FAQs ON COMPANY VOLUNTARY DISSOLUTION/STRIKE OFF: KENYA
In our previous legal insight STRIKING OFF A PRIVATE COMPANY IN KENYA NOW ON BRS V2 – A.O.Wanga Advocates we looked at the circumstances under which one can apply for voluntary striking off or dissolution of a private company, the formal requirements and procedure for applying to strike of a private company. In this insight we look at the frequently asked questions and answers on voluntary strike/dissolution of private companies in Kenya.
| N. | QUESTION | ANSWER | LEGAL BASIS (Companies Act No. 17 of 2015) |
| 1. | Under what circumstances may a company apply to be struck off the register? | If the company is dormant or is no longer trading and has no assets or liabilities.If the shareholders decide that they no longer wish to continue with the company and would like it struck off the register. | Section 897 Note: Before the striking off procedure commences all statutory compliance should be up-to-date. i.e. the company must be linked and verified.UpToDate Annual returns must have been filled.No changes application should be pending.All company’s liabilities must be settled (Taxes, statutory deduction, employees’ salaries, pending bills etc.) |
| 2. | When not apply to apply for strike off | If at any time, in the last 3 months of making the application, it has: carried on business, changed its name, it is subject of voluntary arrangement, it is under administration and is under liquidation. | Section 898 & 899 |
| 3. | Who must you inform? | shareholders of the companyEmployeesCreditorsmanagers or trustees of any employee pension fundany directors who have not signed the form CR 18 | Section 900 Note: these parties must be notified within 7 days of sending the application to the Registrar |
| 4. | How do I withdraw my application for striking off? | The directors may apply to withdraw a voluntary strike off application by completing Form CR 47 if they change their mind or the company ceases to be eligible for striking off. | Section 903 |
| 5. | What are some of the reasons directors may wish to withdraw a strike off application? | Where the company trades or otherwise carries on business Where the company decides to change its name.Where the company becomes a subject of formal insolvency proceedingsWhere there is an objection to striking off by creditors, employees, regulatory authorities such as KRA, County government, statutory bodies etc. | Section 903 |
| 6. | Who can object to voluntary strike off application? | Anyone who has an interest in the affair of the company can object to the Registrar. | Note: Example of parties who may object: banks, suppliers, former employees if the company owes them money, landlords, tenants, guarantors, Kenya Revenue Authority, County government, Statutory bodies, and the local labour officer etc. |
| 7. | How can one object to striking off? | Objections or complaints must be in writing and sent to the Registrar with supporting evidence. | Note: One can object within 3 months after publication of the notice of intended dissolution in the Kenya Gazette. |
| 8. | What are some of the reasons for objecting voluntary strike off? | If the company has breached any of the conditions of its application for instance, it has traded, changed its name or become subject to insolvency proceedings during the three-month period before the application.Failure to notify interested parties.False declaration on the application formif some form of action is being undertaken or is pending, to recover any money owed.If there is a pending legal action against the company. | |
| 9. | Can the Registrar strike a company off the register on his own initiative? | Yes, if it is neither carrying on business nor in operation. | Section 894 Note: Before striking a company off the register, the Registrar is required to write two formal letters and send notice to the company’s registered office to inquire whether it is still carrying on business or in operation. If he is satisfied that it is not, he will publish a notice in the Kenya Gazette stating his intention to strike the company off the register unless he is shown reason not to do so. |
| 10. | How can directors avoid Registrar’s own initiative strike off action? | Directors must reply promptly to any formal inquiry letter from the Registrar and deliver any outstanding documents.Object to such action. | Note: The Registrar will take into account representations from the company and other interested parties. If there is good reason not to strike the company off the register, he may suspend the action until the objection is resolved. |
| 11. | What happens to the assets of a dissolved company? | From the date of dissolution, any assets of a dissolved company (except any asset held in trust for another person) will pass to the State because they do not have a legal owner. The company’s bank account will be frozen and any credit balance in the account will be passed to the State. (You should address any enquiries about property that has vested in the State to the Office of the Attorney General) | |
| 12. | What is Administrative Restoration? | Where a company was dissolved because it appeared to be no longer carrying on business or in operation, a former director or member may apply to the Registrar to have the company restored. This is called ‘administrative restoration’. If the Registrar restores the company, it is deemed to have continued in existence as if it had not been dissolved and struck off the register. | Section 913 Note: For a company to be eligible for “Administrative restoration” it must have been struck of the register under Section 894 or 897 of the Companies Act and dissolved for no more than six years at the date the Registrar receives your application for restoration. |
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