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Section 657 of Insolvency Act CAP 53: Circumstances in which company may dispose of property and goods that are subject to a security or held under credit purchase transaction

    

(1) This section applies to—
(a) property of the company that is subject to a security; and
(b) goods that are in the possession of the company under a credit purchase transaction.
(2) A company may transfer property to that is subject to a security as if it were not subject to the security, but only if—
(a) the holder of the security consents; or (b) the Court gives its approval.
(3) A company may dispose of goods in the possession of the company under a credit purchase transaction as if all rights of the owner under the credit purchase transaction were vested in the company, but only if—
(a) the owner of the goods consents; or (b) the Court gives its approval.
(4) Subsection (5) applies to property of a company that is subject to a security that, as created, was a floating charge.
(5) If property of a company to which this subsection applies is transferred under subsection (2), the holder of the security has the same priority in respect of any property of the company directly or indirectly representing the transferred property as the holder would have had in respect of the property that is subject to the security.
(6) Subsection (7) applies to—
(a) the transfer under subsection (2) of property that is subject to a security other than a security that, as created, was a floating charge; and
(b) the disposal under subsection (3) of goods that are in the possession of the company under a credit purchase transaction.
(7) It is a condition of a consent or an approval under subsection (2) or (3)— (a) that the net proceeds of the transfer or disposal are to be applied; and
(b) if those proceeds are less than such amount as may be agreed, or determined by the Court, to be the net amount that would be realised on a sale of the property or goods in the open market by a willing vendor, that an amount necessary to make good the deficiency is to be applied,
towards discharging the amount secured by the security or payable under the credit purchase transaction.
(8) If a condition imposed by subsection (7) relates to two or more securities, that condition requires—
(a) the net proceeds of the disposal; and
(b) if subsection (7)(b) applies, the amount referred to in that paragraph, to be applied towards discharging the amount secured by those securities in the order of their priority.
(9) If the Court gives approval for a transfer or disposal under subsection (2) or (3), the directors shall, within fourteen days after approval is given, lodge with the Registrar for registration a copy of the order giving approval.
(10) If the directors fail to comply with subsection (9), each of them who is in default commits an offence and on conviction is liable to a fine not exceeding two hundred thousand shillings.
(11) If, after any of the directors has been convicted of an offence under subsection (10), the directors continue to fail to lodge the required copy with the Registrar for registration, each of the directors who is in default commits a further offence on each day on which the failure continues and on conviction is liable to a fine not exceeding twenty thousand shillings for each such offence.

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