RULING
1. Before me is the debtor’s notice motion dated 1.4.2025 seeking the following orders: -
(3) an order restraining the creditor herein from proceeding to file the intended petition and advertising the intended insolvency petition.
(4) an order for the full reconciliation of accounts between the parties according to the service level agreement to establish the true status of accounts between them.
(5) an order that the Applicant pays the balance if any, in instalments of the amount found due to the Creditor/Respondent after reconciliation of accounts between the parties.
(6) costs of this application to be borne by the Creditor/ Respondent.
2. The application is brought under sections 17 (2) (d) and 17 (3) (b) of the Insolvency Act and Regulations 16, 17 (6) of the Insolvency Regulations.
3. It is supported by the affidavit sworn by the debtor’s legal manager, Anne Odongo on 1.4.2025 and written submissions dated 3.10.2025.
4. The creditor opposed the application through a replying affidavit sworn by Cyrus Maina on 9.5.2025 and written submissions dated 15.9.2025.
5. The background is that parties entered a legal services agreement dated 25.4.2022 for debt recovery consisting of outstanding legal fees and recovery of rent arrears due to the debtor.
6. According to the debtor, the creditor was to receive 10% of all recovered amounts as per the agreement.
7. The creditor added that it was a term that where payments were made in instalments, it would be entitled to receiver 10 or 15% of the recovered amounts.
8. The debtor claims that the creditor only managed to recover some amounts of the debts owed but it proceeded to bill its legal fees for the recovery of the entire amount.
9. The creditor claims that it successfully recovered Kshs. 17,083,358 from Insolvency Cause E036 of 2022, Hayer Bishan Singh & Sons and Kshs. 8,535,048 and Kshs. 12,876,150 rent from the Government of Kenya.
10. The creditor also claims that despite its performance of its contractual obligations, the debtor refused to remit the agreed legal fees in breach of the contract.
11. The creditor then issued the demand letter of 4.3.2025 and upon the debtor’s non-compliance, a statutory demand notice dated 18.3.2025.
Applicant’s case
12. The applicant’s gravamen is that the amount claimed is disputed.
13. The applicant contends that: -
(1) It has already made various payments of Ksh 800,000/- to the creditor in settlement of matters subject of the agreement.
(2) The debts in the statutory demand do not meet the prescribed bankruptcy level of Kshs. 250,000,000/-.
(3) The creditor has declined all attempts to reconcile the amounts recovered to get a proper tabulation of the outstanding fee payable to it. It expressed the willingness to pay the amount due upon reconciliation and an agreed payment plan.
(4) The creditor is using the statutory demand as a means of pressurizing the applicant to settle the disputed legal fees owed and it will be prejudiced if the creditor proceeds.
14. The applicant submitted that the court should not allow an insolvency petition arising out of a disputed amount. It also submitted that it is an insurance company and the creditor has fallen short of the capital adequacy requirements under section 41 of the Insurance Act.
15. The applicant relied on, among others: -
(1) Peter Munga v African Seed Investment Fund LLC [2017] eKLR; for the proposition that the grounds for setting aside the statutory demand are not limited by statute;
(2) In re Mitts Electrical Company Limited [2015] eKLR, that winding-up proceedings were never intended to be a process or a procedure for use by a decree-holder to recover the decretal amount owed to him;
(3) In re Ukwala Supermarket Limited [2019] eKLR, that liquidating a Company is a draconian step that amounts to 'corporate execution';
(4) In re Turbo Highway Eldoret Limited [2016] eKLR, where the court took into consideration the fact that the company had made several payments towards the settlement of the debt since institution of winding up proceedings as evidence of solvency;
Response
16. The creditor raised two points for dismissal of the application in limine. First, that the supporting affidavit sworn by Ms. Odongo is defective and incompetent as she has not demonstrated any authority to depose on the debtor’s behalf. Second, that the application is found on material non-disclosure and misrepresentations.
17. The creditor asserted that it was the debtor’s contractual obligation to pay the 10% of the recovered sums. It faulted the debtor for deliberately omitting that.
18. The creditor contended that the purported limit on insolvency petitions (against insurance companies) is irrelevant and inapplicable under Kenyan law. It asserted that the Insolvency Act and the Companies Act, in which no limitation is given, govern insolvency proceedings in Kenya. It submitted that the debt owed totals Kshs. 3,881,549.43, which is above the Kshs. 100,000 prescribed in the Insolvency Act.
