Posts in category: Articles

The High Court recently heralded a ground-breaking decision that is set to transform the hospitality landscape in Kenya. In a case that captured the masses’ attention, Dong Yi v Sun Africa Hotels Limited t/a Keekorok Lodge Masai Mara; First Assurance Company Limited (Civil Suit 12 of 2019), a foreign couple’s idyllic getaway took a tragic turn, sparking a legal shift that would rewrite the playbook for hotel accountability.

The saga unfolded within the lavish confines of a prestigious hotel, where a chance encounter escalated into a harrowing ordeal. What began as a mere altercation between guests swiftly turned into a chilling act of violence. One of the guests used a steak knife that would routinely be placed in the dining area to stab the complainant and his spouse, leaving the complainant’s spouse fatally wounded and eventually meeting her demise. The complainant himself was left grappling with profound loss and seeking redress from the hotel’s doorstep.

But the hotel, armed with legal defences and industry standards, sought to deflect blame, citing the unpredictable nature of the incident and the robust security measures in place. Yet, the court saw through the mask of complacency, holding the hotel culpable for its failure to swiftly quell the escalating conflict and safeguard its guests.

This watershed ruling sends shockwaves throughout the hospitality landscape, compelling hotels to re-evaluate their duty of care and elevate their security protocols to unprecedented heights. No longer can hotels afford to overlook brewing tensions or rely on outdated security measures. The mandate is clear: guest safety must reign supreme, and hotels must spare no effort in fortifying their defences.

With damages awarded to the complainant reaching a staggering 3 million USD, the financial fallout serves as a stark reminder of the high stakes at play. The era of negligence is over; the time for vigilance and accountability is now. As the hospitality sector braces for this new normal, one thing is abundantly clear: business as usual is simply no longer tenable.

As we navigate this uncharted territory, hotels must heed the lessons to be learnt from this High Court case. By prioritizing proactive security measures and fostering a culture of vigilance, hotels can not only shield their guests from harm but also safeguard their own reputation and viability.

This verdict will serve as a clarion call for the hospitality industry to rise to the occasion—to embrace a new era of responsibility and adherence to duty of care.

At JMK Partners Advocates, we pride ourselves on our prowess in litigation, navigating the complex legal landscape with expertise and tenacity. As seasoned legal practitioners, we are keenly attuned to the ripple effects of court decisions, such as the recent verdict that seeks to reshape hotel liability standards. With a keen eye for detail and a deep understanding of the law, we recognize the profound impact this ruling holds for our clients. As such, we remain vigilant in our commitment to safeguarding their interests and advocating for their rights in the face of evolving legal precedents. With JMK Partners Advocates by your side, rest assured that your legal matters are in capable hands, guided by, innovation, integrity, and unwavering dedication to achieving optimal outcomes.

This article is for informational purposes only and should not be taken to be or construed as a legal opinion. For more insights, please do not hesitate to contact info@jmkadvocates.co.ke

Introduction

In Kenya, as in many parts of the world, borrowing money is often a necessary step for individuals and businesses alike to achieve their goals. Whether it’s funding a business venture, buying a home, or covering unexpected expenses, taking on debt can provide the financial flexibility needed to make things happen. However, borrowing also comes with risks, and lenders often require security to protect their interests. So, what exactly is security for debts, and how can it be realized in Kenya? Let’s dive in.

Understanding Debt and Security

Debt is simply money borrowed with the promise of repayment, usually with interest, over a specified period. Lenders, whether banks, financial institutions, or individuals, seek assurance that they will be repaid. This is where security comes into play. Security for debts is essentially collateral provided by the borrower to the lender as a form of guarantee. If the borrower fails to repay the debt as agreed, the lender has the right to seize the collateral to recover their losses.

Legal Framework

Securing debt involves more than just an agreement between the borrower and the lender. It’s a legal journey governed by specific laws and regulations designed to protect the interests of all parties involved. Understanding these legal provisions is crucial for both borrowers and lenders to navigate the debt landscape effectively. Securing debt is primarily governed by the following key legislations:

• The Land Act (2012):  The Act outlines the various forms of land tenure, including leasehold and freehold titles, which can be used as security for loans. It also provides provisions for the creation, transfer, and enforcement of security interests in land.
• The Land Registration Act (2012): This legislation provides for the registration of security interests in land, including mortgages and charges. It outlines the procedures for registering and enforcing security over immovable property.
• The Companies Act (CAP 486): For loans secured by company assets, the Companies Act regulates the creation, registration, and enforcement of security interests over company property.
• The Movable Property Security Rights Act (CAP 499A): This law governs the registration of security interests over movable assets (both tangible and intangible), such as motor vehicles, crops, machinery, livestock, receivables, choses in action, deposit accounts, electronic securities and intellectual property rights
• The Insolvency Act (CAP 53): In the event of borrower default, the Insolvency Act outlines the procedures for creditors to recover debts through insolvency proceedings, including liquidation and administration.

