Considering the issue in question 1 above, TASKIMS has internal wrangles as the business is

family-owned owned and some of the family feel that the business has been mismanaged by
some of the family members they therefore want the business dissolved and pay off creditors
who some are part of the family members. Elucidate the process of adjudging TASKIMS
bankrupt by the family members and draw all necessary applications to the court for ad judgment
of the process (15 Marks)
1. INTRODUCTION.
In accordance with the Insolvency Act, section 32, bankruptcy can be defined as when a person
is unable to pay off his debts, however, when it comes to companies, they are declared to be
insolvent. The process of adjudging TASKIMS insolvent through members is provided for under
the Insolvency Act as a voluntary arrangement by members. This is under division 3 of part vi of
the Insolvency Act.
In order for TASKIMS company to be declared insolvent, it must be proved under section 384
of the Insolvency Act that, it is unable to pay its debts if; a creditor to whom the company is
indebted for a hundred thousand shillings or more has served on the company, by leaving it at the
company’s registered office, a written demand requiring the company to pay the debt and the
company has for twenty-one days afterwards failed to pay the debt or to secure or compound for
it to the reasonable satisfaction of the creditor, if execution or other process issued on a
judgment, decree or order of any court in favor of a creditor of the company is returned
unsatisfied in whole or in part or, if it is proved to the satisfaction of the Court that the company
is unable to pay its debts as they fall due. A company is also unable to pay its debts for the
purposes of this Part if it is proved to the satisfaction of the Court that the value of the company’s
assets is less than the amount of its liabilities (including its contingent and prospective
liabilities).1
THE PROCESS OF ADJUDGING TASKIMS BANKRUPT.
1ST PROCESS.
Section 398 of the Insolvency Act requires the directors of the company to make a declaration of
solvency, that they have made a full inquiry into the company’s affairs; and
(b) that, having done so, they have formed the opinion that the company will be able to pay its
debts in full, together with interest at the official rate, within such period (not exceeding twelve
months from the commencement of the liquidation) as may be specified in the
declaration.
While subsection 2 of the same section states that such a declaration by the directors has no
effect for purposes of this Act

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INSOLVENCY ACT 2015.
unless—
(a) it is made within the five weeks immediately preceding the date of the
passing of the resolution for liquidation, or on that date but before the
passing of the resolution; and
(b) it includes a statement of the company’s assets and liabilities as at
the latest practicable date before the making of the declaration.
2nd PROCESS. SPECIAL RESOLUTION.
Section 393(1) of the Insolvency Act mentions the circumstances under which a company may
be liquidated voluntarily;
(a) when the period (if any) fixed for the duration of the company by the articles expires, or the
event (if any) occurs, on the occurrence of which the articles provide that the company is to be
dissolved, and the company in general meeting has passed a resolution providing for its
voluntary liquidation; or
(b) if the company resolves by special resolution that it be liquidated
voluntarily.
Subsection (2) of the same section requires that before passing a resolution for voluntary
liquidation, the company shall give notice of the resolution to the holder of any qualifying
floating charge in respect of the company’s property.
TASKIMS company may initiate its liquidation process by invoking a special resolution. A
special resolution is a decision that has been approved by a majority of the shareholders of the
company, and since in this case, the family owns the company, the aggrieved family members
can seek majority approval for liquidation of the company on insolvency and mismanagement
claims.
In the case of Kenya Artisans Limited v Chemical & Allied Workers Union 2020, in the
judgment, the judge quotes that a voluntary winding up by members is initiated by a resolution
passed by the members of the company. Such a resolution must state the reasons for the winding
up and the power of the members to pass such a resolution cannot be excluded by the company’s
article.2
The TASKIMS company is required to give notice of the resolution to the holder of any
qualifying floating charge in respect of the company’s property before the passing of the
resolution. And the resolution can be passed only after the expiry of seven days from and

2
http://kenyalaw.org/caselaw/cases/view/218398 retrieved on 3th,MARCH 2024.
including the date on which the notice was given; or (b) if the person to whom the notice was
given has consented in writing to the passing of the resolution.3
3RD PROCESS. TASKIMS is required to make a notice of resolution to liquidate.
Section 394 of the Insolvency Act provides that within 14 days after a company has passed a
resolution for its voluntary liquidation, it shall publish a notice setting out the resolution—
(a) once in the Gazette.
(b) once in at least two newspapers circulating in the area in which the
company has its principal place of business in Kenya; and
(c) on the company’s website (if any).
(2) If a company fails to comply with subsection (1), the company, and each
officer of the company who is in default, commit an offense and on conviction are
each liable to a fine not exceeding five hundred thousand shillings.