19. The creditor also contended that the debtor has neither disputed any email, letter or notice of outstanding debt nor provided any credible evidence such as bank statements and counter-invoices to dispute the debt.
20. The creditor asserted that the debtor’s failure to pay the liquidated and undisputed debt constitutes prima facie evidence of insolvency under section 4 of the Insolvency Act.
21. For the above reasons, the creditor urged the court to dismiss the debtor’s application with costs.
22. The creditor relied on: -
(1) Winfred Nyamira Maina v Winfred Nyawira Maina vs. Peterson Onyiego Gichana [2015] eKLR on legal and evidential burden of proof.
(2) Kevian Kenya Limited v Hipora Business East Africa Limited [2025] KECA 1195 (KLR) on the need for the debtor to demonstrate a genuine dispute on substantial grounds to set aside a statutory demand;
(3) Siokwei Tarita v Dr. Charles Walekwa [2012] KEHC 305 (KLR) to the effect that a person swearing on behalf of a corporation needs authority under the corporate seal of the company; and
(4) Universal Hardware Limited v African Safari Club Limited [2013] KECA 507 (KLR) and Rufus Ragui & another v Vivo Energy Kenya Limited [2020] KEHC 1720 (KLR) to the effect that a company is deemed to be unable to pay its debts once it has failed to respond to a statutory demand within 21 days of its service.
Analysis and Determination
Is the supporting affidavit defective?
23. The creditor contended that the supporting affidavit sworn by Ms. Odongo is defective and incompetent as she has not demonstrated any authority to depose on the debtor’s behalf.
24. It is sufficient for persons authorised by corporate bodies to depose affidavits on their behalf and state that they were duly authorized. Makupa Transit Shade Limited & another v Kenya Ports Authority & another [2015] KECA 891 (KLR)
25. Therefore, the debtor’s contention in this regard fails.
Setting aside the statutory demand
26. The debtor sought for suspension of the statutory demand.
27. Under Regulation 17(6) of the Insolvency Regulations, the court may set aside a statutory demand on the following grounds: -
“a. The debtor appears to have a counterclaim, set-off or cross-demand which equals or exceeds the amount of the debt or debts specified in the statutory demand;
b. The debt is disputed on grounds which appear to the Court to be substantial;
c. It appears that the creditor holds some security in respect of the debt claimed by the demand, and either paragraph (6) is not complied with in respect of the demand, or the Court is satisfied that the value of the security equals or exceeds the full amount of the debt, or;
d. The Court is satisfied, on other grounds, that the demand ought to be set aside.”
28. The debtor bears the burden to show that there are genuine and substantial grounds for disputing the debt. Flower City Limited v Polytanks & Containers Kenya Limited (Insolvency Cause 033 of 2020) [2021] KEHC 34 (KLR)
29. In essence, the debtor’s case is that it is willing to pay the amount found to be due upon reconciliation and an agreed payment plan.
30. On the other hand, the creditor argued that the debtor has not disputed the debt; that the debt is above the Kshs. 100,000/- prescribed in the Insolvency Act and that the debtor’s failure to pay the liquidated and undisputed debt constitutes prima facie evidence of insolvency.
31. The debtor may have a case for taking of accounts or reconciliation. However, the debtor has not shown that it disputes the debt on substantial grounds.
32. Therefore, the debtor has not met the threshold for setting aside the statutory demand.
Restraining orders
33. The debtor has sought orders to restrain the creditor from proceeding to file a liquidation petition. It faults the creditor for using the statutory demand as a means of pressurizing the applicant to settle the disputed legal fees owed.
34. Section 692 of the Insolvency act provides for the court’s power to grant injunctions in certain cases. This is upon the application of a person adversely affected or about to be by the past or continuing conduct in contravention of or about to contravene the provisions of the Act.
35. The guiding principles for determining whether to grant an injunction were established in Giella v Cassman Brown & Co Ltd, (1973) E.A 385, at page 360 (Spry J), to wit: -
a. Whether the applicant has shown a prima facie case with a probability of success.
b. Whether, unless an interlocutory injunction is granted, the applicant might otherwise suffer irreparable injury, which would not adequately be compensated by an award of damages.
c. If the court is in doubt, where does the balance of convenience fall?
