How to Recover a Commercial Debt in Kenya Legally, Without Losing More Than You Recover

The question we are asked is how to recover a debt. The question that actually determines the outcome is whether the debtor still has anything worth recovering by the time you act.

Kenyan law offers creditors a reasonable set of tools. What it does not offer is a way to recover from a debtor who has already dissipated their assets. Everything below is written with that constraint in mind.

What should you do before instructing anyone?

Three things, and they cost almost nothing.

Assemble the documents. The contract or purchase order, invoices, delivery notes, statements of account, and any correspondence in which the debtor acknowledged the debt. An acknowledgement of debt is worth more than the invoice, because it removes the argument about whether the sum is owed.

Check limitation. Under the Limitation of Actions Act, a contract claim must be brought within six years of the cause of action arising. A written acknowledgement or a part payment restarts that clock. Creditors who sit on old debts sometimes discover the claim has expired.

Establish what the debtor has. A judgment against a company with no assets is a piece of paper. Land, vehicles, bank accounts, receivables and shareholdings are all traceable, and knowing what exists shapes whether litigation is worth starting.

Does a demand letter actually achieve anything?

More often than clients expect. A properly drafted demand from an advocate does three things: it establishes the debt formally, it starts interest running where the contract provides for it, and it signals that the creditor will litigate. A significant proportion of commercial debts are paid at this stage, because the debtor was prioritising creditors who were pressing rather than disputing the sum.

The demand should state the amount, its basis, the period allowed for payment — commonly 14 or 21 days — and the consequence of non-payment. It should be sent by a method that proves delivery.

Which forum should you use?

Small Claims Court

For claims up to KES 1 million. Designed for speed, with a target of 60 days to determination. Parties may appear in person. For straightforward liquidated debts in this range, this is usually the correct forum, and the cost ratio is far better than the Magistrates' Court.

Magistrates' Court

Jurisdiction by value, up to KES 20 million depending on the rank of the magistrate. Appropriate for mid-value commercial claims.

High Court, Commercial and Tax Division

For claims above the magistrates' limit and for matters requiring urgent injunctive relief. Slower and more expensive, but it is where preservation orders and complex commercial disputes belong.

Summary judgment

Where the debt is liquidated and there is no genuine defence, summary judgment under Order 36 avoids a full trial. Many commercial debts qualify. Debtors resist by raising a defence, and the court asks whether it is genuine or merely a delaying tactic.

What is a statutory demand, and when should you use it?

Against a corporate debtor, a statutory demand under the Insolvency Act 2015 is often the most effective instrument available, and it is under-used.

Serve a demand for a debt exceeding KES 100,000. If the company fails to pay or reach agreement within 21 days, it is deemed unable to pay its debts, which grounds a winding-up petition.

The leverage is considerable. A company facing liquidation has its banking relationships, its licences and its directors' positions at stake over a debt it may have been treating as a low priority.

The caution is equally important: do not use a statutory demand where the debt is genuinely disputed. Courts treat it as an abuse of process, will restrain the petition, and may award costs against you. It is a collection tool for undisputed debts, not a substitute for proving your claim. Our dispute resolution team assesses which route fits before issuing, because the wrong choice here is expensive.

How do you stop assets disappearing?

Interim relief is frequently the whole case. Once assets are secured, most commercial disputes settle.

• Preservation orders restraining dealings with specific assets.
• Attachment before judgment, where there is evidence the debtor is about to dispose of property or leave the jurisdiction.
• Injunctions preventing dissipation more broadly.

These require prompt application and credible evidence of risk. A suspicion is not enough; a pattern of transfers, a listing of the property for sale, or a sudden change in trading behaviour is.

You have judgment. Now what?

Judgment is a right to enforce, not payment. The execution routes:

• Warrants of attachment and sale — the auctioneer attaches movable or immovable property and sells it.
• Garnishee proceedings — attaching money owed to the debtor by a third party, most commonly a bank account. Effective where the account is identified and funded.
• Charging orders over land or securities.
• Winding up or bankruptcy where the debtor is insolvent.
• Committal for judgment debtors who can pay and will not, though this is a limited and carefully controlled remedy.

