High Court Upholds Administration of Glee Hotel Limited and Clarifies the Powers and Responsibilities of an Administrator

Key Takeaways

The High Court has upheld the appointment of Kamal Anantroy Bhatt of Anant Bhatt LLP as administrator of Glee Hotel Limited (the company) and affirmed the administrator’s authority to assume control of the company’s management and affairs following his appointment.

In a ruling delivered on 12 August 2026 in HCCOMMIP/E045/2026 Equity Bank Kenya Limited v Glee Hotel Limited, the court granted protection orders restraining the company’s directors and their agents from disrupting the company’s operations, interfering with the administrator’s functions, or otherwise interfering with the company’s business.

Munyao Muthama & Kashindi Advocates (Paul Munyao, James Tugee and John Kithome) represented the administrator in the proceedings.

The decision provides significant guidance on the operation of the Insolvency Act, particularly regarding the appointment and assumption of office by administrators, the hierarchy of the objectives of administration, the powers of administrators, the position of directors during administration, and the remedies available to secured creditors.

Background
Equity Bank (Kenya) Limited, a secured creditor of the company, appointed Mr. Bhatt as administrator on 6th July 2026 following the company’s default in repaying credit facilities advanced by the Bank. The facilities were secured, among other securities, by debentures over the company’s assets. Following his appointment, the administrator encountered resistance and interference from the company’s directors and their agents as he sought to take control of the company and its business, Glee Nairobi. He therefore filed an application on 6th July 2026 seeking orders restraining the directors from interfering with the company’s operations and business. The company subsequently filed an application dated 7th July 2026 seeking, among other orders, termination or suspension of the administrator’s appointment or permission for its board of directors to continue managing the company’s day-to-day operations jointly with, or under the supervision of, the administrator. When the matter came before the court for directions on 9th July 2026, the court declined to grant the interim orders sought by the company. The company thereafter filed an application dated 13th July 2026, seeking review of the orders made on 9th July 2026.

Issues Before the Court
The court identified two principal issues arising from the three applications:

1. Whether sufficient grounds had been established for removal of the administrator from office; and

2. Whether the administrator was entitled to the protection orders sought.

Court’s Determination
The court allowed the administra­tor’s application and dismissed the company’s two applications. It held that Mr. Bhatt had been validly ap­pointed and was entitled to dis­charge his statutory functions with­out interference from the company, its directors or their agents.

The court found that the administra­tor had demonstrated that, since his appointment, he had taken various steps and made genuine progress towards achieving the statutory ob­jective of rescuing the company.

The court also observed that the Bank was not the company’s only substantial creditor.
Other substantial creditors had actively pursued claims against the company and filed proof of debt. The existence of these liabilities demonstrated that the company’s financial distress was not caused by the administration process. Rather, the company was already indebted to multiple creditors, and the ad­ministration process was intended to bring those competing claims under order and coordination.

Conduct of the Directors
The court was particularly con­cerned by various actions undertak­en by the company’s directors fol­lowing the administrator’s appoint­ment. These included:
• transferring funds from the com­pany’s bank account to an entity that had not submitted proof of debt, without the administrator’s consent;
• denying the administrator access to the company’s bank accounts, records and IT systems; and
• failing to provide the administra­tor with the company’s statement of affairs despite a request made on 10 July 2026.

The court ultimately held that once an administrator is appointed, management authority of the company resides in the administrator. A company in administration or any of its officers cannot exercise a management function without the administrator’s consent.

The court consequently granted the administrator the protection orders sought, restraining the directors and their agents from disrupting the company’s operations, interfering with the administrator’s functions, or otherwise interfering with the company’s business.

Key Legal Principles Emerging from the Decision

1. Administration has a hierarchy of objectives

The court affirmed the statutory hierarchy of the objectives of ad­ministration:
a. Primary objective: rescue the company as a going concern.

b. Secondary objective: where rescue as a going concern is not reasonably achievable, secure a better outcome for the compa­ny’s creditors as a whole than would be likely if the company were wound up without first being placed under administra­tion.

c. Residual objective: where nei­ther of the foregoing objectives is reasonably attainable, realise the company’s property for the benefit of secured or preferential creditors.

The hierarchy is important in deter­mining the administrator’s priorities and the appropriate course of action during an administration.