36. The debtor claims that the creditor should not file a liquidation petition against it as it is not insolvent and that it is willing to pay the debt upon reconciliation and an agreed payment plan.
37. The debtor stated that it is an insurance company. It contended that the creditor has not shown that it has fallen short of the capital adequacy requirements under section 41 of the Insurance Act.
38. Conversely, the creditor argued that the purported limit on insolvency petitions against insurance companies is irrelevant and inapplicable under Kenyan law. It asserted that under the Insolvency Act, a company is unable to pay its debts if a debt of Kshs. 100,000/- is not paid within 21 days of a statutory demand notice. It submitted that the debt owed totals Kshs. 3,881,549.43, which is above Kshs. 100,000/-.
39. Under section 384 (1) (a) of the Insolvency, it is a relevant consideration that a company is unable to pay its debts if a creditor that is owed Kshs. 100,000/- or more serves a written demand for payment upon the debtor and the debtor failed to pay the debt or to secure or compound for it to the reasonable satisfaction of the creditor.
40. Insurance business is defined in Section 2 of the Insurance Act. It is regulated under the Insurance Act and supervised by the Insurance Regulatory Authority.
41. Solvency regulation is one out of three methods of insurance regulation identified by Robert W Klein in Principles for Insurance Regulation: An Evaluation of Current Practices and Potential Reforms, The Geneva Papers, (2012) Vol 37, at pages 175–199. This paper was cited in Attorney General & another v Commission on Administrative Justice [2024] KECA 1157 (KLR), where the court deduced that: -
“The goal of optimal insurance solvency regulation therefore is to minimise or limit the social cost of insurer insolvency within acceptable parameters. The social cost in this respect is more than the lost equity of the insurer, and includes the effects on policy-holders and third parties who may be creditors of insurers. Regulators potentially limit insolvency risk by requiring insurers to meet a set of financial standards and taking appropriate actions if an insurer assumes excessive default risk or experiences financial distress.”
42. Insurance companies are required to adhere to the minimum capital requirements which are specified in the Second Schedule. Section 23 of the Insurance Act. They are also required to maintain the capital adequacy ratio of one hundred percentum Section 41 of the Insurance Act.
43. Section 121 of the Insurance Act states that for the purpose of section 384 of the Insolvency Act (Cap. 53), an insurer is taken to be unable to pay its debts if at any time the requirements of section 41 (which relate to margins of solvency) are not observed by the insurer.
44. From the reading of the law, the creditor’s contention that the solvency limits for insurance companies are irrelevant in insolvency petitions against insurance companies does not hold sway.
45. Accordingly, the debtor has established a prima facie case for grant of injunctive relief.
Irreparable harm
46. The creditor asserted that debt owed totals Kshs. 3,881,549.43, which is above the Kshs. 100,000/- prescribed under the Insolvency Act.
47. However, courts have considered and appreciated the gravity of liquidation orders.
48. The court observed that ‘winding-up proceedings were never intended to be a process or a procedure for use by a Decree-Holder to recover the decretal amount owed to him.’ Re Mitts Electrical Company Limited [2015] KEHC 8391 (KLR),
49. The court equally appreciated the petitioner’s concerns that law cannot be used as a shield to offer protection to a debtor who has failed to honour its obligations.
50. Abuse of the law of insolvency by ay party including the debtor or creditor, is most loathed by the law. The abuse may be manifested in attempts to convert insolvency into a debt-collection or execution process, or a tool to wade off or stifle or kill competition, or a manoeuvre to shield a debtor from discharging its obligations.
51. Of pointed relevance to thi case is the appreciation that ‘A Liquidation Petition as is Liquidation Order is serious business. Advertising any of the same has serious consequences to the debtor Company.’ Njagi & 9 others v Invesco Assurance Company Limited (Insolvency Petition E015 of 2019) [2023] KEHC 26754 (KLR) (Commercial and Tax) (21 December 2023) (Ruling),
52. As observed by this court an insurance company is quite a serious statutory and public venture under guarded by statutory, government and prudential regulatory radar to protect the insuring public. Directline Assurance Company Limited v Macharia & 11 others [2025] KEHC 284 (KLR)
53. Therefore, public interest ought to be considered.
54. Insurance business is vested in public interest. It affects the greater public, including policyholders, third parties and creditors.
