When a customer or another business owes you money, the problem is not just the unpaid invoice. Delayed payment can disrupt your cash flow, make it harder to pay your own suppliers and employees, and leave you spending valuable time chasing money that should already have been paid.
The steps you take next matter. A well-documented debt may be resolved through a formal demand or negotiated payment plan. Where the debt is disputed or remains unpaid, you may need to take the matter to court and, if necessary, enforce the judgment.
Here is how the debt recovery process in Kenya generally works.
1. Confirm the debt and gather your evidence
Before taking legal action, establish exactly what is owed and why.
Start by reviewing the contract or agreement between you and the debtor. Gather invoices, purchase orders, delivery notes, statements of account, receipts, emails, WhatsApp messages and any other records showing that the goods or services were supplied and payment became due.
You should also reconcile the account so that the amount you are demanding is accurate. If there have been partial payments, credits or disputed invoices, deal with those issues before making the demand.
Good documentation can make a significant difference if the matter eventually goes to court.
2. Check whether the debt is still within the limitation period
Time matters when recovering a business debt.
Under the Limitation of Actions Act, an action founded on contract generally cannot be brought after six years from the date the right to bring the claim arose, subject to the exceptions and other provisions of the Act.
This does not mean you should wait until the deadline approaches. The longer a debt remains unpaid, the greater the risk that records become difficult to obtain, witnesses become unavailable or the debtor’s financial position changes.
If a debt has been outstanding for several years, check whether the claim is still within the applicable limitation period before deciding how to proceed.
3. Send a formal demand for payment
If the debt remains unpaid, the next step is to make a formal demand.
A demand letter should clearly identify the debt, state the amount outstanding and give the debtor a reasonable opportunity to pay. It can also explain what action may follow if payment is not made.
This is more than another reminder that an invoice is overdue. A properly prepared demand puts your position on record and may prompt payment or open the door to a settlement without the need for court proceedings.
It is also an opportunity to establish whether the debtor genuinely disputes the debt. If they do, the nature of the dispute should be assessed before deciding how to proceed.
4. Decide whether to negotiate or take legal action
Court action is not always necessary to recover an unpaid business debt.
If the debtor accepts the amount owed but needs time to pay, a structured repayment arrangement may be commercially sensible. If the debt is disputed, you need to understand the reason for the dispute and assess the strength of your evidence.
If payment still does not come through, however, you may need to move from informal recovery to formal legal action.
The decision should take into account the amount involved, the evidence available, the debtor’s financial position and the likely cost and time involved in pursuing the claim.
5. File a civil suit to recover the debt
Where court action is necessary, the claim should be filed in the appropriate court and through the correct procedure.
The procedure will depend on the nature of the claim and how the debtor responds. Some claims may be resolved without a full hearing, while disputed matters may require the court to consider the parties’ evidence at trial.
For qualifying claims, the Small Claims Court can deal with civil claims arising from contracts for the sale and supply of goods or services and certain other claims, up to KSh 1 million, subject to the applicable statutory limit.
Whether the Small Claims Court is appropriate depends on the amount, nature and legal issues involved. Larger or more complex claims may need to be brought before the ordinary civil courts.
This is why it is important to assess the claim before filing rather than choosing a court based only on the amount owed.
6. Consider summary judgment where the debt is clear
Some business debts are straightforward. The amount is specific, the supporting documents are strong and there is no genuine issue requiring a full trial.
In appropriate cases, Order 36 of the Civil Procedure Rules allows a claimant seeking judgment for a liquidated demand to apply for summary judgment where the defendant has entered appearance but has not filed a defence. The application must be supported by an affidavit setting out the basis of the claim and the amount sought.
Summary judgment is intended for cases where the debt is clear and there is no genuine issue requiring a full trial. If the debtor raises a genuine issue that requires determination at trial, the matter may proceed in the ordinary way.
7. Obtain judgment and enforce it if the debtor still does not pay
Winning a case does not necessarily mean the money will be paid immediately.
If the court gives judgment in your favour and the debtor still does not pay, you can take steps to enforce the judgment. The Civil Procedure Act provides several enforcement mechanisms, including attachment and sale of property, attachment of debts and appointment of a receiver, among others.
Garnishee proceedings may also be available where a third party owes money to the judgment debtor. Where the legal requirements are met, the court can attach that debt and direct the third party to pay the judgment creditor instead.
The appropriate enforcement method depends on the debtor’s circumstances and what assets or debts may lawfully be attached.
Recovering a Business Debt in Kenya: When to Get Legal Help
A business debt can start with a simple unpaid invoice and become much more complicated once the debtor disputes the amount, ignores demands or takes steps that may make recovery more difficult.
If you are considering legal action, it is worth assessing the debt before committing to a particular recovery route. The appropriate approach will depend on the amount owed, the evidence available, whether the debt is disputed and the debtor’s circumstances.
If your business is owed money, our Debt Collection Law team can help you assess the debt, prepare the appropriate demand and advise on the legal process for recovering what you are owed. We can also assist with court proceedings and enforcement where payment is not made.
Frequently Asked Questions
Can I recover interest on an unpaid business debt?
Interest may be recoverable depending on the contract, the nature of the claim and the applicable law. If the agreement provides for interest on late payment, the contractual terms should be reviewed. Where there is no contractual provision, the court may consider whether interest should be awarded and from what date.
How long does debt recovery take in Kenya?
There is no single timeframe for every debt claim. The duration can depend on whether the debt is disputed, the court or procedure involved, the evidence available and whether enforcement is required after judgment.
What if the debtor says they do not owe the money?
The reason for the dispute matters. You should review the contract, invoices, payment records and other evidence to establish whether the debtor has a genuine defence. A disputed debt may require a different recovery approach from a straightforward unpaid invoice.
Can I recover a debt from a company that has stopped paying its debts?
Possibly, but the company’s financial position needs to be assessed carefully. Depending on the circumstances, ordinary debt recovery proceedings or insolvency-related remedies may be relevant. Legal advice should be obtained before choosing the appropriate route.
When should I involve a commercial debt recovery lawyer?
Professional advice can be particularly useful where the debt is substantial, disputed, overdue for a significant period, or likely to require court proceedings or enforcement. A commercial debt recovery lawyer can assess the evidence, advise on the appropriate procedure and help you avoid taking steps that may weaken your claim.