The origins of Bankruptcy Laws in Kenya

The origins of bankruptcy laws in Kenya may be traced back to the historical and legal frameworks, including the influence of the English colonial laws, as well as the customary African practices,  and subsequent legal evolutions. During the British colonial rule in Kenya, one notices that the legal system in Kenya was by and large shaped by the English common law and statutes. Bankruptcy or insolvency laws in Kenya, therefore, drew a lot of their influence from the English legal and accounting tradition, and this includes the procedures, principles, standards, and systems related to insolvency, bankruptcy, accounting, and reporting. When it comes to customary practices, traditional African custom laws, codes, and beliefs also played a role in addressing debts within communities. While these practices may not have evolved directly and formed formal written bankruptcy laws, they contributed to local approaches, and conceptual frameworks. The thought process around resolving disputes and managing fiduciary obligations was embraced in customs and practices relating to dealing with third parties in case of exchange of assets and honoring of liabilities, and accounting for them.

The modern legal evolution, particularly after gaining independence, led to the enactment of specific laws, regulations and legislation relating to bankruptcy and insolvency, and accounting and reporting for them.  In the fullness of time, the legal framework has been refined, redefined, and contextualized to address the contemporary economic challenges. To align these systems with international best practice, since independence 60 years ago, Kenya has undertaken significant legislative reforms to modernize its business  laws, including the insolvency legal, and accounting framework. In this regard the Insolvency Act No18 of 2015 represents perhaps, the most comprehensive overhaul of insolvency laws in the country incorporating existing contemporary approaches to bankruptcy, administration, and liquidation both as it relates to natural persons, and corporate legal entities.

in conclusion,  the, regulatory framework for bankruptcy in Kenya can be seen to have embraced, and been influenced by in the Insolvency Laws of United Kingdom and other parts of the commonwealth of nations . This has reflected in a  hybrid of historical customary and modern influences. This framework targets to provide a structured, and efficient system for dealing with insolvency, restructuring, and the resolution of financial distress both for natural and legal persons in line with local, regional, and international Legal jurisdictions.

FCPA Owen Koimburi

Licensed Insolvency Practitioner

Nairobi February 6, 2024