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Section 498 of Insolvency Act CAP 53: Offence involving commission of fraudulent acts in anticipation of liquidation

    

(1) This section applies in relation to a company—
(a) in respect of which the Court has made a liquidation order; or
(b) that has passed a resolution for the voluntary liquidation of the company.
(2) An officer or former officer of the company commits an offence if, within the twelve months immediately preceding the commencement of the liquidation of the company, the officer or former officer—
(a) concealed any part of the company's property to the value of fifty thousand shillings or more; or concealed any debt due to or from the company;
(b) fraudulently removed any part of the company's property to the value of fifty thousand shillings or more;
(c) concealed, destroyed, mutilated or falsified any document affecting or relating to the company's affairs or property;
(d) made any false entry in any document affecting or relating to the company's affairs or property;
(e) fraudulently parted with, altered or made any omission in any document affecting or relating to the company's affairs or property; or
(f) pawned, created a security right or disposed of any property of the company that has been obtained on credit and has not been paid for.
(3) Subsection (3)(f) does not apply if the pawning, creation of a security right or disposal was done in the ordinary course of the company's business.
(4) An officer or former officer of the company also commits offence—
(a) if, within the twelve months period referred to in subsection (2), the officer or former officer has been privy to the doing by others of any of the acts referred to in paragraphs (c), (d) and (e) of that subsection; or
(b) if, at any time after the commencement of the liquidation, the officer or former officer—
(i) does any of the acts referred to in paragraphs (a) to (f) of that subsection; or
(ii) is privy to the doing by others of any of the acts referred to in paragraphs (c) to (e) of that subsection.
(5) In a prosecution for an offence under—
(a) paragraph (a) or (f) of subsection (2); or
(b) subsection (4) in respect of an act referred to in either of those paragraphs, it is a defence to prove that the officer or former officer had no intention to defraud.
(6) In a prosecution for an offence under—
(a) paragraph (c) or (d) of subsection (2); or
(b) subsection (4) in respect of an act referred to in either of those paragraphs, it is a defence to prove that the officer or former officer had no intention to conceal the state of affairs of the company or to defeat the law.
(7) If property is pawned, encumbered by a security right or disposed of in circumstances that constitute an offence under subsection(2)(f), a person who takes in pawn or security right, or otherwise receives, the property knowing it to have been pawned, encumbered by a security right or disposed of in such circumstances, commits an offence.
(8) A person found guilty of an offence under this section is liable on conviction to a fine not exceeding two million shillings or to imprisonment for a term not exceeding five years, or to both.
(9) The insolvency regulations may increase or reduce the amounts specified in subsection (2)(a) and (b).

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

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