Debt Recovery Laws Every Kenyan Business Owner Should Know

Running a business in Kenya comes with its fair share of challenges — and chasing unpaid debts is one of them. Whether you operate a small startup or a large company, understanding the legal framework surrounding debt recovery is critical. It protects your business, ensures you follow the correct procedures, and increases your chances of successfully recovering what you are owed.

In this article, we will break down the key debt recovery laws in Kenya that every business owner should know.

1. The Basics: Contract Law and Debt Recovery

At the heart of most debt recovery cases is a contract — whether written, verbal, or implied. According to the Law of Contract Act (Cap 23) in Kenya, any legally binding agreement can be enforced by law.

This means if you have evidence (such as an invoice, a signed agreement, or even email communication) showing that a client owes you money, you have the right to pursue recovery through legal means.

✅ Tip: Always ensure there is a written contract for any significant business transaction, clearly stating payment terms.

2. Sending a Demand Letter

Before you rush to court, Kenyan law requires that you first send a formal demand letter. This letter demands payment of the outstanding amount and gives the debtor a chance to settle the matter amicably.

A proper demand letter usually includes:

• The amount owed

• Details of the transaction

• A deadline for payment

• A warning of further legal action if payment is not made

If the debtor ignores the demand, it becomes strong evidence when you escalate the matter to court.

3. Filing a Lawsuit in Court

If the demand letter is unsuccessful, you may need to file a suit in a court of law. The choice of court depends on the amount of money owed:

• Debts up to Ksh 1 million are handled by the Small Claims Court.

• Higher amounts are filed in the Magistrates’ Court or High Court depending on the value.

The court process involves:

• Filing a Plaint (legal complaint)

• Serving the debtor

• Attending hearings

• Enforcing judgment if you win

4. Enforcement of Judgments

Winning a court case is only part of the battle — you still need to enforce the judgment. Under Kenyan law, once the court issues a decree, you can recover your debt by:

• Attaching the debtor’s property (auctioning their assets)

• Garnishing their bank accounts

• Obtaining a court order for salary deductions

Enforcement is strictly regulated to ensure fairness to both parties.

5. Debt Recovery Agencies and Legal Compliance

Professional debt recovery agencies like Meridian Recoveries act within the law to help businesses recover outstanding debts without damaging customer relationships.

In Kenya, debt collectors must:

• Avoid using threats, violence, or harassment

• Follow ethical collection practices

• Respect the debtor’s privacy and dignity

• Act within the confines of the law at all times

Engaging a professional agency also helps businesses avoid costly legal errors during recovery.

6. The Limitations Period

According to the Limitations of Actions Act (Cap 22), you must initiate debt recovery within six years from the date the debt arose.

Waiting too long can result in the court refusing to hear your case — no matter how strong your evidence is.

✅ Tip: Always act promptly when recovering overdue debts.

Final Thoughts

Debt recovery in Kenya is governed by clear legal guidelines designed to protect both creditors and debtors. As a business owner, knowing these laws helps you safeguard your financial interests, recover debts efficiently, and avoid legal pitfalls.

If your business is facing challenges with unpaid debts, consider working with professionals like Meridian Recoveries — experts in lawful, respectful, and effective debt recovery.