CHAMBERS Global PracticeAUSTRALIADENMARK GuidesBELGIUMKENYA Insolvency LAW AND PRACTICE: p.<?>p.3 Contributed by HerbertAnjarwallaGorrissenVan Bael Smith & Federspiel &Bellis Khanna Freehills LawThe ‘Lawand &Practice Practice’ sections – Kenya provide easily accessible information on navigating the legal system when conducting business in the jurisdic- tion. LeadingContributed lawyers explain by local law and practice at key transactional stages and for crucial aspects of doing business. stagesAnjarwalla and for crucial & Khannaaspects of doing business. DOING BUSINESS IN AUSTRALIA:KENYA:DENMARK:BELGIUM: p.<?>349 Chambers & Partners employ a large team of full-time researchers (over 140) in their2018 London office who interview thousands of clients each year. This section is based on these interviews. The advice in this section is based on the views of clients with in-depth international experience. KENYA LAW AND PRACTICE: p.3 Contributed by Anjarwalla & Khanna The ‘Law & Practice’ sections provide easily accessible information on navigating the legal system when conducting business in the jurisdic- tion. Leading lawyers explain local law and practice at key transactional stages and for crucial aspects of doing business. LAW AND PRACTICE KENYA Contributed by Anjarwalla & Khanna Authors: Sonal Sejpal, James Mungai Law and Practice Contributed by Anjarwalla & Khanna CONTENTS 1. Market Trends and Developments p.5 4.5 Special Procedural Protections and Rights for 1.1 Changes to the Restructuring and Insolvency Secured Creditors p.12 Market p.5 5. Unsecured Creditor Rights, Remedies and Priorities p.12 2. Statutory Regimes Governing Restructurings, 5.1 Differing Rights and Priorities Among Classes Reorganisations, Insolvencies and Liquidations p.6 of Secured and Unsecured Creditors p.12 2.1 Overview of the Laws and Statutory Regimes p.6 5.2 Unsecured Trade Creditors p.12 2.2 Types of Voluntary and Involuntary Financial 5.3 Rights and Remedies of Unsecured Creditors p.12 Restructuring, Reorganisation, Insolvency and 5.4 Pre-Judgment Attachments p.12 Receivership p.6 5.5 Typical Timeline for Enforcing an Unsecured 2.3 Obligation to Commence Formal Insolvency Claim p.12 Proceedings p.7 5.6 Bespoke Rights or Remedies for Landlords p.13 2.4 Procedural Options p.7 5.7 Special Procedures or Impediments or 2.5 Liabilities, Penalties or Other Implications for Protections That Apply to Foreign Creditors p.13 Failing to Commence Proceedings p.7 5.8 The Statutory Waterfall of Claims p.13 2.6 Ability of Creditors to Commence Insolvency Proceedings p.7 5.9 Priority Claims p.13 2.7 Requirement for “Insolvency” to Commence 5.10 Priority Over Secured Creditor Claims p.13 Proceedings p.7 6. Statutory Restructurings, Rehabilitations and 2.8 Specific Statutory Restructuring and Insolvency Reorganisations p.13 Regimes p.7 6.1 The Statutory Process for Reaching and Effectuating a Financial Restructuring 3. Out-of-Court Restructurings and Consensual Workouts p.9 /Reorganisation p.13 3.1 Consensual and Other Out-of-Court Workouts 6.2 Position of the Company During Procedures p.14 and Restructurings p.9 6.3 The Roles of Creditors During Procedures p.14 3.2 Typical Consensual Restructuring and Workout 6.4 Modification of Claims p.15 Processes p.9 6.5 Trading of Claims p.15 3.3 Injection of New Money p.10 6.6 Using a Restructuring Procedure to Reorganise 3.4 Duties of Creditors to Each Other, or on the a Corporate Group p.15 Company or Third Parties p.10 6.7 Asset Disposition and Related Procedures p.15 3.5 Consensual, Agreed Out-of-Court Financial 6.8 Release of Secured Creditor Liens and Security Restructuring or Workout p.10 Arrangements p.15 4. Secured Creditor Rights and Remedies p.11 6.9 Availability of Priority New Money p.15 4.1 Type of Liens/Security Taken by Secured 6.10 Statutory Process for Determining the Creditors p.11 Value of Claims p.15 4.2 Rights and Remedies for Secured Creditors p.11 6.11 Restructuring or Reorganisation Plan or Agreement Among Creditors p.15 4.3 The Typical Time-lines for Enforcing a Secured Claim and Lien/Security p.12 6.12 The Ability to Reject or Disclaim Contracts p.16 4.4 Special Procedures or Impediments That Apply 6.13 The Release of Non-debtor Parties p.16 to Foreign Secured Creditors p.12 6.14 Creditors Rights of Set-off, Off-set or Netting p.16 3 KENYA LAW AND PRACTICE Contributed by Anjarwalla & Khanna Authors: Sonal Sejpal, James Mungai 6.15 Failure to Observe the Terms of an Agreed 12. Duties and Personal Liability of Directors and Restructuring Plan p.16 Officers of Financially Troubled Companies p.23 6.16 Receive or Retain Any Ownership or Other 12.1 The Duties of Officers and Directors of a Property p.16 Financially Distressed or Insolvent Company p.23 12.2 Direct Fiduciary Breach Claims p.24 7. Statutory