The High Court of Kenya has ruled in favour of KCB Bank Group, granting the lender priority over the assets of breakfast cereals manufacturer Proctor & Allan (EA) Limited and blocking an attempt by EPCO Builders Limited to auction the company’s assets over a Sh150 million debt.
The court found that KCB Bank’s floating charge over Proctor & Allan’s assets had already crystallised before EPCO Builders could complete execution of its court decree. The ruling preserves the manufacturer’s assets under the existing receivership framework and gives KCB priority over competing claims.
The decision comes amid a wider financial dispute involving Proctor & Allan, which owes KCB about Sh4.94 billion, significantly more than the estimated Sh1.62 billion value of the assets secured in favour of the bank.
KCB’s Sh4.94 Billion Claim Takes Priority
Proctor & Allan obtained a series of credit facilities from KCB Bank Kenya between 2012 and 2022, amounting to approximately Sh80.45 million and US$28.9 million.
The facilities were secured through an all-assets debenture dated November 1, 2013, and a supplemental debenture dated October 28, 2015. The security covered the company’s assets, including land, machinery, receivables and future assets.
The manufacturer fell into arrears in October 2022.
In August 2024, KCB offered Proctor & Allan a restructuring arrangement under which a substantial portion of the debt would be written off if the company paid Sh1 billion by November 2024. Proctor & Allan did not meet the deadline and sought an extension to January 2025 while it pursued potential buyers.
Talks with Equatorial Nuts Processors Ltd collapsed during due diligence, while Broadway Bakery Ltd subsequently offered Sh800 million to acquire the business. KCB rejected the offer as insufficient.
Following the collapse of the negotiations, KCB reinstated the original loan terms together with accrued penalties, with the outstanding amount reaching approximately Sh4.94 billion, comprising Sh37.6 million and US$37.9 million.
In late February 2025, KCB appointed joint receiver managers to take control of Proctor & Allan. Proctor & Allan’s directors initially obtained temporary injunctions against the bank, but High Court Judge Njoki Mwangi ruled in August 2025 that KCB had acted within its contractual rights.
EPCO Builders’ Separate Sh150 Million Claim
The dispute involving EPCO Builders arose separately from Proctor & Allan’s bank debt. EPCO had been involved in a commercial dispute with Proctor & Allan arising from an earlier construction agreement. The contractor obtained a commercial arbitration award of Sh74.7 million, together with 14% annual interest and Sh1.8 million in costs. The amount subsequently increased to approximately Sh150 million.
On February 3, 2025, EPCO obtained a court order allowing it to enforce the arbitration award. On February 20, Betabase Auctioneers proclaimed Proctor & Allan’s movable machinery and other assets for auction on behalf of EPCO.
The proclamation brought EPCO’s recovery efforts into direct conflict with KCB’s existing security over the manufacturer’s assets.
Why KCB Blocked the Asset Auction
KCB moved to court to prevent EPCO’s auctioneer from selling the assets, arguing that the bank’s security interest took priority. The bank demonstrated that Proctor & Allan owed it approximately Sh4.94 billion, while the total value of the charged assets was estimated at only Sh1.62 billion.
The difference means that the secured assets were already insufficient to cover the amount owed to KCB. The bank therefore opposed the sale of individual assets to satisfy EPCO’s claim, arguing that disposing of portions of the asset pool would reduce the security available to recover its outstanding debt.
Court Rules KCB’s Floating Charge Had Crystallised
The High Court ruled that KCB’s floating charge had already crystallised before EPCO could complete execution of its decree. Crystallisation converted the floating charge into a fixed security interest over the relevant assets after the circumstances triggering the security, including the company’s default and appointment of receivers, occurred.
The court consequently found that KCB’s secured claim took precedence over EPCO’s attempt to execute against the same assets. The timing of the two recovery processes was central to the dispute. KCB’s receivership had been triggered before EPCO could complete the auction process, giving the bank priority over the charged assets.
Proclamation Did Not Transfer Ownership
The court also addressed EPCO’s argument based on the February 20, 2025 proclamation by Betabase Auctioneers. Although the auctioneer had already proclaimed Proctor & Allan’s movable assets, the court held that a proclamation did not transfer ownership of the property.
The assets therefore remained subject to the existing receivership arrangement and KCB’s superior security interest. The ruling prevents EPCO from proceeding with the proposed auction of the assets covered by KCB’s security.
Proctor & Allan’s Financial Distress
The ruling is the latest development in Proctor & Allan’s financial difficulties, which have involved both a multi-billion-shilling bank debt and competing creditor claims.
The company’s financial problems escalated after it fell into arrears with KCB in 2022. Attempts to restructure the debt and identify a buyer continued into 2024 and early 2025 but did not result in a completed transaction.
KCB subsequently moved to receivership after the restructuring and buyout efforts failed. The bank’s claim of approximately Sh4.94 billion now stands against charged assets estimated at Sh1.62 billion, leaving the value of the secured assets substantially below the outstanding debt.
The separate EPCO claim of approximately Sh150 million therefore became a question of creditor priority over an already insufficient pool of assets.