Often when a borrower signs their facility letter, they gloss over the clause that safeguards the bank’s rights to set off. Without knowing the full implication of the Set Off clause the borrower will then proceed to sign the offer letter.

Herein below we give a brief overview of the right of set off in a facility agreement and highlight the implications of the right.


Right of set-off is the right of the bank to adjust the amount due from a borrower against the amount payable by the Bank to the borrower to determine the net balance payable by one to another.

When a customer has two or more accounts in the same name and capacity in a bank, the bank has the right to adjust the amount standing to the customer’s credit against the debit balance in the other account. The bank has a right to combine the two accounts.

A banker possesses the right of set-off, which enables him to combine two accounts in the same customer’s name and adjust the debit balance in one account with the credit balance in the other.


In exercise of the of their right to set off the banker may combine two current accounts at any time without notice to the customer.

The courts have analyzed the right to set off in various cases. The key highlights are as follows:

  1. In Barclays Bank of Kenya Ltd v Kepha Nyabera & 191 others & another[2013]eKLR the court held that where a bank has a loan account and also a current account in credit with the same customer and holds security for the ultimate balance, the banker is at liberty to combine and consolidate the accounts and set off the accounts.
  • In Nicholas Mahihu Muriithi v Barclays Bank Kenya Limited [2018] eKLR the Appellant held an account with the respondent bank under which he took out a loan and overdraft facilities. The appellant failed to fully settle the facilities advanced and the bank’s attempts to realize the securities were unsuccessful due to the low bids on the security. Based on this the bank decided to write off the debt. However upon further investigation the bank established that the Appellant held a personal account with the bank. The bank then decided to set off the debts outstanding with the personal account.

The court reached a determination that the respondent was entitled to exercise its right of combination and set off in terms of the charge and the loan agreement. That the right could properly be exercised even after the respondent had written off the loan.

  • In the case of Embakasi Management Limited & 8 others v Imperial Bank Limited (In Receivership) & another (Civil Appeal 113 of 2019) the Borrower took out a hire purchase facility with the Bank. As a further security a right to set off form was signed by a director of the borrower, to set off any debts due from the Borrower, against the accounts of its related companies. The director had common shareholding and directorship with the Appellants.

The court in this instance held that the Set Off contract signed specifically and expressly permitted the bank to lift the veil of the Appellant Company, as the Appellants were under the control of the same shareholders and directors, and therefore part of the same group of companies.


In conclusion we advise that it is essential that the borrower keep in mind that upon signing of an agreement which allows for the banks right of set off, the accounts held either as a personal account or as a company account are subject to the right.

Thus, any account held by the borrower may be subject to the right of set off.

Disclaimer: Kindly note that this write-up does not constitute legal advice but is provided for information purposes only. If you have any specific inquiries on the subject and other related matters, please contact us at