Introduction
1. Before this Court for determination are two applications. The first to be filed is the Notice of Motion dated 12th February 2025 filed by Mamlaka Holdings Limited, seeking two prayers, first, that there be joinder of the Applicant as an interested party, and second, that the Applicant (Intended Interested Party) be recognized as a secured creditor.
2. The application is supported by the affidavit sworn on the same date by its director, Ms. Njoki Muthuri. It is premised on the fact that the Intended Interested Party had a Factoring Agreement with the Company (Sky Foods Limited), but the Official Receiver has failed and/or neglected to acknowledge the Applicant as a Secured Creditor.
3. The Application is opposed by vide a Replying Affidavit dated 28th April 2025, sworn by Mark Gakuru, the Official Receiver and Administrator of the Company (Sky Foods Limited (In Administration) arguing that the Application is defective for want of compliance with Section 560(d) of the Insolvency Act. The Official Receiver also filed a Preliminary Objection dated 25th April 2025.
4. The Second Application is the one dated 28th October 2025 by the Official Receiver (OR), filed under among others, sections 427, 437 and 441 of the Insolvency Act seeking the appointment of the Official Receiver as a Provisional Liquidator in respect of Sky Foods Limited (in administration), pending liquidation petition.
5. The application is supported by the affidavit dated 28th October 2025, sworn by Sylvia Githungo, an Advocate and Officer under the Office of the Official Receiver. It is premised on the fact that the company insolvent with no tangible assets, and the only intangible, a trademark has been realized.
6. The facts leading to the instant dispute is that the Petitioner, Kenya Development Corporation (KDC), appointed the Official Receiver as Administrator of Sky Foods Limited on 26 September 2024 pursuant to debentures dated 31 October 2014 and 20 June 2016 duly registered at the Companies Registry. The appointment was made under Part VIII of the Insolvency Act, 2015.
7. The Administrator subsequently filed reports indicating that Sky Foods Limited had ceased operations, its tangible assets had been distrained by the landlord, and only an intangible trademark was realized for approximately KES 10.5 million. The secured creditor, KDC, was paid in priority, leaving a balance of KES 3.1 million for distribution.
8. Mamlaka Holdings Limited (the Intended Interested Party) now seeks joinder as an interested party, and that it be recognized as a secured creditor by virtue of a factoring agreement dated 1st September 2020.
9. The Official Receiver opposes, raising a preliminary objection under section 560 of the Insolvency Act and contending that Mamlaka holds no registered security. He instead seeks liquidation of the Company.
10. The two Applications were canvassed together. The Petitioner filed its Submissions dated 29th October 2025, whilst the Applicant (Mamlaka Holdings) filed theirs dated 17th July 2025.
Determination and Analysis
11. Having carefully considered the pleadings, the responses thereto, the submissions and the applicable law, I find that the following issues arise for determination: -
i. Whether the Preliminary Objection is merited.
ii. Whether Mamlaka Holdings Limited should be joined as an interested party.
iii. Whether Mamlaka qualifies as a secured creditor under Kenyan insolvency law.
iv. Whether, in light of the lapse of administration, liquidation should proceed.
Whether the Preliminary Objection is merited
12. The Official Receiver raised a preliminary objection on the application by Mamlaka Holdings Limited, arguing that it contravened the provisions of Section 560(1)(d) of the Insolvency Act, which requires leave of Court or consent of the Administrator before proceedings can be commenced against a company in administration.
13. Consequently, the Official Receiver urged this Court to find that the application is fatally defective for want of leave, and to strike out the same.
14. Mamlaka Holdings on its part submitted that its application for joinder as an interested party in the ongoing insolvency proceedings, and the prayer for its recognition as a secured creditor to the Company, does not, in law offend the provisions of Section 560(1)(d) of the Insolvency Act.
15. Section 560 of the Insolvency Act puts a moratorium on other legal proceedings against a company in respect of which an administration order and administration order is in place. Section 560(1) provides that:
“While a company is under administration—
a) A person may take steps to enforce a security over the company’s property only with the consent of the administrator or with the approval of the Court;
b) A person may take steps to repossess goods in the company’s possession under a credit purchase transaction only with the consent of the administrator or with the approval of the Court; if the Court gives approval—subject to such conditions as the Court may impose;
c) A landlord may exercise a right of forfeiture by peaceable re-entry in relation to premises let to the company only with the consent of the administrator or with the approval of the Court; and
d) A person may begin or continue legal proceedings (including execution and distress) against the company or the company’s property only with the consent of the administrator or with the approval of the Court."
