A. FUNCTIONS
AND POWERS OF ADMINISTRATOR
An administrator in relation
to a company means a person appointed to manage the company’s affairs and
property, and, if the context requires, includes a former administrator. A
company is under administration while the appointment of an administrator of
the company continues to have effect.
(a) The court
(b) A body cooperates through
its directors
(c) By a person who holds a
floating charge
What we should note is that an
administrator is an officer of the court whether appointed by the court or not.
An administrator therefore is in fact an Insolvency Practitioner.
Functions and powers of an
Administrator
The administrator of a company
has the functions and powers specified in the Fourth Schedule.
Special functions
The administrator of a
company-
(a) May remove a director of
a company from his position
(b) may appoint a person to
be director of the company (whether or
not to filI a vacancy).
- The administrator has the power to convene
a creditors meeting. The court in light of this may give directions in
undertaking this. And in so doing the administrator will comply there too.
General powers
May take any action in the
management of the affairs of the company, including the 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
The administrator may also
choose to pay companies creditors it would not matter if they were secured or
unsecured. Such discretion is exercised on good judgment in line with the corporation’s
state of affairs. The administrator acts also as an agent of the company
representing it in all manner of transactions.
The powers of the
Administrator can be challenged.
- An aggrieved court can ask the court to
look into the conduct of the Administrators more so to do with the
exercise of his powers on the company. Such aggrieved parties include,
creditors and directors or any other stakeholders.
- The powers of the administrator can also
be examined.
- This is done with , official receiver,
liquidator , contributory and another appointed administrator.
The
functions and power of administrator can and should end when 12 months have
elapsed. However such a term may be extended by the court or on the application
of the appointee for not more than 6 months.
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 administrator’s 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 Creditor’s application to court to end
the administration
A creditor may apply
to the court for an administrator’s 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 administrator’s
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 practitioner[2]
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:
·
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 modifications[4]
unless the court directs otherwise. If however the provisional supervisor is an
administrator or liquidator he/she shall of the company and company’s 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]
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'
meeting[9]
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) 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 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.
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 company’s 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)
It could be paid either in
partly or wholly in Kenyan shillings
[1]
Ibid Section 625 (1)
[2]
Ibid section 625 (3)
[3]
Ibid section 625 (2)
[4]
Ibid section 628 (1)
[5]
Ibid section 628 (2)
[6]
Ibid section 628 (9)
[7]
Ibid section 630
[8]
Ibid section 629 (7)
[9]
Ibid section 629 (8)(a)
[10]
Ibid section 629 (8)(b)
[11]
Ibid Section 630 (2)
[12]
Ibid section 630 (3)
[13]
Ibid section 630 (4)
[14]
Ibid section 633
[15]
Ibid section 635
does a company require leave to challenge the appointment of administrators in the company
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