Commercial Law

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LEGAL ALERT: Digital lenders on the cusp of coming under CBK’s radar with the proposed amendments to the CBK Act.
LEGAL ALERT: Digital lenders on the cusp of coming under CBK’s radar with the proposed amendments to the CBK Act. 150 150 Admin_salclaw

The Central Bank of Kenya (Amendment) Bill 2020 is currently before the National Assembly’s finance committee, with the public participation stage having ended on 11th August 2020. After that, the finance committee will report to the house sitting in plenary on their consideration of the Bill before members of Parliament brace themselves for debating and voting on the same. The Bill aims to arrest the excessive digital lending rates that have entrapped many borrowers and to tame predatory lending. Further, the Bill aims to bring some sanity to the digital lending marketplace as there have been several complaints by members of the public over the unorthodox and humiliating tactics lenders use to pursue debt payment. For example, some lenders contact close family members of the debtors incessantly for them to appeal to the debtors to settle their debt.

A survey conducted by the Star newspaper in 2019 regarding interests charged by some digital lenders in Kenya revealed that a majority of them were charging interest rates as high as 15 percent per month, which translates to an Annual Pricing Rate of 180 percent. This figure is 15 times more than what commercial Banks charge for unsecured loans, with the present average rate being 11.95 percent, according to CBK.

If the Bill is passed, digital lenders will require CBK’s approval to vary their interest rates and to introduce new loan products. While digital lenders do not oppose the idea of regulation, some of them are however, against strict supervision by the CBK as they are not deposit-taking institutions like banks.  Instead, digital lenders consider regulation under the Microfinance Act as a more rational and suitable approach as this law caters for non-deposit taking microfinance institutions.  They also hold that regulation under the Microfinance Act will ensure that digital lenders maintain flexibility in the innovation of loan products as CBK approval will not be required.

 

Written by Edward O. Sudi

edwardsudi@salclaw.co.ke

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Child maintenance proceedings should not be employed to serve ulterior motives against fathers, court rules.
Child maintenance proceedings should not be employed to serve ulterior motives against fathers, court rules. 150 150 Admin_salclaw

The High Court in (JR. 5 of 2020) has ruled that in Child maintenance disputes, courts are supposed to take into account the financial means of both parents to avoid overburdening and arbitrarily purging either of them. This decision was made after a man who had been jailed for a month on account of failing to honour a court order that required him to pay Ksh. 900,000 towards child upkeep, sued to the High Court at Mombasa on the constitutionality and fairness of the process adopted by the magistrates’ Court in issuing the order. In his judgment, Justice Ogola held that the magistrate, who was the first respondent, acted outside the laid down legal procedure by failing to take heed of section 101 of the Children’s Act. Notably, the said section 101 under subsection 4, mandates courts to conduct inquiries pertaining to the financial ability of persons liable for child maintenance to pay the sums of money they owe.

It was revealed that the man had made an application in the trial court to have an inquiry on the parties’ financial position conducted, which was granted. However, before a report on the parties’ financial position could be presented, the trial magistrate went ahead and declared that the man had intentionally ignored and disobeyed a previous court order before committing him to jail. It is this bizarre turn of events that the judge took utmost issue with, adjudging the magistrate’s decision to proceed in the absence of the financial report to have been irregular, unreasonable, and unfair.

Consequently, the judge expunged the orders of contempt and committal and subsequently directed the Magistrates’ Court to conduct a proper investigation into the man’s financial capability in order to reach a fair arrangement regarding the contributions of both parents towards the minor’s care and upkeep without overwhelming either of them.