A Spectrum of Assets

Within Kenya’s diverse economic landscape, an array of assets can be used as security for debts, including:

• Real Estate: Properties such as land, buildings, or homes can be pledged as security for loans. This type of security is common in mortgage financing, where the property being purchased serves as collateral.

• Vehicles: Cars, trucks, and other vehicles can also be used as security for loans, particularly in auto financing or vehicle loans. The lender may hold the vehicle’s logbook (ownership document) until the loan is repaid.

• Financial Assets: Savings accounts, fixed deposits, stocks, and bonds can be pledged as security for loans. These assets provide a source of funds for repayment if the borrower defaults.

• Business Assets: Equipment, inventory, and accounts receivable can be used as security for business loans. This type of security is common in asset-based lending, where the value of the business’s assets determines the loan amount.

Realizing Security

Securing debt in Kenya involves a series of practical steps, often starting with the negotiation of loan terms and culminating in the enforcement of security in the event of default. Here’s a simplified overview of the process:

• Negotiation and Documentation:  The borrower and the lender negotiate the terms of the loan, including the type and nature of security to be provided. This is documented in a loan agreement which sets out the rights and obligations of both parties.

• Registration: Depending on the type of collateral, security interests may need to be registered with the relevant government authorities. For example, charges over land are registered with the Ministry of Lands, while charges over company assets are registered with the Registrar of Companies.

• Possession: This arises in specific transactions, such as when a debt is secured by an informal charge over land. In such cases, the lender may assume physical possession of the title deed of the land.

• Enforcement: In the event of borrower default, the lender has the right to enforce the security to recover the debt. This may involve selling the collateral through a legal process or taking other appropriate action to recover the outstanding amount.

Conclusion: Balancing Risk and Reward

Whereas debt can be a powerful tool for achieving financial goals, it also carries risks. Security for debts provides lenders with a measure of protection against these risks, allowing them to extend credit more confidently. For borrowers, understanding the types of security available and the process for realizing security can help navigate the borrowing landscape more effectively. By striking the right balance between risk and reward, borrowers and lenders alike can make informed decisions that support their financial objectives.

At JMK Partners Advocates, we recognize the importance of sound legal advice in matters of securing the repayment of debt. Our firm features a team of competent and experienced lawyers well-versed in relevant laws and regulations governing debt transactions. Whether you’re a borrower seeking financing or a lender extending credit, our team is here to provide expert guidance and support every step of the way.

This article is for informational purposes only and should not be taken to be or construed as a legal opinion. For more insights, please do not hesitate to contact info@jmkadvocates.co.ke

Take a step into the realm where synergy meets opportunity, where the pulse of innovation beats with the rhythm of possibility. Welcome to Kenya’s dynamic business landscape, where mergers aren’t just transactions; they’re transformative journeys unlocking boundless potential for growth and economic vitality.

Kenya is set apart not just by the promise of mergers; it also possesses a robust legal and institutional framework meticulously crafted to ensure these business alliances flourish. Here, amidst the vibrant land of opportunity, our legal infrastructure stands as a beacon of assurance, guiding businesses through every step of their transformative journey with clarity, confidence, and unparalleled expertise.

At JMK Partners Advocates LLP, we acknowledge the power of mergers to redefine industries, reshape economies, and unlock boundless opportunities for our clients. With our deep understanding of Kenya’s legal landscape and unwavering commitment to excellence, we stand ready to be your trusted partner in navigating the complexities of mergers, ensuring your success story is written with precision, passion, and unparalleled proficiency.

The Competition Authority of Kenya is a watchdog of fair competition in the business landscape. The Authority plays a vital role in ensuring that mergers are conducted in accordance with the law with a view to safeguarding integrity of the marketplace. The Competition Authority of Kenya authorizes proposed mergers and acquisitions depending on whether they are notifiable to the Authority or not. Below is a breakdown of merger transactions notifiable to the authority:

1. Where the undertakings have a minimum combined turnover or assets (whichever is higher) of one billion shillings and the turnover or assets (whichever is higher) of the target undertaking is above five hundred million shillings
2. If the acquiring company’s turnover or assets exceed 10 billion shillings and if the merging parties operate in the same market or can vertically integrate, the merger may be subject to notification to the COMESA Competition Commission unless it meets the COMESA Competition Commission Merger Notification Thresholds
3. In the carbon based mineral sector, if the value of the reserves, the rights and the associated assets to be held as a result of the merger exceeds ten billion shillings;
4. Where the undertakings operate in the COMESA the combined turnover or assets (whichever is higher) of the merging parties does not exceed five hundred million shillings and two-thirds or more of their turnover or assets (whichever is higher) is generated or located in Kenya.