55. Filing and advertisement of a liquidation petition, albeit a legal process or requirement, may result into creditors’ rush overwhelming the debtor, thus, crippling the debtor’s ability to cope or recover. This should be seen within the culture of salvaging viable businesses whilst they pay their debts which is one of the objectives of the Insolvency law intended to depart from the infamous ‘kiss of death’ practice that reigned in receiverships in Kenya.
56. Hence, the debtor being an insurance company, in my considered view, the debtor has demonstrated that unless the restraining orders are granted it will suffer irreparable harm that cannot be compensated by damages.
57. I find and hold that the balance of convenience tilts in favour granting the restraining orders. The public interest in the insureds as well as affected third parties and the interests of the policy holders, all creditors and the company are substantial interests requiring protection from a possible creditors’ rush that may be precipitated by these proceedings. But, a proportioned balance will be attained through the orders I shall fashion as required of the court.
58. Parties are encouraged to deploy AJS suitable to their cause and amicably settle the dispute.
Disposal
59. In the circumstances of this case, I order the following: -
(1) an order restraining the creditor herein from filing the intended petition and advertising the intended insolvency petition is granted until further orders of the court.
(2) The sum claimed be deposited in an interest-earning account in the joint names of both legal counsels within 45 days
(3) Meanwhile, an order is issued for the full reconciliation of accounts to be taken within 14 days between the parties according to the service level agreement to establish the true status of accounts between them and the sum due.
(4) on the basis of its submission, the applicant shall pay the sum due under (3) if any, within 30 days of the reconciliation.
(5) If (3) & (4) is attained before (2) above, then order (2) becomes inoperative or redundant.
(6) In the event of default, any party may apply for orders and or directions.
(7) The debtor shall pay the applicant the costs of this application due to its non-compliance with the demand.
Dated, signed and delivered at Nairobi through Microsoft Teams online application this 30th day of July 2026
--------------
F. Gikonyo M
Judge
In the presence of: -
Ms. Onderi for Waigwa for Creditor
No appearance for Debtor
CA- Ivan/Aggrey
1. Before me is the debtor’s notice motion dated 1.4.2025 seeking the following orders: -
(3) an order restraining the creditor herein from proceeding to file the intended petition and advertising the intended insolvency petition.
(4) an order for the full reconciliation of accounts between the parties according to the service level agreement to establish the true status of accounts between them.
(5) an order that the Applicant pays the balance if any, in instalments of the amount found due to the Creditor/Respondent after reconciliation of accounts between the parties.
(6) costs of this application to be borne by the Creditor/ Respondent.
2. The application is brought under sections 17 (2) (d) and 17 (3) (b) of the Insolvency Act and Regulations 16, 17 (6) of the Insolvency Regulations.
3. It is supported by the affidavit sworn by the debtor’s legal manager, Anne Odongo on 1.4.2025 and written submissions dated 3.10.2025.
4. The creditor opposed the application through a replying affidavit sworn by Cyrus Maina on 9.5.2025 and written submissions dated 15.9.2025.
5. The background is that parties entered a legal services agreement dated 25.4.2022 for debt recovery consisting of outstanding legal fees and recovery of rent arrears due to the debtor.
6. According to the debtor, the creditor was to receive 10% of all recovered amounts as per the agreement.
7. The creditor added that it was a term that where payments were made in instalments, it would be entitled to receiver 10 or 15% of the recovered amounts.
8. The debtor claims that the creditor only managed to recover some amounts of the debts owed but it proceeded to bill its legal fees for the recovery of the entire amount.
9. The creditor claims that it successfully recovered Kshs. 17,083,358 from Insolvency Cause E036 of 2022, Hayer Bishan Singh & Sons and Kshs. 8,535,048 and Kshs. 12,876,150 rent from the Government of Kenya.
10. The creditor also claims that despite its performance of its contractual obligations, the debtor refused to remit the agreed legal fees in breach of the contract.
11. The creditor then issued the demand letter of 4.3.2025 and upon the debtor’s non-compliance, a statutory demand notice dated 18.3.2025.
Applicant’s case
12. The applicant’s gravamen is that the amount claimed is disputed.
13. The applicant contends that: -
(1) It has already made various payments of Ksh 800,000/- to the creditor in settlement of matters subject of the agreement.
