MENU

Section 398 of Insolvency Act CAP 53: Making and effect of declaration of solvency by directors of company

    

(1) If it is proposed to liquidate a company voluntarily, the directors (or, in the case of a company having more than two directors, the majority of them) may at a directors' meeting make a statutory declaration to the effect—
(a) that they have made a full inquiry into the company's affairs; and
(b) that, having done so, they have formed the opinion that the company will be able to pay its debts in full, together with interest at the official rate, within such period (not exceeding twelve months from the commencement of the liquidation) as may be specified in the declaration.
(2) Such a declaration by the directors has no effect for purposes of this Act unless—
(a) it is made within the five weeks immediately preceding the date of the passing of the resolution for liquidation, or on that date but before the passing of the resolution; and
(b) it includes a statement of the company's assets and liabilities as at the latest practicable date before the making of the declaration.
(3) Within fourteen days after the date on which the resolution for liquidation is passed, the company shall lodge a copy of the declaration with the Registrar for registration.
(4) A director who makes a declaration under this section without having reasonable grounds for the opinion that the company will be able to pay its debts in full, together with interest at the official rate, within the specified period commits an offence and on conviction is liable to a fine not exceeding two million shillings or to imprisonment for a term not exceeding five years, or to both.
(5) For the purpose of subsection (4), it is to be presumed, unless the contrary is established, that the director did not have reasonable grounds for his or her opinion if—
(a) the company is liquidated in accordance with a resolution passed within five weeks after the making of the declaration; and
(b) its debts (together with interest at the official rate) are not paid or provided for in full within the specified period.
(6) If a company fails to comply with subsection (3), the company, and each officer of the company who is in default, commit an offence and on conviction are each liable to a fine not exceeding two hundred thousand shillings.
(7) If, after a company or any of its officers is convicted of an offence under subsection (6), the company continues to fail to lodge the required declaration, the company, and each officer of the company who is in default, commit a further offence on each day on which the failure continues and on conviction are each liable to a fine not exceeding twenty thousand shillings for each such offence.

« Previous:   Section 397 - Share transfers and attempts to alter member's status after liquidation resolution to be void          Next: »   Section 399 - Appointment of liquidator in members' voluntary liquidation

Disclaimer: This document is not to be taken as legal advise.

Enhance Your Research with Bookmarks and Annotations

Here's how you can use these features:

  • To bookmark this page, click the "Bookmark this Page" button below the document title.
  • To add an annotation, highlight text in the document and select "Add Annotation" from the toolbar that appears.
  • These features are great for organizing your research and keeping track of key information.
  • You can view and manage your bookmarks and annotations on your Bookmarks and Annotations page.

Cited By:

More Sections