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How Can You Challenge Unlawful Enforcement of a Receivership Order?
Corporate & Commercial Law
How Can You Challenge Unlawful Enforcement of a Receivership Order?
Understanding receivership, enforcement of security, the rights of companies and lenders, and the appropriate legal process for challenging unlawful enforcement.
01 Understanding the Issue
Receivership can have significant consequences for a company, particularly where a lender seeks to enforce security following a borrower’s default.
In a recent decision, Zingo Investments Limited v National Bank of Kenya Limited & another [2026] KEHC 13356 (KLR) , the High Court considered the extent to which a company may resist the exercise of a receiver and manager’s powers after defaulting on its secured obligations.
Recent High Court Decision
Zingo Investments Limited v National Bank of Kenya Limited & another
The Court considered the circumstances surrounding the exercise of a receiver and manager’s powers and the effect of an earlier injunction restraining the receiver after that injunction came to an end.
02 What Is Receivership?
Security Enforcement
Receivership is a form of security enforcement through which a receiver and manager is appointed to take control of specified assets or, where applicable, the business of a company.
03 Can a Company Stop a Receiver From Taking Control?
A company may challenge the appointment of a receiver where it considers the enforcement unlawful or irregular. It may also seek interim orders to prevent enforcement while the dispute is being determined.
Important Legal Point
Obtaining temporary protection does not necessarily permanently prevent enforcement. The effect and duration of any injunction or interim order will depend on the terms of the order and the circumstances of the case.
04 What Happens When a Company Obstructs a Receiver?
Where a receiver has been lawfully appointed and is exercising the powers arising from that appointment, obstruction may expose the company and those acting on its behalf to further court proceedings and enforcement measures.
An order requiring the company to give the receiver unrestricted access to its premises and assets.
An order requiring the handover of management and control of the secured business.
An order requiring the handover of books, records, documents and keys.
Orders restraining directors, employees and agents from obstructing or interfering with the receiver’s functions.
Police assistance to facilitate compliance with court orders where necessary.
Challenge Through the Proper Process
A company may still challenge the receiver’s appointment or conduct through the appropriate legal process. However, it should not obstruct the receiver or disregard existing court orders while pursuing such a challenge.
05 What Should Companies and Lenders Know?
For Companies Facing Receivership
- Review the security and lending documents.
- Establish whether a default has occurred.
- Confirm whether the lender has complied with applicable enforcement requirements.
- Seek legal advice promptly where enforcement is threatened.
- Challenge unlawful enforcement through the appropriate legal process rather than obstructing a receiver.
For Lenders
- Ensure that the security documents permit the proposed enforcement.
- Comply with applicable notice and procedural requirements.
- Properly document the borrower’s default.
- Ensure that the receiver is properly appointed.
- Seek appropriate court orders where resistance to enforcement arises.
06 Role of Legal Practitioners
Legal practitioners can assist both companies and lenders in understanding their rights, obligations and available legal remedies throughout the receivership and enforcement process.
Reviewing security documents and lending arrangements.
Advising on default and available enforcement options.
Advising on the appointment, powers and duties of receivers.
Negotiating restructuring or settlement arrangements.
Preparing applications for injunctions or stays where appropriate.
Representing clients in enforcement proceedings.
Conclusion
Receivership provides lenders with an effective mechanism for enforcing security where a borrower defaults. However, enforcement must be undertaken in accordance with the applicable contractual and legal requirements.
Companies facing receivership should address any disputes through the appropriate legal channels and avoid obstructing a lawfully appointed receiver or disregarding existing court orders.
At Wambui Gichui & Co. Advocates, we advise both lenders and companies on security enforcement, receivership, restructuring and related court proceedings, helping clients navigate the legal and practical issues that arise when a company is in default.
Facing Receivership or Security Enforcement?
Whether you are a company facing enforcement or a lender seeking to enforce security, timely legal advice can help you understand your rights, obligations and available legal remedies.
Speak to Our Legal Team
