In the famous novel titled Things Fall Apart, Chinua Achebe tells the story of a debt-ridden man called Unoka, a story similar to one told by William Shakespeare 400 years earlier about a character called Portia and the greedy Shylock in his book The Merchant of Venice. The narratives center around two persons overburdened by debt to the extent that no one ever gives Unoka a loan because they knew he would not pay while Portia offers a part of her flesh, (if it is gotten without making her bleed) to make good a debt owed to a ravenous shylock.

Although presented in the extreme, these narratives are something that a great number of individuals and corporations can relate to. Financial distress is as old as the human race and even the most successful businesses often find themselves in seemingly insurmountable debt. Most individuals who find themselves in such a situation opt for filing bankruptcy and businesses opt to undergo voluntary liquidation. Kenya’s Insolvency Act offers several alternatives such as the no asset procedure, payment by instalment orders, voluntary arrangements and compositions as ways of rescuing businesses in dire financial distress.

However, all of these options carry with them several risks. For businesses keen on maintaining a good public image, the public nature of these procedures can significantly affect their goodwill. Secondly, these procedures are more often compared to morticians as opposed to doctors for struggling businesses. This is because their very nature involves the death of the business or the individual’s financial well-being. Often, they carry with them restrictions from doing any further business as the incorporated entity or as an individual.

This is part of the reason why the concept of Debt Restructuring is gaining significant traction not only in the Country but in the Continent as a whole. Spurred by government encouragement to enter into arrangements with their Creditors during the Covid-19 pandemic a wide array of small, medium and large businesses got into formal debt restructuring arrangements with their Lenders.  To put this in context, in 2020 the Central Bank reported that the number of loans that small and medium-sized businesses restructured totalled a staggering 234.7 billion shillings ($2.17 billion) up from 20.6 billion shillings in 2019.[i]

Signs and Symptoms…

Some of the signs that a business might have a debt problem include failure to meet supplier payments, recurring breaches of the payment segments of their… click this link to continue reading