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Bankruptcy laws good, but lock out cheats

By Editorial | October 25th 2020

In the next few months or years, Kenya is likely to witness increased insolvency activities due adverse effects of Covid-19.

This is not just a reflection of how the pandemic has devastated the Kenyan economy, it is also a badge of approval on the country’s insolvency laws.

The new insolvency laws, enacted in 2015, have been useful in helping improve the ease of doing business in the country.

Being declared bankrupt in Kenya is still viewed with stigma. But as Mark Gakuru, the Official Receiver said, insolvency is a special determinant of a country’s entrepreneurship.

Gakuru says bankruptcy and insolvency is one of the things which make people take risks and that with insolvency laws in place, people are not afraid of going to civil jail for taking risks. But there are a few rotten individuals who do not want to pay their debts and will take any chance to be declared bankrupt to avoid meeting their obligations.

And the fact that our property indexing is not impressive, makes matters worse. There are thousands of properties not captured in the public registry.

There have also been cases of businesses or individuals abusing the insolvency process. Directors of companies for whom it is clear they can’t pay their debts have engaged in delaying tactics, sometimes with the sole aim of stripping assets from the company.

Moreover, the country should try to expedite the insolvency process. This will help creditors recover as much of their debts, and keep the wheels of entrepreneurship rolling.

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