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Dissolution/Deregistration and Restoration of A Company – Analysis of Companies Act, 2015

By: Njeri Githanga & Felix Okiri[1]

TABLE OF CONTENTS

1.0INTRODUCTION

1.1.DISSOLUTION

I. Instances when a company may be dissolved from the Register of Companies

II. The effect of dissolution of a company

1.2 RESTORATION OF A COMPANY TO THE REGISTER OF COMPANIES.

I. Types of restoration of a company.

a) Administrative restoration (restoration by the Registrar)

Conditions for Administrative restoration The effect of administrative restoration of a company

b) Court ordered restoration (Application to Court for restoration)

Who may bring an application for court restoration? When can an application to the Court for restoration be made

II. Judicial perspectives on restoration of a Company

1.3 CONCLUSION


1.0 INTRODUCTION

The registration of a company also known as ‘incorporation’ brings the company into existence.[2] At the end of its doing business, a company may also be deregistered or dissolved. [3] A deregistered/dissolved company ceases to exist. [4] Theoretically, while both deregistration and dissolution have the effect of terminating the legal existence of a company, their consequences are different. [5] Where a company is dissolved, the liability of the directors, members and officers ceases. [6] With deregistration however, such liability does not cease to exist. [7] Notwithstanding deregistration/dissolution, a deregistered/dissolved company may also be reinstated. [8]The act of reinstating a deregistered company is also referred to as restoration. [9]

1.1. DISSOLUTION

I. Instances when a company may be dissolved from the Register of Companies

The Companies Act 2015 provides for instances when a company may be dissolved. [10] Those instances include: -

i. Where a company is not carrying on business or is not in operation.

Where the Registrar reasonable believes that a company is not carrying on business or is not in operation,
[11] the Registrar may then send to the company by post, a letter inquiring whether the company is carrying on business or is operation. [12] If the correspondence indicates that a company is not in operation, the registrar may strike off the company from the register and the company will be dissolved. [13]

ii. A company that is in liquidation

In the case of a company that is in liquidation and where the Registrar reasonably believes that the affairs of the company are fully wound up or that no liquidator is acting, the registrar may strike the company’s name off the Register. [14]

iii. Where a company applies to the Registrar that it be struck off the register

The registrar may also strike the company’s name off the Register on application by a company. [15] Such an application is effective only if it is made on behalf of the company by its directors or by a majority of them. [16] Such an application as stated above may not be made where an application to the Court under Part XXXIV has been made on behalf of the company for the sanctioning of a compromise or arrangement and the matter has not been finally concluded. [17]

II. The effect of dissolution of a company

Under the Act, the effect of dissolution of a company is that the property that had not been distributed immediately prior to the dissolution of a company vests in the state with effect from dissolution of the company. [18]However, the Attorney General may discharge such property vested in the state by issuing a notice of disclaimer of ownership of that property. [19]The effect of the disclaimer above is that such property is taken never to have vested in the State. [20]

In the South African case of case of G Walker Engineering CC t/a Atlantic Steam Services v First Garment Rental (Pty), [21]the court found that the effect of the deregistration of a company was that all its property, including any third party claims vested in the state as bona vacantia. [22]In Barclays National Bank Ltd v Kalk, [23] the court held that the effect of deregistration was that a debt which due to a creditor of a deregistered company was not extinguished, but unenforceable. [24]

1.2 RESTORATION OF A COMPANY TO THE REGISTER OF COMPANIES

I. Types of restoration of a company

a) Administrative restoration (restoration by the Registrar)

An application may be made to the Registrar to restore a company that has been struck off the Register under section 894 or 897. [25] Such an application may be made even where the company has been dissolved. [26] The application may only be made by a former director or former member of the company [27]; and not after the expiry of six years from the date on which the company was dissolved. [28]

  • Conditions for Administrative restoration

A company may only be restored on conditions that;- the company was carrying on business or in operation at the time of its striking off [29] ; if any property previously vested in or held on trust for the company has vested in the State under section 905, the Attorney General has signified to the Registrar in writing consent to the company’s restoration to the Register [30]; The third condition is that the applicant has lodged with the Registrar for registration such documents relating to the company as are necessary to bring up to date the records kept by the Registrar. [31]

  • The effect of administrative restoration of a company

The effect of administrative restoration of a company is that the company is taken to have continued in existence as if it had not been dissolved or struck off the Register. [32]

b) Court ordered restoration (Application to Court for restoration)

An application may also be made to the Court to restore to the Register a company [33]that has either: – been dissolved after being liquidated under the law relating to insolvency [34]; that is taken to have been dissolved following administration under that Act; or that has been struck off the Register under section 894 or 895 [35]; or under section 897. [36]

  • Who may bring an application for court restoration?

An application to the Court for restoration may be made by either:- the Attorney General [37]; a former director of the company; [38] person having an interest in land in which the company had a superior or derivative interest [39]; person who, had a contractual relationship with the company [40]; and a person with a potential legal claim against the company [41] among others.

