ii) Under Section 323 (1) (a) of the Act, if in the course of winding up a company, it appears that any business of the company has been carried on,
• With intent to defraud its creditors or creditors of any other person or
• For any fraudulent purpose.
the court may, on application of the official receiver or liquidator or creditor or contributory of the company, declare that any person who was knowingly party to the carrying on of the company‟s business as such personally responsible without any limitation of liability, for any debts or other liabilities of the company as the curt may direct.
• All persons who are knowingly parties to the carrying on of the company‟s business are liable to an imprisonment for a term not exceeding 2 years or a fine not exceeding Kshs.10,000 or both.
• If the person(s) is a creditor to the company, the court may order that he ranks behind all other creditors in the satisfaction of claims.
• If the person(s) is a creditor to the company, his claim against the company is offset against the amount due from him to the liquidator.