16. From the above, it is evident that while a Company is under Administration, for one to take steps to enforce, begin or continue legal proceedings against the Company, one has to obtain Consent of the Administrator or act with approval of the court.
17. In the present case, it is clear from the pleadings that the Applicant has not instituted a fresh suit but only seeks joinder in existing insolvency proceedings. Moreover, the Application has been filed within the existing insolvency proceedings. Such joinder is not “beginning or continuing legal proceedings” within the meaning of section 560 of the Act.
18. Consequently, I find that the preliminary objection misconceived and incompetent as it rests on a factual mischaracterization of the application by Mamlaka Holdings Limited. It therefore fails.
Whether Mamlaka Holdings Limited should be joined as an interested party.
19. The Applicant (Mamlaka) argued that by a factoring agreement dated 1st September 2020 it had with the Sky Foods Limited (in administration) under which it acquired rights to collect assigned receivables from the company, it has a direct and substantial interest in the insolvency proceedings. It submits that the administration and subsequent liquidation will determine whether its claim is admitted and how it ranks in distribution.
20. The Official Receiver on its part argued that the Applicant (Mamlaka) has filed no valid proof of debt and that its alleged factoring arrangement does not confer a legally cognizable interest in the insolvency proceedings. It further argued that Mamlaka has not demonstrated registration of any security, and therefore its claim is at best unsecured.
21. It was submitted on behalf of the Official Receiver that that joinder is unnecessary and would complicate the administration.
22. The power of the Court to order for joinder of parties to add a party “whose presence before the court may be necessary in order to enable the court effectually and completely to adjudicate upon and settle all questions involved,” is Order 1 Rule 10(2) of the Civil Procedures Act, which provides that:
“The court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the court to be just, order that the name of any party improperly joined, whether as plaintiff or defendant, be struck out, and that the name of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the court may be necessary in order to enable the court effectually and completely to adjudicate upon and settle all questions involved in the suit, be added.”
23. The Supreme Court of Kenya in Trusted Society of Human Rights Alliance v Matemo & 5 others [2014] KESC 32 (KLR) the Court defined the term “Interested Party” as follows:
“An interested party is one who has a stake in the proceedings, though he or she was not party to the cause ab initio. He or she is one who will be affected by the decision of the Court when it is made, either way. Such a person feels that his or her interest will not be well articulated unless he himself or she herself appears in the proceedings, and champions his or her cause.”
24. Similarly, in the case of Meme v. Republic, 2004 1 EA 124, the Court observed that a party could be enjoined in a matter for the following reasons:
(i) Joinder of a person because his presence will result in the complete settlement of all the questions involved in the proceedings;
(ii) Joinder to provide protection for the rights of a party who would otherwise be adversely affected in law;
(iii) Joinder to prevent a likely course of proliferated litigation.”
25. From the above authorities, it is clear that under Order 1 Rule 10(2) of the Civil Procedure Rules, joinder is a discretionary matter, and therefore not automatic. In insolvency proceedings, creditors ordinarily participate by filing proofs of debt with the Administrator or Liquidator.
26. However, where a creditor demonstrates that its interests may be prejudiced by orders of the Court, such as the issues raised herein, then joinder is appropriate. Mamlaka Holdings has in the present case, filed a proof of debt and claims exposure under a factoring arrangement. The distribution of the residual funds will directly affect its recovery.
27. Applying Order 1 Rule 10(2) and the test in Meme v. Republic (supra), I find that Mamlaka has shown a direct and substantial interest. Its presence is therefore necessary to enable the Court to effectually and completely adjudicate upon the questions of creditor recognition and distribution.
28. Accordingly, Mamlaka Holdings Limited qualifies to be joined as an interested party in the present Insolvency Proceedings.