(2) The debts in the statutory demand do not meet the prescribed bankruptcy level of Kshs. 250,000,000/-.
(3) The creditor has declined all attempts to reconcile the amounts recovered to get a proper tabulation of the outstanding fee payable to it. It expressed the willingness to pay the amount due upon reconciliation and an agreed payment plan.
(4) The creditor is using the statutory demand as a means of pressurizing the applicant to settle the disputed legal fees owed and it will be prejudiced if the creditor proceeds.
14. The applicant submitted that the court should not allow an insolvency petition arising out of a disputed amount. It also submitted that it is an insurance company and the creditor has fallen short of the capital adequacy requirements under section 41 of the Insurance Act.
15. The applicant relied on, among others: -
(1) Peter Munga v African Seed Investment Fund LLC [2017] eKLR; for the proposition that the grounds for setting aside the statutory demand are not limited by statute;
(2) In re Mitts Electrical Company Limited [2015] eKLR, that winding-up proceedings were never intended to be a process or a procedure for use by a decree-holder to recover the decretal amount owed to him;
(3) In re Ukwala Supermarket Limited [2019] eKLR, that liquidating a Company is a draconian step that amounts to 'corporate execution';
(4) In re Turbo Highway Eldoret Limited [2016] eKLR, where the court took into consideration the fact that the company had made several payments towards the settlement of the debt since institution of winding up proceedings as evidence of solvency;
Response
16. The creditor raised two points for dismissal of the application in limine. First, that the supporting affidavit sworn by Ms. Odongo is defective and incompetent as she has not demonstrated any authority to depose on the debtor’s behalf. Second, that the application is found on material non-disclosure and misrepresentations.
17. The creditor asserted that it was the debtor’s contractual obligation to pay the 10% of the recovered sums. It faulted the debtor for deliberately omitting that.
18. The creditor contended that the purported limit on insolvency petitions (against insurance companies) is irrelevant and inapplicable under Kenyan law. It asserted that the Insolvency Act and the Companies Act, in which no limitation is given, govern insolvency proceedings in Kenya. It submitted that the debt owed totals Kshs. 3,881,549.43, which is above the Kshs. 100,000 prescribed in the Insolvency Act.
19. The creditor also contended that the debtor has neither disputed any email, letter or notice of outstanding debt nor provided any credible evidence such as bank statements and counter-invoices to dispute the debt.
20. The creditor asserted that the debtor’s failure to pay the liquidated and undisputed debt constitutes prima facie evidence of insolvency under section 4 of the Insolvency Act.
21. For the above reasons, the creditor urged the court to dismiss the debtor’s application with costs.
22. The creditor relied on: -
(1) Winfred Nyamira Maina v Winfred Nyawira Maina vs. Peterson Onyiego Gichana [2015] eKLR on legal and evidential burden of proof.
(2) Kevian Kenya Limited v Hipora Business East Africa Limited [2025] KECA 1195 (KLR) on the need for the debtor to demonstrate a genuine dispute on substantial grounds to set aside a statutory demand;
(3) Siokwei Tarita v Dr. Charles Walekwa [2012] KEHC 305 (KLR) to the effect that a person swearing on behalf of a corporation needs authority under the corporate seal of the company; and
(4) Universal Hardware Limited v African Safari Club Limited [2013] KECA 507 (KLR) and Rufus Ragui & another v Vivo Energy Kenya Limited [2020] KEHC 1720 (KLR) to the effect that a company is deemed to be unable to pay its debts once it has failed to respond to a statutory demand within 21 days of its service.
Analysis and Determination
Is the supporting affidavit defective?
23. The creditor contended that the supporting affidavit sworn by Ms. Odongo is defective and incompetent as she has not demonstrated any authority to depose on the debtor’s behalf.
