President Uhuru Kenyatta has rejected a Bill sponsored by Juja MP Francis Waititu that would have compelled creditors to seize assets of defaulting borrowers before touching a guarantor’s property.
Mr Waititu had sought to amend Section 3 of the The Law of Contract (Amendment) Bill, 2019 that lays rules for signing of such agreements.
The National Assembly had late last year voted to approve the Bill without any amendment. The Bill proposes that in case of a default by the principal borrower, the creditor should first auction the assets of the former before raiding the property of guarantors.
The law currently okays creditors to seize the property of the guarantor in case of default by the principal borrower.
In his Memorandum to Parliament, tUhuru states that amending Section 3 will negate a long-standing principle of contract law, prejudice the financial sector, and heavily affect credit advanced to micro, small and medium enterprises.
The President also objects to the Bill on grounds that it will interfere with the operations of capital markets.
The Bill had also faced opposition from the government since the beginning with Attorney-General Kihara Kariuki directing Mps to delay debate on the proposal, a directive they defied.
“I have received a letter from the AG saying that we wait for more instructions. I want to tell Attorney-General that the legislative work of this House cannot be stopped… If you have issues as government, you need to bring amendments to this private members Bill and not ask this House to step down the Bill,” Leader of Majority Aden Duale had told Mps.
Parliament could, however, still veto Uhuru’s move by casting two-thirds of its total votes to push the bill.
Kenyan Business Feed is the top Kenyan Business Blog. We share news from Kenya and across the region. To contact us with any alert, please email us to email@example.com