Whether Mamlaka qualifies as a secured creditor
29. Mamlaka Holdings Limited argued that its factoring agreement dated 1st September 2020 gave it rights over assigned receivables of Sky Foods Limited (in receivership). It submitted that factoring is a modern financing instrument, functionally equivalent to a security interest, because the factor acquires rights to collect receivables and is exposed to the debtor’s insolvency risk.
30. Mamlaka contends that its rights should be recognized as “secured” under section 522(1)(c) of the Insolvency Act, which contemplates distribution to “one or more secured or preferential creditors.”
31. It urges the Court to adopt a purposive interpretation of “security” to include receivables assignments, so that commercial realities are not ignored. It invokes section 533(1)(f), which empowers the Court to “make any other order that the Court considers appropriate,” arguing that the Court can safeguard its interests by recognizing its factoring rights as secured.
32. The Official Receiver on its part opposed Mamlaka’s argument and asserted that unlike KDC’s interest which was registered, Mamlaka’s factoring arrangement with the Company was never registered as a charge under the Companies Act or the Movable Property Security Rights Act. It exhibited in its affidavit in reply, certificates of registration of debentures in favour of KDC (MG -1A; MG-1b, and MG-1c), covering “all present and after-acquired property” of Sky Foods Limited.
33. The Official Receiver maintained that under Section 2 of the Insolvency Act, a “secured creditor” is one who holds a security over the company’s property. Without registration, Mamlaka holds no enforceable security. It relies on Re Spectrum Plus Ltd [2005] UKHL 41, where the House of Lords held that priority in insolvency depends on the nature and perfection of the security interest. According to the OR, Mamlaka’s rights are at best contractual, ranking as unsecured, and cannot displace KDC’s perfected floating charge.
34. Having carefully considered the parties’ arguments, I find the argument by the Official Receiver more plausible. Section 2 of the Insolvency Act is clear in its terms that a secured creditor must hold a security over the company’s property. The Section states that:
"secured creditor" means—
(a) a person holding a security on or against the property of the debtor or (any part of it) to secure a debt due or accruing due to the person from the debtor; or
(b) a person whose claim is based on, or secured by, a negotiable instrument held as collateral security and on which the debtor is only indirectly or secondarily liable;
35. Further, the term "security" is defined to mean “any mortgage, charge, lien or other security.
36. Under Part XXXI of the Companies Act, 2015 (sections 878–884), charges (securities) created by a company must be registered with the Registrar of Companies to be effective against third parties. Section 884 of the Act provides that:
“884. Registrar to keep register of charges
(1) The Registrar shall keep, with respect to each company, a register of all the charges that are required to be registered under this Part.
(2) If a charge is part of a series of debentures, the Registrar shall record in the register the required particulars specified in section 880(2).
(3) In the case of any other charge, the Registrar shall record in the register the following particulars:(a)if it is a charge created by a company, the date of its creation;(b)if it is a charge which was existing on property acquired by the company, the date of the acquisition;(c)the amount secured by the charge;(d)short particulars of the property charged;(e)the persons entitled to the charge.
(4) On registering a charge, the Registrar shall issue a certificate of the registration of the charge, stating the amount secured by the charge.
(5) The Registrar shall either sign a certificate of registration of a charge or authenticate it with the Registrar's official seal.
(6) A certificate of registration signed by the Registrar or authenticated with the Registrar's seal is conclusive evidence that the requirements of this Part as to registration have been satisfied.
(7) The Registrar shall keep open for public inspection during the ordinary business hours of the Companies Registry each register kept under this section.
(8) A person who wishes to inspect a register of charges may do so without payment, but is entitled to be provided with a copy of the register or an entry in it only on payment of the prescribed fee (if any).”
37. From the above provisions of the law, it is clear that the statutory scheme requires two elements: the existence of a security (mortgage, charge, debenture, lien, pledge, etc.), that security must attach to the company’s property, and that to bind third parties and rank in insolvency, the security must be perfected by registration under the Act.
38. In this case, Mamlaka Holdings has not exhibited any evidence of registration of the factoring arrangement it entered into with the Company – Sky Foods Limited (in receivership). No certificate of registration of the interest issued under Section 884(6) of the Act has been exhibited by the Applicant.
