Professional Documents
Culture Documents
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.
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
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)
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:
present
it is approved by a majority (in number and value) of the members of each of the
groups of creditors
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
Ibid
Ibid
Ibid
Ibid
Ibid
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;
-
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.