Contingent and prospective liabilities of the company:

A creditor who petitions on grounds of the company's insolvency may rely on any of the following situations to show (as he is required to do) that the company is unable to pay its debts:

(a)     a creditor (or creditors) to whom the company owes more than one thousand shillings serves on the company at its registered office a written demand for payment and the company neglects, within the ensuing 21 clear days, either to pay the debt or to offer reasonable security for it.  If, however, the company denies on apparently reasonable grounds that it owes the money the court will dismiss the petition and leave the creditor to establish his claim by taking legal proceedings for debt;

(b)     a creditor obtains judgement against the company for debt, attempts to enforce the judgement but is unable to obtain payment, i.e. no assets of the company have been found and seized;

(c)     a creditor satisfies the court that taking account of the contingent and prospective liabilities of the company it is unable to pay its debts.  The petition may be based on a statement of estimated assets and liabilities or the creditor may show that the company is no longer paying its trade debts as they fall due.  But this is the residual category and any suitable evidence of actual or prospective insolvency may be adduced.

Although no minimum amount is specified for (b) or (c) a one thousand shillings minimum is in practice applied (it need not all be owed to one creditor if others support his petition and together they claim Shs.1,000 or more).  The debt claimed must be a specified amount, i.e. a claim for general damages or for a specific sum less a deduction of uncertain amount will not do.