4TH PROCESS. Commencing of the liquidation process.

Section 395 of the Insolvency Act provides that the voluntary liquidation of a company
commences when the resolution for voluntary liquidation is passed.
5TH PROCESS. Appointment of liquidator in members’ voluntary liquidation.
After the members' voluntary liquidation process has commenced, Section 399 of the Insolvency
Act requires the members to appoint a liquidator in the General Meeting, the liquidator may be
one or more for the purpose of liquidating the company’s affairs and distributing its assets. Only
an authorized insolvency practitioner is eligible for appointment. Sections 6 and 8 of the
Insolvency Act provide the qualifications of an insolvency practitioner.
Subsection 2 of the same section provides that upon the appointment of a liquidator, all the
powers of the directors cease, except in so far as the company in general meeting or the
liquidator sanctions their continuance.
TASKIMS is required to appoint a liquidator in the process elaborated above.

6TH PROCESS. Power to fill a vacancy in the office of liquidator.

Section 400 of the insolvency act provides that upon vacancy in the office of the liquidator, the
company members and its directors will have a meeting and appoint another liquidator. Where
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IBID 1.
there where more than one liquidator, the contributor can make an application to the court and
the court will give directions on the appointment of the liquidator as it may determine.
7TH PROCESS. Conducting General company meetings at each year’s end.
Section 401 requires that if the liquidation process continues for more than one year a meeting is
to be convened within three months after the end of the year in which the liquidator should give
accounts and process and progress of liquidation.
In the case of Re Kenyon Limited Insolvency Cause 2020, in the issue was raised as to whether
the liquidator was illegally in office after the alleged violation of section 401 and section 403,
when he failed to hold a general meeting required in section 401 if the insolvency process took
more than 12months and section 403 which requires a creditor’s meeting to be announced if he is
on the perception the company unable to pay its debts in full within the period set in section 398
of the insolvency Act. The court ruled that a liquidator must conduct general meetings if the
liquidation process takes more than 12 months, and he is required to do so within three months
after the end of each subsequent period of twelve months. A liquidator who fails to comply with
this section commits an offense and on conviction is liable to a fine not exceeding five hundred
thousand shillings.
Subsection 4, requires the cabinet secretary to extend the period of three years if he is
satisfied that there were extenuating circumstances barring the liquidator from holding a
meeting within three months.

8th PROCESS. Final meeting before dissolution: members’ voluntary liquidation.

Section 402(1) of the Insolvency Act requires that as soon practicable after the liquidation of the
company’s affairs is complete, the liquidator—shall prepare an account of the liquidation
showing how it has been conducted and how the company’s property has been disposed of, and
shall then convene a general meeting of the company for the purpose of laying before it the
account and giving an explanation of it.
The liquidator is also required to convene the meeting by publishing, at least thirty days before
the meeting, an advertisement—
(i) once in the Gazette.
(ii) once in at least two newspapers circulating in the area in which
the company has its principal place of business in Kenya; and
(iii) on the company’s website (if any); and
(b) shall specify the time, date, place, and purpose of the meeting.
And, within seven days after the meeting, the liquidator shall lodge with the Registrar a copy of
the account, together with a return giving details of the holding of the meeting and of its date.
Subsection 6 requires If a quorum is not present at the meeting, the liquidator shall, instead of the
return referred to in subsection (3), make a return that the meeting was duly convened and that
no quorum was present; and on such a return being made,
subsection (3) as to the lodging of the return is taken to have been satisfied.
9TH PROCESS. Suppose the liquidator is of the opinion that the company is unable to pay its
debts.
Section 403 of the Insolvency Act, requires the liquidator to have a meeting with the company
creditors after forming the opinion that the company is unable to pay its debts during the period,
before the day on which the creditors' meeting is to be held, provide creditors, free of charge,
with such information concerning the affairs of the company as they may reasonably require and
specify in the notice of the creditors' meeting.
Subsection 3 requires the liquidator to
(a) prepare a statement setting out the financial position of the company.
(b) lay that statement before the creditors' meeting, and
(c) attend and preside at that meeting.
A statement complies with this requirement if it specifies.
the prescribed details of the company's assets, debts and
liabilities, the names and addresses of the company's creditors; the securities (if any) respectively
held by them and the dates on which they were respectively given; and
is verified by a statutory declaration signed by the liquidator.