2. An administrator may be appointed through three routes
The court recognized three statuto­ry routes through which an adminis­trator may be appointed:
a. by an order of the court;
b. by the company itself or its direc­tors; or
c. by the holder of a qualifying floating charge, acting without recourse to the court.

3. Parties are bound by their contracts
Where a qualifying floating charge is executed by the bank and the borrower conferring upon the bank the power to appoint an administra­tor, the court cannot rewrite the bargain struck between the parties. The duty of the court is rather to give effect to the terms of the par­ties’ agreement.

4. Documents filed upon appointment by a holder of a qualifying floating charge
Where an administrator is appoint­ed by a holder of a qualifying float­ing charge, the documents lodged in court are intended to provide suf­ficient material to enable the court and interested parties to establish that:
a. the appointor holds a qualifying floating charge over the compa­ny’s property;
b. the charge was enforceable at the date of appointment; and
c. the appointment complied with the requirements of the Insolven­cy Act.

The court clarified that these docu­ments are not intended to consti­tute a fully particularised pleading of the secured creditor’s cause of action against the company.

5. No prior notice to the debtor is required
The court held that the Insolvency Act does not require prior notification of the debtor company before a holder of a qualifying floating charge ap­points an administrator. Notice is required only to be served upon a holder of a prior qualifying floating charge, where one exists.

6. Secured creditors may choose their preferred remedy
A secured creditor is entitled to select, from the remedies available in law, the mode of recovery it considers most appropriate in the circumstances. The creditor is not restricted to one remedy or required to pursue reme­dies in a prescribed sequential order.

7. Removal of an administrator requires proof of the alleged grounds
Although the court has power to remove an administrator where circum­stances exist that make it inappropriate for the administrator to continue in office, the burden rests on the applicant seeking removal to prove the allegations relied upon in support of the application.

8. Directors cannot exercise management functions without the administrator’s consent
A company in administration, or any of its officers, may not exercise a management function without the consent of the administrator. The court further noted that undertaking such a function without the administrator’s consent constitutes an offence. This principle is particularly significant for directors who may otherwise assume that their ordinary management powers continue notwithstanding the commencement of administration.

9. Administrators have broad management powers
An administrator is empowered to take any action that contributes, or is likely to contribute, to the effective and efficient management of the affairs, busi­ness and property of the company.

10. Directors must provide a statement of affairs
Upon request, the directors of a company in administration are required to fur­nish the administrator with the company’s statement of affairs within 12 days of receiving the request. Failure to provide the statement without reasonable excuse constitutes a punishable offence.

Significance of the decision for Stakeholders
The decision has practical implications across the banking, lending and insol­vency sectors.
a. Companies, directors and other officers: Companies taking credit facili­ties and providing security, together with their directors and officers, should appreciate the consequences of administration and the extent to which management powers are displaced following appointment of an administra­tor. Once administration commences, directors and other officers must un­derstand the limits placed on their management functions and cooperate with the administrator, including by providing the statement of affairs and access to the company’s records, systems, accounts and other relevant infor­mation.

b. Banks and other lenders: Secured creditors have important flexibility in selecting and enforcing the remedies available to them following borrower default, including appointment of an administrator where the statutory requirements are met.

The decision also provides guidance on the process and evidential require­ments for appointment of administrators by holders of qualifying floating charges.
c. Advocates: Counsel involved in lending and insolvency transactions should take account of the decision when drafting security instruments and advising secured creditors, borrowers and directors on enforcement op­tions.

d. Insolvency practitioners: The decision reinforces the authority of duly ap­pointed administrators to assume management of a company and provides guidance on the exercise of their statutory functions and the protection available where directors or other persons interfere with the administration.

Ultimately, the decision offers useful guidance to companies, secured credi­tors, insolvency practitioners and their advocates in navigating administration proceedings and managing the relationship between the company, its direc­tors, creditors and the administrator.

Conclusion

The decision reinforces the central principle that an administrator, once validly appointed, assumes the statutory management role contemplated under the Insolvency Act. Directors cannot continue exercising management functions independently of the administrator, and interference with the administrator’s statutory mandate may attract both judicial protection of the administrator and statutory consequences. More broadly, the decision provides useful guidance on how administrators are appointed, the objectives they must pursue, the evidential burden for chal­lenging their appointment, the remedies available to secured creditors, and the obligations of directors and officers during administration.