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MBUI: Suppliers recourse when payment delays

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Suppliers recourse when payment delays

In order to be enforceable, a retention of
In order to be enforceable, a retention of title clause must have been properly drafted in the contract between the company and the supplier. FILE PHOTO | NMG 

Retention of title clause aims at giving supplier priority over secured and unsecured creditors.

When a financially distressed company is placed under administration in Kenya, it automatically receives a 12-month breathing space from any adverse action being taken or continued by its creditors without court approval.

This gives the company the time it needs to put together a rescue plan or achieve a better outcome for its creditors than would be possible if it went out of business. In the event that this is not achievable, the 12-month moratorium may also be used to realise the property of the company in order to make a distribution to one or more secured or preferential creditors.

The moratorium further applies where a supplier wants to enforce a retention of title clause in a contract. Retention of title is standard practice internationally, and means that where a supplier has delivered goods, the ownership of those goods remains with the supplier until they receive full payment.

The aim of a retention of title clause is to give the supplier priority over secured and unsecured creditors of the company in the event that certain instances listed in the clause take place.

Instances usually included are insolvency or the commencement of insolvency proceedings against the company (which includes administration).

SUPPLIER MUST SEEK CONSENT FIRST

To invoke its retention of title clause and reclaim its goods, the supplier would usually approach the administrator appointed to handle the distressed company’s financial affairs. If the administrator declines consent, the supplier would turn to the courts for consent.

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No steps regarding a retention of title clause can be taken without the consent of the administrator or the permission of the court. This prohibition also applies during any interim moratorium in place before an administrator’s appointment takes effect.

The steps outlined above in relation to retention of title clauses when companies are placed under administration are applicable in Kenya, under the Insolvency Act, 2015.

This might come as a surprise in Kenyan business circles as administration is a relatively new option for companies in financial distress.

In order to be enforceable, a retention of title clause must have been properly drafted in the contract between the company and the supplier. The supplier should take care to ensure that

both the legal and beneficial title to the goods is retained; the supplier has a right to enter the company’s premises and repossess the goods; there is an easy way to identify the supplier’s goods.

For example, the company may be required to mark them in a certain way or store them separately from other goods; and there is clarity on the circumstances under which it can demand payment for the goods and, upon non-payment, repossess them.

A supplier will want to require that the company insure the goods to protect against the risk of these being damaged or destroyed while in the company’s possession, and to ensure the supplier’s interest is noted in the policy.

A company on the other hand will want to ensure that title to the goods passes on delivery or, if the goods are paid for before delivery, as soon as the payment is made.

MAKING CLAUSES MORE ROBUST

A simple retention of title clause can be made robust by including other clauses such as all monies clauses, proceeds of sale clauses, or a mixed goods clause.

The parties should always take into account the type of goods supplied. Retention of title will be of little value to a supplier where the goods are perishable or have a low scrap or resale value.

For the most part, it pays to be painstaking about retention of title clauses, whether from the perspective of the supplier of goods or the company buying them, and to be aware of how retention of title relates to administration. To be forewarned is to be forearmed.

The writer is partner, Bowmans.

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World Bank pushes G-20 to extend debt relief to 2021

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World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.

“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.

He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.

The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.

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People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.

For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.

Debt burdens, already unsustainable for many countries, are rising to crisis levels.

“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.

ALSO READ:Global Economy Plunges into Worst Recession – World Bank

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Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans

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The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.

“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”

According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.

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Tighter Reins on Platforms for Mobile Loans

The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.

Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.

Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.

SEE ALSO: Central Bank Unveils Measures to Tame Unregulated Digital Lenders

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Scope Markets Kenya customers to have instant access to global financial markets

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NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options. 

This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.

The Scope Markets app offers clients over 500 investment opportunities across global financial markets.

The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.

The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).

The platform also offers an enhanced client interface including catering for those who trade at night.

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The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour;  Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).

The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.

Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”

He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.

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