24. It is sufficient for persons authorised by corporate bodies to depose affidavits on their behalf and state that they were duly authorized. Makupa Transit Shade Limited & another v Kenya Ports Authority & another [2015] KECA 891 (KLR)
25. Therefore, the debtor’s contention in this regard fails.
Setting aside the statutory demand
26. The debtor sought for suspension of the statutory demand.
27. Under Regulation 17(6) of the Insolvency Regulations, the court may set aside a statutory demand on the following grounds: -
“a. The debtor appears to have a counterclaim, set-off or cross-demand which equals or exceeds the amount of the debt or debts specified in the statutory demand;
b. The debt is disputed on grounds which appear to the Court to be substantial;
c. It appears that the creditor holds some security in respect of the debt claimed by the demand, and either paragraph (6) is not complied with in respect of the demand, or the Court is satisfied that the value of the security equals or exceeds the full amount of the debt, or;
d. The Court is satisfied, on other grounds, that the demand ought to be set aside.”
28. The debtor bears the burden to show that there are genuine and substantial grounds for disputing the debt. Flower City Limited v Polytanks & Containers Kenya Limited (Insolvency Cause 033 of 2020) [2021] KEHC 34 (KLR)
29. In essence, the debtor’s case is that it is willing to pay the amount found to be due upon reconciliation and an agreed payment plan.
30. On the other hand, the creditor argued that the debtor has not disputed the debt; that the debt is above the Kshs. 100,000/- prescribed in the Insolvency Act and that the debtor’s failure to pay the liquidated and undisputed debt constitutes prima facie evidence of insolvency.
31. The debtor may have a case for taking of accounts or reconciliation. However, the debtor has not shown that it disputes the debt on substantial grounds.
32. Therefore, the debtor has not met the threshold for setting aside the statutory demand.
Restraining orders
33. The debtor has sought orders to restrain the creditor from proceeding to file a liquidation petition. It faults the creditor for using the statutory demand as a means of pressurizing the applicant to settle the disputed legal fees owed.
34. Section 692 of the Insolvency act provides for the court’s power to grant injunctions in certain cases. This is upon the application of a person adversely affected or about to be by the past or continuing conduct in contravention of or about to contravene the provisions of the Act.
35. The guiding principles for determining whether to grant an injunction were established in Giella v Cassman Brown & Co Ltd, (1973) E.A 385, at page 360 (Spry J), to wit: -
a. Whether the applicant has shown a prima facie case with a probability of success.
b. Whether, unless an interlocutory injunction is granted, the applicant might otherwise suffer irreparable injury, which would not adequately be compensated by an award of damages.
c. If the court is in doubt, where does the balance of convenience fall?
36. The debtor claims that the creditor should not file a liquidation petition against it as it is not insolvent and that it is willing to pay the debt upon reconciliation and an agreed payment plan.
37. The debtor stated that it is an insurance company. It contended that the creditor has not shown that it has fallen short of the capital adequacy requirements under section 41 of the Insurance Act.
38. Conversely, the creditor argued that the purported limit on insolvency petitions against insurance companies is irrelevant and inapplicable under Kenyan law. It asserted that under the Insolvency Act, a company is unable to pay its debts if a debt of Kshs. 100,000/- is not paid within 21 days of a statutory demand notice. It submitted that the debt owed totals Kshs. 3,881,549.43, which is above Kshs. 100,000/-.
39. Under section 384 (1) (a) of the Insolvency, it is a relevant consideration that a company is unable to pay its debts if a creditor that is owed Kshs. 100,000/- or more serves a written demand for payment upon the debtor and the debtor failed to pay the debt or to secure or compound for it to the reasonable satisfaction of the creditor.
40. Insurance business is defined in Section 2 of the Insurance Act. It is regulated under the Insurance Act and supervised by the Insurance Regulatory Authority.
41. Solvency regulation is one out of three methods of insurance regulation identified by Robert W Klein in Principles for Insurance Regulation: An Evaluation of Current Practices and Potential Reforms, The Geneva Papers, (2012) Vol 37, at pages 175–199. This paper was cited in Attorney General & another v Commission on Administrative Justice [2024] KECA 1157 (KLR), where the court deduced that: -
“The goal of optimal insurance solvency regulation therefore is to minimise or limit the social cost of insurer insolvency within acceptable parameters. The social cost in this respect is more than the lost equity of the insurer, and includes the effects on policy-holders and third parties who may be creditors of insurers. Regulators potentially limit insolvency risk by requiring insurers to meet a set of financial standards and taking appropriate actions if an insurer assumes excessive default risk or experiences financial distress.”
42. Insurance companies are required to adhere to the minimum capital requirements which are specified in the Second Schedule. Section 23 of the Insurance Act. They are also required to maintain the capital adequacy ratio of one hundred percentum Section 41 of the Insurance Act.