Written by Edward O. Sudi

edwardsudi@salclaw.co.ke

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LEGAL ALERT: IMPACT OF CORONA VIRUS ON BUSINESS CONTRACTS-FORCE MAJEURE
LEGAL ALERT: IMPACT OF CORONA VIRUS ON BUSINESS CONTRACTS-FORCE MAJEURE 150 150 Admin_salclaw

Overview
The outbreak of Coronavirus is impacting global markets, trade and commerce. Quarantine and travel measures have begun to impact local businesses and the supply chains supporting them. Many businesses may thus seek to rely on force majeure clauses or other contractual rights for relief from the performance of certain obligations due to the impact of the Coronavirus outbreak.
What is force Majeure
Force majeure refers to a clause that is included in contracts to remove liability for natural and unavoidable catastrophes like war, natural disasters, terrorist attacks Etc that interrupt the expected course of events and restricts parties from fulfilling their obligations under the said contracts.
What does your force majeure clause actually say?
There is no single “standard” force majeure clause. Just because your business may include force majeure clauses in its contracts does not mean they are necessarily all uniform. Since the virus is a relatively new phenomenon, it is unlikely that any force majeure clauses would explicitly refer to the event of a Coronavirus outbreak. Thus the party relying on the clause will still likely need to prove that the force majeure event was not “reasonably contemplated” by the parties when making the contract, and that the event is “beyond the reasonable control” of the party seeking relief.
How can you seek / prevent relief for force majeure?
The onus is on the party seeking to rely on the force majeure clause to prove that the force majeure event has prevented, hindered, delayed or affected the performance of the contract. Generally, if a force majeure event occurs, performance of certain obligations within the contract will be suspended for a specified period of time (for example, until the Coronavirus outbreak is contained or its consequences on the contract parties come to an end). In some cases, a suspension of obligations may not be viable and parties may seek to terminate the contract entirely.
Is notice required?
Force majeure clauses vary in their notice requirements. Some require notice within a certain timeframe of the occurrence of an event of force majeure, whereas others only require prompt or “reasonably” prompt notice. In the context of the coronavirus pandemic, is notice required upon WHO’s declaration the coronavirus outbreak a pandemic? Was it when a travel ban was entered? Was it when a local lock down measures were enacted?
What if there is no force majeure clause?
If there is no force majeure clause one can rely on the doctrine of frustration which means that events beyond their control may occur which frustrate the purpose of their agreement, or render it very difficult or impossible, or as even illegal, to perform obligations under a contract.
Understanding Your Contract
Be sure to fully understand what the contract requires for one declare a force majeure event. Many force majeure provisions include procedural requirements the claiming party must abide by in order to effectively enforce the provision, including notice requirements.

By Eugene Sudi
SUDI & ASSOCIATES
sudi@salclaw.co.ke

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LEGAL ALERT:Employees wooed by Kshs. 9,000 monthly tax relief under the Affordable Housing Programme
LEGAL ALERT:Employees wooed by Kshs. 9,000 monthly tax relief under the Affordable Housing Programme 150 150 Admin_salclaw

The Affordable Housing Programme (AHP) has been in the list of president Uhuru’s Big 4 Agenda. The said programme seeks to provide affordable housing for Kenyans in the low and middle income segment.The programme launched in January, 2019 seeks to roll out 500,000 units by 2022 to try and plug the housing gap in the country.
To spur uptake and interest in the programme, the Government of Kenya through an amendment to Finance Act 2019 and the schedules therein has provided a tax relief to employees that will allow them a tax relief of 15% of gross contributions capped to KSh. 108,000 per year or KSh. 9,000 per month of their income. Employers will be allowed to reduce their employees’ Pay As You Earn (PAYE) payable by 15% of the gross contributions to the Affordable Housing Scheme and this relief will be termed as Affordable Housing Relief. For instance, a person earning Kshs. 90,000 a month is currently liable to pay KRA Kshs. 20,740 but under the housing incentive plan, their income tax would reduce to Ksh11, 740.

The Kenya Revenue Authority (KRA) will be required to issue details on tax relief to employers. Technically, saving into the housing fund has become voluntary as only workers who will have registered for the programme will enjoy the relief.

Initial plans to force employers to deduct the equivalent of 1.5 per cent of workers’ pay to the housing fund mandatorily were dashed by the courts which ruled that the proposal was illegal.

By Eugene Sudi

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