Not long time ago, a debtor, to defeat his creditors, would cause to be adjudged bankrupt. Or like the son of Moi, a famous citizen, file bankruptcy to avoid paying maintenance for an estranged wife.
In those days, one would be adjudged bankrupt for committing, what was called, an act of bankruptcy. There were eight acts of bankruptcy, including failure to pay debts and fraudulent preferences.
Potential bankrupts had found a trick. Before jumping into a cesspool that is bankruptcy, they would conceal his properties. The concealment would be by way putting the properties into shadow companies, bogus trusts or transferring their titles to hideous relatives.
They would leave little traceable properties, from which creditors would use to satisfy their debts, in outlined statutory priority. It was the morally bankrupt lawyers and accountants who engineered and arranged these crooked tricks. They thought, they were very clever. Not any more.
No sooner than the bankrupt was discharged from bankruptcy than they would retrieve concealed properties, go on to live happily thereafter, creditors demands vanquished.
Cyrus Jirongo, a politician of shady history, has been adjudged bankrupt. Probably, he is playing those tricks yore. Little does he know, the cheese has moved. Such era is long gone. Who moved the cheese? The errant era went with the passage of the new insolvency law, that year 2015.
An individual will only be adjudged bankrupt on two scenarios. By their own filing of bankruptcy petition, when unable to pay their debts as they fall due. Or by failure to pay statutory demand of debt or levy of execution from creditors, within 21 days.
Once adjudged bankrupt, all properties will vest on the bankruptcy trustee. The official receiver, this being an office in the Attorney General’s office, is the bankruptcy trustee in the first instance. Later, creditors may appoint an insolvency practitioner to carry on.
To those who use bankruptcy to defeat creditors, woe. The catch comes by way of a claw back period, of two years. Properties that have been fraudulently transferred, sold at an undervalue, preference in payment to creditors, within two years, will have such transactions voidable.
The same note applies for a company. However, a company is not necessarily liquidated for being insolvent. Insolvency is a fact, where liabilities exceed assets. Liquidation is only the last step, of technically interring the company. But there are others ways, call them alternatives, on which an insolvent company may be saved.
Even so for individuals. Even when insolvent, one will not be adjudged bankrupt, if they are able to enter into scheme of arrangement with creditors. Such a scheme must be registered by the court.
The Insolvency Act that applies, Kenya copy and pasted it from England, without building consensus, without interrogating. It would look, Corruption has permeated even in law making. Consultants are hired to generate bills after kickbacks and they deliver tosh.
It is why you will find there is already an amendment Bill to amend this insolvency Act, despite it being less than two years old. The amendment bill is a shameful read. You will come across clauses like-
“Paragraph x is amended by deleting the word United Kingdom immediately after the word (.) and substituting thereof with word Kenya”. Even proper copy and pasting was a problem. Rotten republic.
It means. Defeating creditors demand. Any property you will have transferred to your relatives, trusts, used to capitalize companies, will be deemed to be either a preference, or fraudulent transfer. Such transfer will be voidable and will be reversed and vested to the bankruptcy trustee.
As a bankrupt, try concealing your properties, you will be risking penalties and jail terms. Before, penalties were a pat on the bank. Now such penalties are a stab on the belly. But you are will be entitled to keep your tools of trade. If Jirongo has orchestrated his bankruptcy, the future is gloomy.
Oh, Shakhalaga Jirongo, your life has become Shaghalabagala!