Suleiman Enterprises Limited v Kensalt Limited & 3 others [2020] KEELC 3273 (KLR)
The bottom line
#A Kenyan court ruled that directors of a company in receivership cannot instruct lawyers or control company assets, and only the High Court handles insolvency matters.
What this practically means
#Executive summary
#Key legal issues
#Jurisdiction of the court over matters under the Insolvency Act 2015
The court lacks jurisdiction; Section 2(1) of the Insolvency Act vests jurisdiction over insolvency matters in the High Court
The application was expressed to be brought under Sections 520, 521, 593 and 594 of the Insolvency Act 2015. That Act defines 'Court' as the High Court or its insolvency division. The presiding court is not the High Court, and jurisdiction cannot be arrogated by craft of interpretation. The applicant had already filed two similar applications in the High Court, which remain the proper forum.
Locus standi of directors of a company in receivership
Directors of a company in receivership cannot make decisions on behalf of the company regarding assets under receivership nor instruct advocates to act for the company
The 2nd Defendant is described as being in receivership. Upon appointment of a receiver, floating charges crystallise and directors lose control of the assets covered by the charge. Until matters pending in the High Court are determined, the directors are not a proper party to make the application or participate through an agent.
Expiry of receivership by effluxion of time under Section 593 of the Insolvency Act
Not determined; the court declined to delve into the question, leaving it to the pending High Court matters
The applicant argued that the receivers' 12-month term expired without extension under Section 594. The court found the same subject matter was pending in Malindi HCCC No. 28 of 2016 and Mombasa High Court Miscellaneous Cause No. 226 of 2018, both properly before the High Court, and declined to determine the issue.
Legal principles established
#- Where a court has no jurisdiction, it must down its tools and decline to take any further steps in the matter
- Appointment of a receiver over floating charges crystallises them and removes control of the company's assets from the directors
Court orders
#- 1.The Notice of Motion dated 4th February 2019 is dismissed
- 2.Costs of the application awarded to the opposing parties (dismissed with costs)
- Jurisdiction invoked
- Sections 520, 521, 593 and 594 of the Insolvency Act 2015 invoked by Applicant; court held Section 2(1) confines insolvency matters to the High Court
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Suleiman Enterprises Limited v Kensalt Limited & 3 others [2020] KEELC 3273 (KLR)", Case Analysis (2020). Notice of Motion dated 4th February 2019 (within pending suit). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2020/3273/eng@2020-03-13
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.