together with a final progress report with the court
and the registrar of companies. The administrators appointment ends from the date and

time the notice is filed at court.

Replacement of an administrator.
An administrator may be replaced by an application made where by there are
circumstances such as a death, or resignation by the administrator. Creditors may replace
the administrator if there is no holder of a qualifying floating charge in respect to the
company property. This happens by way of written consent. Once his appointment ends,
he is discharged from all the liabilities in n respect of all acts done or omitted to be
donees an administrator.
C.PROPOSALS FOR COMPANY VOLUNTARY ARRANGEMENT
Proposal for a company voluntary arrangement are established under Part IX of the
Insolvency Act 2015. Just as it is in the case of individual persons, company voluntary
arrangement; serve as an alternative to bankruptcy.
The company directors may make a proposal to the company and to the creditors for a
voluntary arrangement under which the company enters into a composition in satisfaction
of its debts or a scheme for arranging its financial affairs. 1 In making such a proposal, the
directors are required to provide for the appointment of an authorized insolvency
practitioner2 to supervise the implementation of the voluntary arrangement.3
Proposals may also be made if the company is under administration by the administrator
or by the liquidator if the company is in liquidation.
Procedure if provisional supervisor is not the liquidator or administrator
The provisional supervisor after receiving notice of the proposal shall within thirty days
or any period as the court may specify submit a report to the court stating:
1 Ibid Section 625 (1)
2 Ibid section 625 (3)
3 Ibid section 625 (2)

whether, in the supervisor's opinion, the proposal has a reasonable prospect of

being approved and implemented

whether, in the supervisor's opinion, meetings of the company and of the

company's creditors should be convened to consider the proposal

if that supervisor believes that those meetings should be convened, the date on
which, and the time and place at which, it is proposed to hold the meetings

The proposers are required to submit a document setting out the terms of the proposal and
a statement of the company's financial position. Failure to submit the report by a
supervisor or if it is impracticable for the supervisor to continue to the court may lead to
an order of removal upon application.
If the provisional supervisor is not an administrator or liquidator and had submitted to the
court that a meeting should be convened, that supervisor will convene the meeting the
purpose of which is to approve the proposal or that proposal with modifications4 unless
the court directs otherwise. If however the provisional supervisor is an administrator or
liquidator he/she shall of the company and companys creditors to consider the proposal.
At the beginning of the meeting, the meeting shall elect one of their number to be the
chairperson.5 Who will then divide the creditors into three (secured, preferential and
unsecured). After the conclusion of a company meeting or a creditors' meeting, as soon as
practicable, the chairperson of the meeting shall report the result of the meeting to the
Court and immediately after give notice of the result of the meeting to those persons who
attended the meeting, and to those persons of whom the chairperson is aware who were
entitled to attend the meeting but did not do so.6
4 Ibid section 628 (1)
5 Ibid section 628 (2)
6 Ibid section 628 (9)

Among the reasons for holding the meeting is approval of the proposal (with or without
modifications).
The proposal including any modifications is approved if it is approved:

by a majority the members of the company present (either in person or by proxy)

by a majority (in number and value) of the members of each group of creditors

present
it is approved by a majority (in number and value) of the members of each of the
groups of creditors

A directors' proposal (with or without modifications) takes effect as a voluntary

arrangement by the company on the day after the date on which it is approved by the
Court or on such later date as may be specified in the order.7
It is important to note that any member of the company, or any creditor, who attended or
was entitled to attend the meetings may make an application to the Court and the court
may make an order approving the proposal (with or without the modifications (if any) or
any order it deems appropriate.8 The Court may make an order even if the proposal (or a
modification to it) was not approved at the company meeting, or was not approved at the
creditors' meeting9 by a majority of the preferential creditors' group or the unsecured
creditors' group, but has been approved by a majority of the secured creditors, is not
discriminative to the dissenting groups and respects the priorities of preferential creditors
over unsecured creditors.10
The effect of approval of a voluntary arrangement is first that it binds every member of
the company and every person (including a secured creditor and a preferential creditor)
7 Ibid section 630
8 Ibid section 629 (7)
9 Ibid section 629 (8)(a)
10 Ibid section 629 (8)(b)

who was entitled to vote at the meeting of the company or would have been so entitled if
the member had received notice of that meeting.11 Secondly the provisional supervisor
becomes the supervisor of the arrangement unless that supervisor has been replaced.12
If, a voluntary arrangement ceases to have effect any amount payable under the
arrangement to a person bound (including a secured creditor and a preferential creditor)
because they would have been entitled to vote if the person had received notice of that
meeting, and the arrangement did not end prematurely the company becomes, at that
time, liable to pay to that person the amount payable under the arrangement.13
When a proposal takes effect as a voluntary arrangement the supervisor becomes
responsible for implementing the arrangement in the interests of the company and its
creditors and monitoring compliance by the company with the terms of the arrangement.14
A voluntary arrangement ends prematurely when it ceases to have effect It has not been
fully implemented in respect of all persons bound by the arrangement (every member of
the company and every person (including a secured creditor and a preferential creditor)
who was entitled to vote at the meeting of the company or would have been so entitled if
the member had received notice of that meeting).15

D.ELIGIBILITY TO OBTAIN A MORATORIUM.

The insolvency Act is not forthright and express on the criteria a company must meet in
order to obtain a moratorium. It is nonetheless clear on the factors that shall be
11
12
13
14
15

Ibid
Ibid
Ibid
Ibid
Ibid

Section 630 (2)

section 630 (3)
section 630 (4)
section 633
section 635

considered to disqualify a company from obtaining it (the moratorium). These, as

outlined by section 640 include if the company;
-

Is under administration
Is under liquidation
Has a voluntary arrangement already in effect
Already has a provisional liquidator appointed over it
Is/ was subject to a moratorium in the last 12 months.XRE

Section 641 also lays emphasis on the fact that if on the date of lodgment, the company is
a project company in a public-private partnership that includes step-in rights,
then it is not eligible for the moratorium. Under S 641, a project company has been
defined to include a company that is;
-

holding property for the purpose of a project

its sole responsibility under an agreement is to carry out all or part of the project
is one of a number of other companies together carrying out a project
has the responsibility to supply the finance for the carrying out of a project
is a holding company of (an)other company(ies) that does any of the above

The concept of a company being in a public-private partnership has also been

elaborated within S 641 to mean a company;
a. Whose resources in a project are partly/wholly provided by a public body and/or a
private body
b. Designed wholly or mainly to assist a public body undertake a project.
Exceptions to the rule in S 641 (641(4)).
A company will not be viewed as a project company if:
Its aims of establishment conforms to section 641(2) a-d and applies subsection 3 but;

does not perform the functions within a-d,

or related to functions a-d,
Or related to the project at all.

Notwithstanding the rule in Section 641(4), subsection 7 provides that a company will be
deemed a project company whether it acts or takes part in the project wholly itself or
through agents. E.g. through other companies or its subsidiary companies.
INELIGIBILITY.
In accordance with Section 642, if a companys outstanding liability under an agreement
amounts to more than kshs.1 billion, the company will not be eligible for a moratorium.
This liability will include;
a. A present or future liability (certain/contingent)
b. It could be paid either in partly or wholly in Kenyan shillings.