The regulatory approval doesn’t stop there. Sector-specific regulators also have a say in the matter, ensuring compliance with industry-specific laws and regulations:

• The Cabinet Secretary of Finance oversees mergers involving banking institutions, with a keen eye on transactions exceeding 5% share capital transfer.
• The Capital Markets Authority weighs in on mergers and takeovers involving listed companies, ensuring alignment with capital market regulations.
• The Insurance Regulatory Authority provides oversight for insurers looking to amalgamate or transfer insurance business.

And in the event of disputes or challenges to regulatory decisions, the Competitions Tribunal stands as the impartial arbiter, offering a platform for recourse and ensuring fairness in the regulatory process.

At JMK Partners Advocates LLP, we understand that mergers are strategic moves that shape the future of businesses. With our guidance, your merger journey will be navigated with precision and confidence, ensuring compliance with regulatory requirements while unlocking new avenues for growth.

This article is for informational purposes only and should not be taken to be or construed as a legal opinion. For more insights, please do not hesitate to contact info@jmkadvocates.co.ke

In a market where the parties involved have an unequal bargaining power, it is inevitable that the weaker party may be disadvantaged. Therefore, the enactment of the Central Bank of Kenya (Amendment) Act, 2021 and the Central Bank of Kenya (Digital Credit Providers) Regulations, 2022 (the “Regulations) was essential to regulate the digital credit providers in order to enhance consumer protection as well as generally control the operations within the industry.

The Central Bank of Kenya (Amendment) Act, 2021 mandates the Central Bank of Kenya to regulate and licence digital credit providers. Therefore, any person who intends to carry out the business of providing credit facilities or loan services through a digital channel will be required to be licenced by the Central Bank of Kenya.

To enhance consumer protection in the digital lending industry, the Regulations have outlined various provisions to be implemented by digital credit providers, these entail:

Consumer information rights

Prior to the granting of a loan, the digital credit providers have an obligation to ensure that the terms and conditions of issuance of the loan are communicated to the consumer in a clear and transparent manner. Notably, such terms and conditions cannot be varied without a prior thirty (30) days notification to the consumer.

Consumers are also entitled to information relating to the fundamental benefits, risks and terms of the products or services offered by a digital credit provider.

Additionally, the consumers will be entitled to a comprehensive statement of transaction.

Provision of a limit on the amount of money that can be recovered from a consumer

The charging of excessive lending interest rates by the digital credit providers was one of the main woe that the consumers were exposed to prior to the enactment of the Regulations. To ease out the woe, the Regulations limit recoveries to (i) the principal owing when the loan becomes non­performing; (ii) interest not exceeding the principal owing when the loan becomes non­performing; and (iii) reasonable expenses incurred in recovering amounts owing.

Consumer complaints resolution

A digital credit provider is under an obligation to establish a system for customers to report complaints and to ensure that the complaints are handled either immediately or within a period of 30 days of the customer reporting the complaint. In addition, all records of customer complaints and the outcome of resolutions are required to be kept by the digital credit provider.

Exchange of information with the credit reference bureau

A digital credit provider shall not submit, to a credit reference bureau, negative information relating to a consumer where the amount in question does not exceed Kenya Shillings One Thousand. In addition, a digital credit provider shall give a consumer a notification of at least seven to thirty days prior to submitting the consumer’s negative information to a credit reference bureau. Besides, within thirty days of a digital credit provider submitting negative information to a credit reference bureau, the digital credit provider shall notify the consumer.

Collection of non-performing loans

The Regulations prohibit the use of threat, violence, obscene or profane language, harassment, abuse or oppression or any other improper or unconscionable debt collection tactics.

Data Protection

Digital credit providers are required to promote the protection of the personal data collected from their consumers. Such data shall be used for lawful manner. Consumers are also now entitled to opt out of marketing messages from digital credit providers.

Besides the provisions for licensing of digital credit providers as well as those for consumer protection, digital credit providers have also been placed under an obligation to promote anti-money laundering and combat financing of terrorism. The digital credit providers are also required to annually submit a return to the Central Bank of Kenya certifying compliance with the Regulations.

The digital credit providers contribute to the promotion of the economy by offering readily accessible funds to consumers, however, amidst the woes projected by the consumers, the enactment of the Regulations was crucial. At JMK Partners Advocates LLP, we are well versed with the provisions of the Regulations and are upto task in assisting the digital credit providers to comply with the Regulations.

This article is for informational purposes only and should not be taken to be or construed as a legal opinion. For more insights, please do not hesitate to contact info@jmkadvocates.co.ke