By The Weekly Vision Court Reporter
The High Court in Nairobi has upheld the appointment of an administrator to Glee Hotel Limited, rejecting attempts by the hotel’s directors to have the administrator removed and to regain control of the company’s day-to-day operations. Lady Justice Dr Githiru Freda Mugambi, sitting at the Milimani High Court’s Commercial and Tax Division, ruled that the administrator was lawfully appointed by Equity Bank Kenya Limited after the hotel defaulted on credit facilities secured by qualifying floating charges.
The ruling, delivered on 12th August 2026 in HCCOMMIP/E045/2026, Equity Bank Kenya Limited v Glee Hotel Limited, determined three applications arising from the dispute between the bank, the hotel and the administrator. The court dismissed two applications filed by Glee Hotel and allowed the administrator’s application seeking protection and orders necessary to exercise control over the company’s affairs.
Glee Hotel had challenged the administrator’s appointment on several grounds, including alleged failure to give notice, shortcomings in the statutory declaration and statement of facts, the existence of other companies within the borrowing group and the argument that administration was disproportionate because the bank held other forms of security.
Justice Mugambi found that Equity Bank held qualifying floating charges over the company’s assets, that the charges were enforceable when the administrator was appointed, and that the statutory requirements under Part VIII of the Insolvency Act had been complied with. The judge also rejected the argument that the company was entitled to prior notice of the administrator’s appointment, holding that section 535(1) of the Insolvency Act requires notice to a specific class of person — the holder of a prior qualifying floating charge — rather than the company or its directors.
The court therefore found that Glee Hotel could not rely on that provision to invalidate its own administration. It noted that it was not disputed that Equity Bank had advanced credit facilities to Glee Hotel, that the company had provided various forms of security, including debentures creating qualifying floating charges, and that it subsequently defaulted on repayment.
A consent judgment was entered between the parties on 24th February 2026, followed by a High Court ruling on 4th June 2026. The court found that the terms of the consent judgment were not honoured by the company. Justice Mugambi further relied on the terms of the debentures, particularly Clause 18, which expressly empowered Equity Bank to appoint an administrator after the secured money became payable.
The court held that the agreement allowed the bank to choose among lawful debt-recovery remedies and that it was not required to exhaust other forms of security before resorting to administration. Importantly, the court stressed that administration under Kenya’s Insolvency Act is not simply a debt-enforcement mechanism. Justice Mugambi said section 522 establishes a hierarchy of objectives, with the rescue of a company as a going concern being the primary objective. A better outcome for creditors than liquidation is the secondary objective, while realisation of company assets for secured or preferential creditors is the residual objective where the first two cannot reasonably be achieved.
The judge therefore emphasised that an administrator’s overriding duty is to act in the interests of the company’s creditors as a whole. The ruling found evidence that the administrator was already taking steps towards rescuing Glee Hotel rather than simply realising its assets.
Among the measures cited were the engagement of a marketing consortium, a contract with World Travel Group UK Limited to improve bookings, a review of what the administrator described as an unsustainable wage bill accounting for more than 47 per cent of gross income, and an improvement in room occupancy.
According to the court record, occupancy increased from 7.51 per cent on 1st July 2026 to 24.41 per cent by 12th July 2026. Justice Mugambi described the improvement as evidence of genuine progress towards the statutory objective of rescuing the company as a going concern. The court also found that the hotel’s directors had interfered with the administrator’s statutory functions.
One of the most significant incidents involved the transfer of KSh23,071,562 from the company’s account to Workright East Africa Limited on 9th July 2026. The court found that the payment was made without the administrator’s consent and involved an entity that had not submitted a proof of claim to the administrator. Justice Mugambi held that the payment amounted to an exercise of a management and distribution function reserved for the administrator and had the effect of preferring an unsecured and unverified creditor over secured and preferential creditors.
The court further found that the directors had denied the administrator passwords, credentials and access to bank accounts, company records and IT systems. The administrator had also demanded the company’s statement of affairs, but the directors failed to provide it despite a written demand dated 10th July and expiry of the statutory period on 22nd July 2026.
Glee Hotel had sought permission for its board to continue managing the business jointly with, or under the supervision of, the administrator. The court rejected the proposal, with Justice Mugambi pointing to section 581 of the Insolvency Act, which restricts a company under administration and its officers from exercising management functions without the administrator’s consent.
She also cited section 580, which gives the administrator powers necessary for effective and efficient management of the company’s affairs, business and property. The judge said the company’s own debenture agreement similarly gave the administrator power to carry on the hotel’s business. She concluded that the parties had not contemplated a system in which the administrator would co-manage the business with the existing directors, adding that a company could not properly be run on such a divided basis.
The directors had also sought the administrator’s removal, relying partly on allegations contained in an affidavit filed in unrelated proceedings. The court found those allegations untested and therefore insufficient to justify removal.
Justice Mugambi stressed that an applicant seeking removal of an administrator must prove the allegations relied upon, and that courts should not readily interfere with an insolvency administration without serious and compelling grounds. The judge also considered another winding-up matter cited by the company but noted that the proceedings remained pending and that no conclusive finding had been made against the administrator.
The court observed that, even if wrongdoing were eventually established, it would not automatically mean that Glee Hotel should be released from administration. At most, such a finding could result in removal and replacement of the administrator while leaving the administration process intact.
In her final orders, Justice Mugambi allowed the administrator’s Notice of Motion dated 6th July 2026 and awarded him the costs of that application. The hotel’s Notice of Motion dated 7th July 2026 was dismissed with costs, as was its further application dated 13th July 2026 seeking review, rescission or variation of the court’s earlier orders.
The ruling leaves the administrator firmly in control of Glee Hotel’s management under the statutory insolvency framework. The court, however, made clear that administration is not intended to become a permanent state of affairs. It noted that should the company demonstrate a viable means of resolving its financial obligations, including through related entities, there would be no reason why the administration could not eventually come to an end.
