Question 1

What security can a lender take over movable assets in Kenya?

Accepted Answer

The Movable Property Security Rights Act 2017 created a modern regime, and the collateral registry is operated by the Business Registration Service for security over movable assets including inventory, equipment, receivables, bank accounts, intellectual property and even future assets, with registration in a central collateral registry. This matters because registration determines priority: an unregistered interest can be defeated by a later registered one, and by a buyer in the ordinary course of business. It is a common and costly oversight. See movable property security.

Question 2

What is the difference between a fixed charge and a floating charge?

Accepted Answer

A fixed charge attaches to a specific identified asset from the outset. A floating charge hovers over a class of assets that changes in the ordinary course of business, such as stock, until it crystallises on a defined event. The distinction matters on enforcement, because a floating charge holder generally ranks behind a fixed charge holder and behind certain preferential claims, and because the company can deal with floating charge assets until crystallisation. Which is appropriate depends on the assets and the lender's position.

Question 3

What happens if security is not registered or perfected?

Accepted Answer

The lender can lose the security or lose priority to another creditor. Depending on the type of security and the registration regime, an unperfected interest may be void against a liquidator, an administrator or a subsequent registered creditor, leaving the lender as an unsecured creditor in the borrower's insolvency. Perfection is a series of steps with statutory deadlines, and it is worth a completion file that records what was filed where and when. See company documents a lender will ask for.

Question 4

Can a lender appoint a receiver over a Kenyan company?

Accepted Answer

Where the security documents validly provide for it and the contractual conditions are met, yes. The appointment must follow the terms of the instrument and the applicable law, and the receiver's duties and the priority of claims on realisation are regulated. Appointment is a significant step that usually triggers disputes, so the notices, the default and the authority are all scrutinised. Borrowers facing an appointment have their own rights worth checking quickly. See winding-up and insolvency.

Question 5

Why does a bank ask for a CR12 and board resolutions?

Accepted Answer

A lender needs to confirm who is authorised to bind the borrower and that the borrowing and the security have been properly approved. A CR12 shows the current directors and shareholders, and resolutions show that the board, and where the constitution requires it the shareholders, approved the facility and the grant of security. Lenders also run searches to check for existing registrations and to confirm nothing has changed between approval and completion. See CR12 and CR13 certificates and changing company directors.

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