Garnishee proceedings against a known bank account are usually the fastest route to actual money.

What does recovery cost, and when is it not worth it?

Advocates' fees in Kenya are governed substantially by the Advocates Remuneration Order, which scales with the sum claimed. Court filing fees also scale. Successful parties recover costs, but recovery is on the party-and-party scale, which is lower than what you actually paid.

The practical test: litigation over a debt below roughly KES 300,000 rarely justifies High Court proceedings, though the Small Claims Court changes that calculation materially. Against a debtor with no traceable assets, the answer is usually to write the debt off and fix the credit control that allowed it.

How do you avoid being here again?

Most bad debts trace to contract terms, not bad luck.

Write recovery into the contract. Payment terms, default interest, an acknowledgement that costs of recovery are payable, and a clear governing law and forum clause.

Take security where the exposure justifies it. A personal guarantee from a director, a charge over assets, or a retention of title clause on goods supplied. Retention of title is straightforward to include and routinely omitted.

Act on ageing. Debts are collectable in inverse proportion to their age. A receivables ledger that is reviewed monthly and escalated at 60 days recovers materially more than one reviewed annually. Our commercial law practice reviews standard terms for clients whose recovery problem is really a drafting problem.

What if the debtor disputes the debt?

A disputed debt is a different matter entirely, and treating it as a collection exercise is the mistake that turns a recoverable claim into an expensive one.

The first question is whether the dispute is genuine or manufactured. Debtors facing pressure routinely raise defects in the goods, allege oral variations, or claim a set-off that appears for the first time in the response to your demand. Courts are alert to this, but they will not dismiss a defence simply because it is late.

Where the dispute is genuine, three things follow. Statutory demands become unavailable — issuing one against a genuinely disputed debt is an abuse of process and will be restrained with costs against you. Summary judgment becomes harder, because the test is whether there is a triable issue rather than whether the defence is likely to succeed. And the economics change, because a defended suit costs several multiples of an undefended one.

Where the dispute is partial — the debtor accepts KES 3 million of a KES 5 million claim — consider proceeding for the admitted sum immediately and litigating the balance separately. Creditors frequently litigate the whole claim and wait years for money that was never actually in dispute.

Recovering from an insolvent debtor

If the debtor is genuinely unable to pay, the strategy changes from recovery to position.

Secured creditors rank first. If you hold a registered charge or debenture, you are paid from the charged assets before unsecured creditors see anything. This is the entire argument for taking security at the point of contracting rather than at the point of default.

Retention of title. Where you supplied goods and the contract reserved title until payment, those goods may not form part of the insolvent estate at all. The clause has to be in the contract before delivery, and the goods must be identifiable. It costs nothing to include and is regularly omitted from standard terms.

Preferential and unsecured claims. Employee entitlements and certain tax liabilities rank ahead of ordinary trade creditors. An unsecured trade creditor in a Kenyan liquidation should expect a modest dividend at best, and often nothing.

Antecedent transactions. Where the debtor transferred assets at undervalue or preferred one creditor over others in the period before insolvency, a liquidator can apply to unwind those transactions. Creditors who spot a pattern of asset transfers should raise it, because the liquidator may not have the information you do.

Cross-border debts

Where the debtor is outside Kenya, or the judgment was obtained abroad, enforcement depends on the jurisdiction. Judgments from countries listed under the Foreign Judgments (Reciprocal Enforcement) Act can be registered directly. Others require a fresh suit on the judgment as a debt. Arbitral awards enforce under the New York Convention, to which Kenya is a party, and are frequently easier to enforce than court judgments.

The short version

Move early, document the debt, establish what the debtor owns before you spend money on proceedings, use the Small Claims Court where the value fits, and reserve statutory demands for debts that are genuinely undisputed. The creditors who recover are not the ones with the best arguments. They are the ones who started while there was still something to recover.