39. The Official Receiver on its part has exhibited certificates of registration of debentures in favour of Kenya Development Corporation dated 2014, 2015, and 2016. These are perfected securities covering “all present and after-acquired property” of Sky Foods Limited.
40. Accordingly, I find that Mamlaka Holdings Limited does not qualify as a secured creditor within the meaning of section 2 of the Insolvency Act, 2015. I agree with the Official Receiver’s submissions that the factoring arrangement, absent any evidence of registration or perfected assignment, confers only contractual rights. It therefore follows that Mamlaka’s claim ranks with unsecured creditors in the distribution of assets.
Whether, in light of the lapse of administration, liquidation should proceed
41. The question for determination is whether the official receiver has made a case for its appointment as provisional liquidator pending the hearing of the liquidation petition. Also sought in the application is the leave for service of the petition upon creditors and any other relevant parties.
42. The Official Receiver was appointed Administrator of the company on 26th September 2024, by KDC, o holder of a Qualifying Floating Charge, for a period of one year from the date of appointment. Its term has therefore ended, and it now seeks, by this application and the accompanying petition, to have the company liquidated.
43. The Court is enjoined under section 522 of the Insolvency Act to consider whether the objectives of administration can be achieved. These objectives are threefold:
(a) maintaining the company as a going concern;
(b) achieving a better outcome for creditors than immediate liquidation; and
(c) realizing property for distribution to secured or preferential creditors
44. Section 437 of the Insolvency Act provides: -
“(1) The Court may appoint a provisional liquidator either on or after, or at any time before, the making of a liquidation order in respect of a company.”
45. The Official Receiver also relied on Section 441 (1) of the Insolvency Act, which provides as follows: -
“If a liquidation order is made immediately on the appointment of an administrator ceasing to have effect, the Court may appoint as liquidator of the company the person whose appointment as administrator has ceased to have effect.”
46. The Official Receiver, in support of the application filed an affidavit and annexed thereto an interim report dated 9th October 2024 demonstrating that Sky Foods Limited (Under Administration) ceased operations, and by the time of administration in September 2024, the company had no tangible assets. The landlord had levied distress for rent arrears, stripping the company of its equipment and machinery. The only remaining asset was an intangible trademark, which was subsequently realized, and the secured creditor (KDC) paid.
47. In these circumstances, it is clear that the objectives under section 522(1)(a) and (b) are plainly unattainable. In re Media Edge Interactive Limited [2025] KEHC 4040 (KLR), the Court held that where administration fails to achieve its objectives, liquidation is the appropriate next step to protect creditors’ interests.
48. In the present case, the evidence is overwhelming that Sky Foods Limited is insolvent, has ceased operations, and has no prospect of revival. The continuation of administration would serve no useful purpose. Liquidation will allow the Official Receiver, as liquidator, to marshal whatever assets remain, including intangible rights, and to distribute them in accordance with the statutory hierarchy under sections 474–477 of the Insolvency Act.
49. In the premises, the Court finds that liquidation is the only viable option to safeguard the interests of creditors, ensure compliance with statutory objectives, and bring finality to the company’s affairs.
Final Orders
50. Accordingly, the Court orders as follows:
i. The Notice of Preliminary Objection dated 25 April 2025 by the Official Receiver is hereby dismissed.
ii. Mamlaka Holdings Limited is joined as an interested party/creditor in Insolvency Cause No. E193 of 2024. However, its prayer for recognition as a secured creditor is hereby declined. It shall participate in the insolvency proceedings and be treated as an unsecured creditor.
iii. The Official Receiver is appointed Provisional Liquidator of Sky Foods Limited pending determination of the liquidation petition. The moratorium continues to apply; no execution or other proceedings may be commenced or continued against the company or its property without leave.
iv. The Official Receiver is granted leave to serve this Application and Petition together with any consequent order upon creditors by substituted service through advertisement in the Kenya Gazette and a newspaper of nationwide circulation.
51. Costs shall be in the cause.
52. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT THIS
11TH DECEMBER 2025
ADO MOSES
JUDGE
In the presence of: -
C/A – Moses
.…………..for the Mamlaka Holdings Limited/Applicant
….……………. for the Official Receiver
1. Before this Court for determination are two applications. The first to be filed is the Notice of Motion dated 12th February 2025 filed by Mamlaka Holdings Limited, seeking two prayers, first, that there be joinder of the Applicant as an interested party, and second, that the Applicant (Intended Interested Party) be recognized as a secured creditor.
