Kenya: Striking Off or Deregistration of Companies

It is noteworthy that striking off of a company does not release its directors, members and officers of existing liabilities prior to the approval of the application for striking off. Such liabilities continue and may be enforced as if the company had not been dissolved.

 

There are two modes of deregistration, these include:

 

Under this mode, the Registrar acts on his/her own motion and is therefore not prompted by the company or its officers to strike off the company.

 

Section 894 of the Act states that if the Registrar reasonably believes that a company is not carrying on busi­ness or is not in operation, the Registrar may send to the company by post a letter inquiring whether the company is carrying on business or is in operation. If the Registrar does not receive a reply within the stipulated timeline provided under the Act, the company will be struck off the Register upon issuance of a three month notice on the Kenya Gazette. 

 

It should be noted that under Section 895 of the Act, the Registrar has the power to strike off a company that is in liquidation where he/she reasonably believes, that the affairs of the company are fully wound up or that no liquidator is acting for the company.

  

Section 897 and 898 of the Act provides that a company may through its directors or a majority of them apply to the Registrar of Companies to be struck off the register of companies as it ceases its operations and exis­tence subject to the conditions set out in the Act. A company undergoing a voluntary arrangement, adminis­tration process or liquidation whether voluntary or by court in accordance with the Insolvency Act, 2015; is not qualified to make such an application until the specific insolvency process is completed. 

 

The application to be struck off the register can only be made if a company has not changed its name or carried on business or engaged in any other activity three months before the application. The aforesaid notwith­standing, a company that has engaged in activity necessary for the purposes of making the application to be struck off, or for the purposes of legal or regulatory compliance within the three months prior to the application to strike off; is still qualified for the striking off process. In any event, the application to strike off cannot progress if the company continues to have gaps in statutory compliance. Therefore all gaps including filing of annual returns must be made clean prior to the application. 

 

The striking off application is made by lodging Form CR 18 and Form CR 19. This application is accompanied by a Special Resolution passed by the directors attaching a copy of the certificate of incorporation. The application is then reviewed by the Registrar of Companies upon payment of the requisite application fees.

 

Upon the filing of the striking off application, the directors are obligated to notify the persons associated with the company of the lodging of the application. The persons associated with the company include the share­holders, employees, creditors, directors and a manager or trustee of a pension scheme. It is safe to presume that, any person who is likely to be affected once the application to strike off has been approved, should be made aware of the process prior to the approval by the Registrar. Where notification of certain affected persons is impossible or difficult to effect, proof of reasonable steps towards such compliance would be sufficient to discharge the directors of this obligation. Failure by a director to notify the said affected persons or failure to adopt reasonable processes towards this compliance exposes such director to a fine not exceeding fifty thousand shillings upon conviction.  

 

After the application has been approved by the Registrar, the applicant is required to apply for publication of the intended dissolution of the company in the Kenya Gazette. The Registrar will then publish a gazette notice notifying the public of the intended dissolution of the company and inviting any person to show cause why the name of the company should not be struck off the Register. This is considered as the first gazettement.

 

Upon expiry of three months, the Registrar proceeds to publish the second gazette notice confirming that the company's name has been struck off the Register as of a specified date. It is to be noted however that the second and final gazette notice will only be issued if no objection to the process is raised and sustained in accordance with the Act. 

 

It is expected that the application to be struck off the register is preceded by a clean-up exercise that includes the settlement of existing liabilities by the company including but not limited to settlement of all tax claims by the Kenya Revenue Authority (KRA). Post deregistration, the applicant should follow up with KRA for the cancellation of the tax obligations of the company and deactivation of the company’s Personal Identification Number.