Insolvency and Liquidation Proceedings p.16 12.3 Chief Restructuring Officers p.24 7.1 Types of Statutory Voluntary and Involuntary Insolvency and Liquidation Proceedings p.16 12.4 Shadow Directorship p.24 7.2 Distressed Disposals as Part Insolvency 12.5 Owner/Shareholder Liability p.24 /Liquidation Proceedings p.20 13. Transfers/Transactions That May Be Set Aside p.24 7.3 Implications of Failure to Observe the Terms 13.1 Grounds to Set Aside/Annul Transactions p.24 of an Agreed or Statutory Plan p.20 13.2 Look-back Period p.24 7.4 Investment or Loan of Priority New Money p.20 13.3 Claims to Set Aside or Annul Transactions p.24 7.5 Insolvency Proceedings to Liquidate a Corporate Group on a Combined Basis p.21 14. Intercompany Issues p.25 7.6 Organisation of Creditors p.21 14.1 Intercompany Claims and Obligations p.25 7.7 Conditions Applied to the Use of or Sale of Its 14.2 Offset, Set off or Reduction p.25 Assets p.21 14.3 Priority Accorded Unsecured Intercompany 8. International/Cross-border Issues and Processes p.21 Claims and Liabilities p.25 8.1 Recognition or Other Relief in Connection with 14.4 Subordination to the Rights of Third Party Foreign Restructuring or Insolvency Proceedings p.21 Creditors p.25 8.2 Protocols or Other Arrangements with 14.5 Liability of Parent Entities p.25 Foreign Courts p.21 14.6 Precedents or Legal Doctrines That Allow 8.3 Rules, Standards and Guidelines to Determine Creditors to Ignore Legal Entity Decisions p.25 the Paramountcy of Law p.21 14.7 Duties of Parent Companies p.26 8.4 Foreign Creditors p.21 14.8 Ability of Parent Company to Retain Ownership/Control of Subsidiaries p.26 9. Trustees/Receivers/Statutory Officers p.21 9.1 Types of Statutory Officers Appointed in 15. Trading Debt and Debt Securities p.26 Proceedings p.21 15.1 Limitations on Non-banks or Foreign Institutions p.26 9.2 Statutory Roles, Rights and Responsibilities of 15.2 Debt Trading Practices p.26 Officers p.22 15.3 Loan Market Guidelines p.27 9.3 Selection of Statutory Officers p.22 15.4 Enforcement of Guidelines p.27 9.4 Interaction of Statutory Officers with Company 15.5 Transfer Prohibition p.27 Management p.22 15.6 Navigating Transfer Restrictions p.27 9.5 Restrictions on Serving as a Statutory Officer p.22 16. The Importance of Valuations in the 10. Advisors and Their Roles p.22 Restructuring & Insolvency Process p.27 10.1 Types of Professional Advisors p.22 16.1 Role of Valuations in the Restructuring and 10.2 Authorisations Required for Professional Insolvency Market p.27 Advisors p.22 16.2 Initiating Valuation p.27 10.3 Roles Typically Played by the Various 16.3 Jurisprudence Related to Valuations p.27 Professional Advisors p.22 11. Mediations/Arbitrations p.22 11.1 Use of Arbitration/Mediation in Restructuring /Insolvency Matters p.22 4 LAW AND PRACTICE KENYA Contributed by Anjarwalla & Khanna Authors: Sonal Sejpal, James Mungai Anjarwalla & Khanna has an established banking and fi- and financial institutions. A&K is the founding member nance practice, with a dedicated team of three partners, and driving force of ALN, a leading independent African eleven associates and one paralegal with offices in Nairobi alliance of top-tier law firms in 16 countries. The banking and Mombasa, Kenya. The team advises on corporate re- and finance team has developed specialist expertise in sev- structuring and insolvency in relation to regulatory, finan- eral practice areas, including all aspects of complex bank- cial, and commercial issues to stakeholders from corporate ing and finance transactions, with a particular emphasis on debtors experiencing financial difficulties to lender groups; syndications, insolvency and restructurings involving cor- agents to syndicated lending groups; commercial creditors porate and commercial organisations and aviation finance. Authors Sonal Sejpal ‘s expertise covers all aspects James Mungai ‘s main focus is on complex of complex banking and finance transac- banking and finance transactions, and he tions, with a particular emphasis on has particular interests in insolvency and syndications, insolvency and restructuring restructuring in corporate and commer- in corporate and commercial organisa- cial organisations. He has advised credi- tions and aviation finance. Sonal is a tors, debtors and insolvent companies member of the UK-based Loan Market Association (LMA) alike on insolvency in various contexts, such as the priority and is regularly and actively involved in reviewing of docu- of secured creditors or other registered securities; volun- ments for use in East Africa by this Association. She is a tary arrangements; liquidation and administration of regular speaker at LMA events on various aspects of companies among other areas. James has advised on banking and commercial law, including seminars.