2. The application is supported by the affidavit sworn on the same date by its director, Ms. Njoki Muthuri. It is premised on the fact that the Intended Interested Party had a Factoring Agreement with the Company (Sky Foods Limited), but the Official Receiver has failed and/or neglected to acknowledge the Applicant as a Secured Creditor.
3. The Application is opposed by vide a Replying Affidavit dated 28th April 2025, sworn by Mark Gakuru, the Official Receiver and Administrator of the Company (Sky Foods Limited (In Administration) arguing that the Application is defective for want of compliance with Section 560(d) of the Insolvency Act. The Official Receiver also filed a Preliminary Objection dated 25th April 2025.
4. The Second Application is the one dated 28th October 2025 by the Official Receiver (OR), filed under among others, sections 427, 437 and 441 of the Insolvency Act seeking the appointment of the Official Receiver as a Provisional Liquidator in respect of Sky Foods Limited (in administration), pending liquidation petition.
5. The application is supported by the affidavit dated 28th October 2025, sworn by Sylvia Githungo, an Advocate and Officer under the Office of the Official Receiver. It is premised on the fact that the company insolvent with no tangible assets, and the only intangible, a trademark has been realized.
6. The facts leading to the instant dispute is that the Petitioner, Kenya Development Corporation (KDC), appointed the Official Receiver as Administrator of Sky Foods Limited on 26 September 2024 pursuant to debentures dated 31 October 2014 and 20 June 2016 duly registered at the Companies Registry. The appointment was made under Part VIII of the Insolvency Act, 2015.
7. The Administrator subsequently filed reports indicating that Sky Foods Limited had ceased operations, its tangible assets had been distrained by the landlord, and only an intangible trademark was realized for approximately KES 10.5 million. The secured creditor, KDC, was paid in priority, leaving a balance of KES 3.1 million for distribution.
8. Mamlaka Holdings Limited (the Intended Interested Party) now seeks joinder as an interested party, and that it be recognized as a secured creditor by virtue of a factoring agreement dated 1st September 2020.
9. The Official Receiver opposes, raising a preliminary objection under section 560 of the Insolvency Act and contending that Mamlaka holds no registered security. He instead seeks liquidation of the Company.
10. The two Applications were canvassed together. The Petitioner filed its Submissions dated 29th October 2025, whilst the Applicant (Mamlaka Holdings) filed theirs dated 17th July 2025.
Determination and Analysis
11. Having carefully considered the pleadings, the responses thereto, the submissions and the applicable law, I find that the following issues arise for determination: -
i. Whether the Preliminary Objection is merited.
ii. Whether Mamlaka Holdings Limited should be joined as an interested party.
iii. Whether Mamlaka qualifies as a secured creditor under Kenyan insolvency law.
iv. Whether, in light of the lapse of administration, liquidation should proceed.
Whether the Preliminary Objection is merited
12. The Official Receiver raised a preliminary objection on the application by Mamlaka Holdings Limited, arguing that it contravened the provisions of Section 560(1)(d) of the Insolvency Act, which requires leave of Court or consent of the Administrator before proceedings can be commenced against a company in administration.
13. Consequently, the Official Receiver urged this Court to find that the application is fatally defective for want of leave, and to strike out the same.
14. Mamlaka Holdings on its part submitted that its application for joinder as an interested party in the ongoing insolvency proceedings, and the prayer for its recognition as a secured creditor to the Company, does not, in law offend the provisions of Section 560(1)(d) of the Insolvency Act.
15. Section 560 of the Insolvency Act puts a moratorium on other legal proceedings against a company in respect of which an administration order and administration order is in place. Section 560(1) provides that:
“While a company is under administration—
a) A person may take steps to enforce a security over the company’s property only with the consent of the administrator or with the approval of the Court;
b) A person may take steps to repossess goods in the company’s possession under a credit purchase transaction only with the consent of the administrator or with the approval of the Court; if the Court gives approval—subject to such conditions as the Court may impose;
c) A landlord may exercise a right of forfeiture by peaceable re-entry in relation to premises let to the company only with the consent of the administrator or with the approval of the Court; and
d) A person may begin or continue legal proceedings (including execution and distress) against the company or the company’s property only with the consent of the administrator or with the approval of the Court."
