Kenyan businesses to shut down in droves without a miracle intervention

• Kenya’s business sector has been projected to take a huge hit. 
• As many as 46 businesses are at risk of liquidation.
• This could be as a result of the country’s insolvency laws. 

The corporate sector in Kenya could take a huge hit owing to a wide spread insolvency.

An estimated 46 firms currently face liquidation as a result of their inability to continue to handle their cost of operations.

According to the Kenyan State Receiver Office, this number is more than double the figure recorded in 2015, as back then only 18 companies were faced with this challenge.

The State Receiver Office also noted that companies grappling with court-sanctioned liquidations increased to 34 from 13 while those under voluntary liquidation grew to 12 from 5.

This new and daunting development in Kenya’s business sector could be tagged to the insolvency laws that require financially troubled firms to be given time to recover through an administration procedure, with liquidation being the last resort.

According to the East African, a media company covering news in East Africa, “Kenya’s state receiver Mark Gakuru said in February that there are rising cases where company owners obtain court injunctions to stall the administration process as they strip company of assets.

As a result, authorities want to change the law to require company management to provide security equivalent to a portion of what is owed to creditors.

The government is also making changes to the Insolvency Act to stop administration by receiver managers who take years to resolve a failed business while paying themselves thousands of dollars.

The insolvency practitioners will also not get a blank cheque when seeking to extend the period of administration.

The administrators will have to explain what they have done so far and how much recoveries they have been able to make to justify their pay.”

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