Security Trustees in Kenyan Lending: Does the Trust Administration Act Apply?

Syndicated loans, bond issues and project finance deals in Kenya usually rely on a security trustee: one party holds the security, whether charges over land, debentures or security over movable assets, on trust for all the lenders or bondholders. It saves re-registering security every time a lender changes and lets a single party enforce for everyone. The Trust Administration Act, 2026, which came into force on 25 September 2026, raises a question the market has not yet answered: does the new registration regime apply to security trusts?

Why the question arises

The Act’s core rule is general. Section 5 provides that a written trust must be registered or incorporated under the Act, and that a written trust is not enforceable unless it is. A court may also declare a trust invalid if it has not been registered or incorporated (section 6(1)(f)). A security trust is created in writing, in a security trust deed or intercreditor agreement, and it is a trust in the ordinary sense: the security trustee holds property for the benefit of others.

The Act contains no express exemption for commercial or security trusts. The only exemption route is for charitable trusts, which may apply to the Attorney-General (section 95). Nor does the Act mention security trustees, lenders or bondholders anywhere. The same question therefore arises for trustees acting for bondholders and for agents holding security in club deals.

The argument that security trusts fall outside the regime

There is a respectable counter-argument, built on section 3:

• Section 3(1) applies the Act to trusts registered or incorporated under it, trusts created by court order, and trusts created by or under any other written law.
• Section 3(2) provides that nothing in the Act limits, invalidates or otherwise affects a trust arising under equity or any written law.

The Movable Property Security Rights Act expressly recognises trust arrangements in secured lending. It applies to security rights created through, among other things, a “trust indenture” (section 4(1)(b)), which it defines as a document under which debt obligations secured by a security right are issued and a person is appointed as trustee for the holders of those obligations (section 2). A registration notice under that Act may also identify the secured creditor “or its representative” (section 27(1)(b)). A lender could argue that a security trust arises under equity and under that Act, so section 3(2) protects it from being invalidated for want of registration.

That argument has not been tested, and it sits uneasily with the plain words of section 5. Until the Regulations or the courts clarify the position, lenders should not assume that an unregistered security trust is safe.

What registration would involve

If the Act applies, the consequences are practical rather than fatal, but they need planning:

• Registration or incorporation with the Registrar of Trusts, lodging the trust deed, a statement of initial trust property and a register of beneficial owners (section 22).
• Beneficial ownership. Every trust must keep and lodge a register of its beneficial owners and lodge changes within 21 days (sections 65 to 67). In a syndicated loan, lenders change through transfers; working out how that maps onto the beneficial ownership register is the hardest operational point.
• Annual returns within 30 days of each anniversary of registration (section 75), and records kept for at least seven years, including a register of charges and security rights created under the Movable Property Security Rights Act (section 63).
• Corporate trustees. A corporate trustee must be licensed (section 2), and section 36(3) refers to a company whose main object is providing trustee services and to licensing under other relevant written law, with its conditions joined by “or”. A corporate trustee must also have a local contact person resident in Kenya (section 36(4)). Banks and agency firms that act as security trustee should check whether they meet that test.

Practical steps for lenders and borrowers

1. New transactions. Consider registering the security trust as a precaution, and draft the security documents so that enforcement does not depend solely on the trust, for example by also taking security in favour of each lender or appointing the security holder as agent where the structure allows.
2. Existing transactions. All existing trusts must comply with the Act within 24 months of commencement, or such time as the Registrar directs (section 99(2)(b)). Review existing security trust deeds within that window rather than waiting for enforcement to test them.
3. Legal opinions. Enforceability opinions on Kenyan security should now address the Trust Administration Act expressly.
4. Watch the Regulations. The Attorney-General may make Regulations under section 96, which is the most likely source of clarity on commercial trusts.

Securitisation structures raise related issues; see our article on securitisation in Kenya, and on the use of non-charitable purpose trusts to hold special purpose vehicles.