16. From the above, it is evident that while a Company is under Administration, for one to take steps to enforce, begin or continue legal proceedings against the Company, one has to obtain Consent of the Administrator or act with approval of the court.
17. In the present case, it is clear from the pleadings that the Applicant has not instituted a fresh suit but only seeks joinder in existing insolvency proceedings. Moreover, the Application has been filed within the existing insolvency proceedings. Such joinder is not “beginning or continuing legal proceedings” within the meaning of section 560 of the Act.
18. Consequently, I find that the preliminary objection misconceived and incompetent as it rests on a factual mischaracterization of the application by Mamlaka Holdings Limited. It therefore fails.
Whether Mamlaka Holdings Limited should be joined as an interested party.
19. The Applicant (Mamlaka) argued that by a factoring agreement dated 1st September 2020 it had with the Sky Foods Limited (in administration) under which it acquired rights to collect assigned receivables from the company, it has a direct and substantial interest in the insolvency proceedings. It submits that the administration and subsequent liquidation will determine whether its claim is admitted and how it ranks in distribution.
20. The Official Receiver on its part argued that the Applicant (Mamlaka) has filed no valid proof of debt and that its alleged factoring arrangement does not confer a legally cognizable interest in the insolvency proceedings. It further argued that Mamlaka has not demonstrated registration of any security, and therefore its claim is at best unsecured.
21. It was submitted on behalf of the Official Receiver that that joinder is unnecessary and would complicate the administration.
22. The power of the Court to order for joinder of parties to add a party “whose presence before the court may be necessary in order to enable the court effectually and completely to adjudicate upon and settle all questions involved,” is Order 1 Rule 10(2) of the Civil Procedures Act, which provides that:
“The court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the court to be just, order that the name of any party improperly joined, whether as plaintiff or defendant, be struck out, and that the name of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the court may be necessary in order to enable the court effectually and completely to adjudicate upon and settle all questions involved in the suit, be added.”
23. The Supreme Court of Kenya in Trusted Society of Human Rights Alliance v Matemo & 5 others [2014] KESC 32 (KLR) the Court defined the term “Interested Party” as follows:
“An interested party is one who has a stake in the proceedings, though he or she was not party to the cause ab initio. He or she is one who will be affected by the decision of the Court when it is made, either way. Such a person feels that his or her interest will not be well articulated unless he himself or she herself appears in the proceedings, and champions his or her cause.”
24. Similarly, in the case of Meme v. Republic, 2004 1 EA 124, the Court observed that a party could be enjoined in a matter for the following reasons:
(i) Joinder of a person because his presence will result in the complete settlement of all the questions involved in the proceedings;
(ii) Joinder to provide protection for the rights of a party who would otherwise be adversely affected in law;
(iii) Joinder to prevent a likely course of proliferated litigation.”
25. From the above authorities, it is clear that under Order 1 Rule 10(2) of the Civil Procedure Rules, joinder is a discretionary matter, and therefore not automatic. In insolvency proceedings, creditors ordinarily participate by filing proofs of debt with the Administrator or Liquidator.
26. However, where a creditor demonstrates that its interests may be prejudiced by orders of the Court, such as the issues raised herein, then joinder is appropriate. Mamlaka Holdings has in the present case, filed a proof of debt and claims exposure under a factoring arrangement. The distribution of the residual funds will directly affect its recovery.
27. Applying Order 1 Rule 10(2) and the test in Meme v. Republic (supra), I find that Mamlaka has shown a direct and substantial interest. Its presence is therefore necessary to enable the Court to effectually and completely adjudicate upon the questions of creditor recognition and distribution.
28. Accordingly, Mamlaka Holdings Limited qualifies to be joined as an interested party in the present Insolvency Proceedings.