43. Section 121 of the Insurance Act states that for the purpose of section 384 of the Insolvency Act (Cap. 53), an insurer is taken to be unable to pay its debts if at any time the requirements of section 41 (which relate to margins of solvency) are not observed by the insurer.
44. From the reading of the law, the creditor’s contention that the solvency limits for insurance companies are irrelevant in insolvency petitions against insurance companies does not hold sway.
45. Accordingly, the debtor has established a prima facie case for grant of injunctive relief.
Irreparable harm
46. The creditor asserted that debt owed totals Kshs. 3,881,549.43, which is above the Kshs. 100,000/- prescribed under the Insolvency Act.
47. However, courts have considered and appreciated the gravity of liquidation orders.
48. The court observed that ‘winding-up proceedings were never intended to be a process or a procedure for use by a Decree-Holder to recover the decretal amount owed to him.’ Re Mitts Electrical Company Limited [2015] KEHC 8391 (KLR),
49. The court equally appreciated the petitioner’s concerns that law cannot be used as a shield to offer protection to a debtor who has failed to honour its obligations.
50. Abuse of the law of insolvency by ay party including the debtor or creditor, is most loathed by the law. The abuse may be manifested in attempts to convert insolvency into a debt-collection or execution process, or a tool to wade off or stifle or kill competition, or a manoeuvre to shield a debtor from discharging its obligations.
51. Of pointed relevance to thi case is the appreciation that ‘A Liquidation Petition as is Liquidation Order is serious business. Advertising any of the same has serious consequences to the debtor Company.’ Njagi & 9 others v Invesco Assurance Company Limited (Insolvency Petition E015 of 2019) [2023] KEHC 26754 (KLR) (Commercial and Tax) (21 December 2023) (Ruling),
52. As observed by this court an insurance company is quite a serious statutory and public venture under guarded by statutory, government and prudential regulatory radar to protect the insuring public. Directline Assurance Company Limited v Macharia & 11 others [2025] KEHC 284 (KLR)
53. Therefore, public interest ought to be considered.
54. Insurance business is vested in public interest. It affects the greater public, including policyholders, third parties and creditors.
55. Filing and advertisement of a liquidation petition, albeit a legal process or requirement, may result into creditors’ rush overwhelming the debtor, thus, crippling the debtor’s ability to cope or recover. This should be seen within the culture of salvaging viable businesses whilst they pay their debts which is one of the objectives of the Insolvency law intended to depart from the infamous ‘kiss of death’ practice that reigned in receiverships in Kenya.
56. Hence, the debtor being an insurance company, in my considered view, the debtor has demonstrated that unless the restraining orders are granted it will suffer irreparable harm that cannot be compensated by damages.
57. I find and hold that the balance of convenience tilts in favour granting the restraining orders. The public interest in the insureds as well as affected third parties and the interests of the policy holders, all creditors and the company are substantial interests requiring protection from a possible creditors’ rush that may be precipitated by these proceedings. But, a proportioned balance will be attained through the orders I shall fashion as required of the court.
58. Parties are encouraged to deploy AJS suitable to their cause and amicably settle the dispute.
Disposal
59. In the circumstances of this case, I order the following: -
(1) an order restraining the creditor herein from filing the intended petition and advertising the intended insolvency petition is granted until further orders of the court.
(2) The sum claimed be deposited in an interest-earning account in the joint names of both legal counsels within 45 days
(3) Meanwhile, an order is issued for the full reconciliation of accounts to be taken within 14 days between the parties according to the service level agreement to establish the true status of accounts between them and the sum due.
(4) on the basis of its submission, the applicant shall pay the sum due under (3) if any, within 30 days of the reconciliation.
(5) If (3) & (4) is attained before (2) above, then order (2) becomes inoperative or redundant.
(6) In the event of default, any party may apply for orders and or directions.
(7) The debtor shall pay the applicant the costs of this application due to its non-compliance with the demand.
Dated, signed and delivered at Nairobi through Microsoft Teams online application this 30th day of July 2026
--------------
F. Gikonyo M
Judge
In the presence of: -
Ms. Onderi for Waigwa for Creditor
No appearance for Debtor
CA- Ivan/Aggrey