Update: Legal Alert | Kenya | Proposed Amendment to the Law of Contract Act and its Impact on Debt Recovery

Further to the Legal Alert of 20 February 2019 concerning the proposed amendment to the Law of Contract Act, Cap 23 of the laws of Kenya requiring lenders to exhaust all possible avenues of realising the assets of the principal borrower before pursuing to realise assets of guarantors. This amendment was introduced in Parliament by Hon. Francis Munyua Waititu, the Member of Parliament for Juja constituency on 24 January 2019.  To read the previous alert, click here.

We have now learnt that the Justice and Legal Affairs committee has proposed a minor amendment restricting the application of the Bill to only apply to such arrangements that are entered into after the Bill becomes law. We are yet to have sight of the proposed wording of this change, but understand that the Bill is scheduled for its second reading in Parliament any day between Tuesday, 7 May 2019 and Thursday, 9 May 2019.

As expressed in our earlier Alert, this Bill, if passed, is bound to have a significant impact on the lending sector. Borrowers who may otherwise have been able to borrow utilising security provided by relatives and related third parties will be unlikely to access loans, thereby further restricting the availability of credit in the loans market. In addition, the drafting of the Bill is not precise and will lead to ambiguity and uncertainty in an environment that is already fragile.

We shall keep you updated on developments. In the meantime, if you require any assistance or clarifications please do not hesitate to contact Sonal Sejpal .

Sonal Sejpal
ALN Kenya | Anjarwalla & Khanna



The content of this alert is intended to be of general use only and should not be relied upon without seeking specific legal advice on any matter.