Whether Mamlaka qualifies as a secured creditor
29. Mamlaka Holdings Limited argued that its factoring agreement dated 1st September 2020 gave it rights over assigned receivables of Sky Foods Limited (in receivership). It submitted that factoring is a modern financing instrument, functionally equivalent to a security interest, because the factor acquires rights to collect receivables and is exposed to the debtor’s insolvency risk.
30. Mamlaka contends that its rights should be recognized as “secured” under section 522(1)(c) of the Insolvency Act, which contemplates distribution to “one or more secured or preferential creditors.”
31. It urges the Court to adopt a purposive interpretation of “security” to include receivables assignments, so that commercial realities are not ignored. It invokes section 533(1)(f), which empowers the Court to “make any other order that the Court considers appropriate,” arguing that the Court can safeguard its interests by recognizing its factoring rights as secured.
32. The Official Receiver on its part opposed Mamlaka’s argument and asserted that unlike KDC’s interest which was registered, Mamlaka’s factoring arrangement with the Company was never registered as a charge under the Companies Act or the Movable Property Security Rights Act. It exhibited in its affidavit in reply, certificates of registration of debentures in favour of KDC (MG -1A; MG-1b, and MG-1c), covering “all present and after-acquired property” of Sky Foods Limited.
33. The Official Receiver maintained that under Section 2 of the Insolvency Act, a “secured creditor” is one who holds a security over the company’s property. Without registration, Mamlaka holds no enforceable security. It relies on Re Spectrum Plus Ltd [2005] UKHL 41, where the House of Lords held that priority in insolvency depends on the nature and perfection of the security interest. According to the OR, Mamlaka’s rights are at best contractual, ranking as unsecured, and cannot displace KDC’s perfected floating charge.
34. Having carefully considered the parties’ arguments, I find the argument by the Official Receiver more plausible. Section 2 of the Insolvency Act is clear in its terms that a secured creditor must hold a security over the company’s property. The Section states that:
"secured creditor" means—
(a) a person holding a security on or against the property of the debtor or (any part of it) to secure a debt due or accruing due to the person from the debtor; or
(b) a person whose claim is based on, or secured by, a negotiable instrument held as collateral security and on which the debtor is only indirectly or secondarily liable;
35. Further, the term "security" is defined to mean “any mortgage, charge, lien or other security.
36. Under Part XXXI of the Companies Act, 2015 (sections 878–884), charges (securities) created by a company must be registered with the Registrar of Companies to be effective against third parties. Section 884 of the Act provides that:
“884. Registrar to keep register of charges
(1) The Registrar shall keep, with respect to each company, a register of all the charges that are required to be registered under this Part.
(2) If a charge is part of a series of debentures, the Registrar shall record in the register the required particulars specified in section 880(2).
(3) In the case of any other charge, the Registrar shall record in the register the following particulars:(a)if it is a charge created by a company, the date of its creation;(b)if it is a charge which was existing on property acquired by the company, the date of the acquisition;(c)the amount secured by the charge;(d)short particulars of the property charged;(e)the persons entitled to the charge.
(4) On registering a charge, the Registrar shall issue a certificate of the registration of the charge, stating the amount secured by the charge.
(5) The Registrar shall either sign a certificate of registration of a charge or authenticate it with the Registrar's official seal.
(6) A certificate of registration signed by the Registrar or authenticated with the Registrar's seal is conclusive evidence that the requirements of this Part as to registration have been satisfied.
(7) The Registrar shall keep open for public inspection during the ordinary business hours of the Companies Registry each register kept under this section.
(8) A person who wishes to inspect a register of charges may do so without payment, but is entitled to be provided with a copy of the register or an entry in it only on payment of the prescribed fee (if any).”
37. From the above provisions of the law, it is clear that the statutory scheme requires two elements: the existence of a security (mortgage, charge, debenture, lien, pledge, etc.), that security must attach to the company’s property, and that to bind third parties and rank in insolvency, the security must be perfected by registration under the Act.
38. In this case, Mamlaka Holdings has not exhibited any evidence of registration of the factoring arrangement it entered into with the Company – Sky Foods Limited (in receivership). No certificate of registration of the interest issued under Section 884(6) of the Act has been exhibited by the Applicant.
39. The Official Receiver on its part has exhibited certificates of registration of debentures in favour of Kenya Development Corporation dated 2014, 2015, and 2016. These are perfected securities covering “all present and after-acquired property” of Sky Foods Limited.
40. Accordingly, I find that Mamlaka Holdings Limited does not qualify as a secured creditor within the meaning of section 2 of the Insolvency Act, 2015. I agree with the Official Receiver’s submissions that the factoring arrangement, absent any evidence of registration or perfected assignment, confers only contractual rights. It therefore follows that Mamlaka’s claim ranks with unsecured creditors in the distribution of assets.
Whether, in light of the lapse of administration, liquidation should proceed
41. The question for determination is whether the official receiver has made a case for its appointment as provisional liquidator pending the hearing of the liquidation petition. Also sought in the application is the leave for service of the petition upon creditors and any other relevant parties.
42. The Official Receiver was appointed Administrator of the company on 26th September 2024, by KDC, o holder of a Qualifying Floating Charge, for a period of one year from the date of appointment. Its term has therefore ended, and it now seeks, by this application and the accompanying petition, to have the company liquidated.
43. The Court is enjoined under section 522 of the Insolvency Act to consider whether the objectives of administration can be achieved. These objectives are threefold:
(a) maintaining the company as a going concern;
(b) achieving a better outcome for creditors than immediate liquidation; and
(c) realizing property for distribution to secured or preferential creditors
44. Section 437 of the Insolvency Act provides: -
“(1) The Court may appoint a provisional liquidator either on or after, or at any time before, the making of a liquidation order in respect of a company.”
45. The Official Receiver also relied on Section 441 (1) of the Insolvency Act, which provides as follows: -
“If a liquidation order is made immediately on the appointment of an administrator ceasing to have effect, the Court may appoint as liquidator of the company the person whose appointment as administrator has ceased to have effect.”
46. The Official Receiver, in support of the application filed an affidavit and annexed thereto an interim report dated 9th October 2024 demonstrating that Sky Foods Limited (Under Administration) ceased operations, and by the time of administration in September 2024, the company had no tangible assets. The landlord had levied distress for rent arrears, stripping the company of its equipment and machinery. The only remaining asset was an intangible trademark, which was subsequently realized, and the secured creditor (KDC) paid.
47. In these circumstances, it is clear that the objectives under section 522(1)(a) and (b) are plainly unattainable. In re Media Edge Interactive Limited [2025] KEHC 4040 (KLR), the Court held that where administration fails to achieve its objectives, liquidation is the appropriate next step to protect creditors’ interests.
48. In the present case, the evidence is overwhelming that Sky Foods Limited is insolvent, has ceased operations, and has no prospect of revival. The continuation of administration would serve no useful purpose. Liquidation will allow the Official Receiver, as liquidator, to marshal whatever assets remain, including intangible rights, and to distribute them in accordance with the statutory hierarchy under sections 474–477 of the Insolvency Act.
49. In the premises, the Court finds that liquidation is the only viable option to safeguard the interests of creditors, ensure compliance with statutory objectives, and bring finality to the company’s affairs.
Final Orders
50. Accordingly, the Court orders as follows:
i. The Notice of Preliminary Objection dated 25 April 2025 by the Official Receiver is hereby dismissed.
ii. Mamlaka Holdings Limited is joined as an interested party/creditor in Insolvency Cause No. E193 of 2024. However, its prayer for recognition as a secured creditor is hereby declined. It shall participate in the insolvency proceedings and be treated as an unsecured creditor.
iii. The Official Receiver is appointed Provisional Liquidator of Sky Foods Limited pending determination of the liquidation petition. The moratorium continues to apply; no execution or other proceedings may be commenced or continued against the company or its property without leave.
iv. The Official Receiver is granted leave to serve this Application and Petition together with any consequent order upon creditors by substituted service through advertisement in the Kenya Gazette and a newspaper of nationwide circulation.
51. Costs shall be in the cause.
52. It is so ordered.
SIGNED, DATED, and DELIVERED IN VIRTUAL COURT THIS
11TH DECEMBER 2025
ADO MOSES
JUDGE
In the presence of: -
C/A – Moses
.…………..for the Mamlaka Holdings Limited/Applicant
….……………. for the Official Receiver