  • When can an application to the Court for restoration be made

Such an application may be made at any time for the purpose of bringing proceedings against the company for damages for personal injury. [42] However, such an application to the Court may not be made after the expiry of six years from the date of the dissolution of the company. [43]

II. Judicial perspectives on restoration of a Company

i. A person ought to be a holder of a valid Decree in order to seek the restoration of a company to the Register of Companies

The courts have held that – a holder of a valid Decree is entitled under the applicable law, to seek the restoration of a company to the Register of Companies for the purposes of execution of that Decree. [44] In Re Queensway Investments Limited, [45]the Queensway Investments Limited having been struck off the register, creditor felt aggrieved because the company owed the creditor a sum of money which, together with costs and interest was more than Kshs. 9.5 million. [46] In its holding, the Court found out that it was just and equitable that the company had to be restored to the register. [47]

In John Blasious Ogati vs. the Attorney General [48] and Jackson Wachuga vs. Eastern Kitui Stores Ltd [49] , the court discussed Section 339 of cap 486 which has been replicated in Sections 913 and 918 of the Companies Act, 2015. Section 339 of cap 486 set out the conditions that had to be satisfied before a company could be restored to the Register of Companies. [50] In Jackson Wachuga vs. Eastern Kitui Stores Ltd, [51] the Court held that the defendant company having been dissolved on 18th March 2005 vide Gazette Notice No.2057 of the same date, the company remained dissolved and was no longer in existence. [52] Of essence, the Court found that for the company to be restored back to life, it had to take the intervention of the High Court as was provided by section 339(6) of the Companies Act. [53] The Registrar of companies’ decision to restore the defendant company was an exercise in futility. [54]

ii. An application for restoration ought not be time barred

In Agnator Kanini v Mwalimu Mamundi Autoparts Ltd & another, [55] following dissolution of a company under section 339 of the repealed Companies Act cap 486 (equivalent of Section 894 of the Companies Act, 2015), an application for restoration of a company was filed under Section 917 of the Companies Act, 2015 [56] and section 3A of the Civil Procedure Act.[57]The Applicants contended that the striking of the company’s name off the Register of Companies was a move calculated to evade the payment of the Decree that the Applicants had obtained against the company. [58] The Applicants urged the Court to allow the application to enable them (Applicant) execute the Decree earlier issued in her favour. [59]

The issue occurred on October 16, 2010. Subsequently, the proceedings for damages were filed by the Applicant on August 6, 2012 while the dissolution of the Applicant was done on 11th December 2014when the Applicants’ suit was pending. The Court found that the application was timeously brought and as a result it was not barred by section 917 (4)of the Companies Act, 2015. [60]

iii. Proof that a company was in operation/ carrying on business at the time of striking off

Under section 339(6) of the repealed Companies Act, Cap 486, an applicant who sought restoration by court had to demonstrate that the company was, at the time of striking off, carrying on business, or was in operation. [61]However, under section 916 or Section 917 of the Companies Act, 2015 on restoration by the court, there is no similar provision demanding that an applicant demonstrates that the company was in operation at the time of striking off. [62]In a nutshell, the condition that an applicant proves that the company was in business does not apply to restoration of companies by court under Sections 916and 917 of the Act. [63] The above condition only applies to applications to the Registrar for administrative restoration underSections 913(2) and 918 of the Companies Act, 2015. [64]

1.3 CONCLUSION

A deregistered/ dissolved company may be re- registered on application to the Court or the Registrar. The act of reinstating a deregistered company is referred to as restoration. Such restoration, either by Court or Registrar may only be done on the fulfillment of certain conditions as enumerated by the Act. The Courts have also held onto certain consideration in determining whether or not to grant orders for restoration. Some of the considerations have included :- whether a person is a holder of a valid decree; whether an application is time barred; and proof that a company was in operation/ carrying on business at the time of striking off.

* Njeri Githanga is a holder of LLB degree ,PDG Law and an Advocate of the High Court

Felix Okiri is a holder of LLB degree from Moi University & PDG Law (Ongoing) Kenya School of Law.


[2] Susan McLaughlin Unlocking Company Law (Routledge, 5 Mar 2015)15 ; also see The Companies Act No. 17 of 2015 section S.19(a)

[3] Stephen Bottomley, Kath Hall, Peta Spender, Beth Nosworthy Contemporary Australian Corporate Law (Cambridge University Press, 8 Nov 2017)464

[4]Ratan Nolakha Company Law and Practice (Vikas Publishing House)5.14

[5] Allen West DEREGISTRATION OF COMPANIES AND CLOSE CORPORATIONS VIS-À-VIS THE DISSOLUTION OF COMPANIES AND CLOSE CORPORATIONS AND THE EFFECT THEREOF ON CONVEYANCING MATTERS < http://www.macrobert.co.za/News-Blog/Blog/DEREGISTRATION-EFFECT-CONVEYANCING-MATTERS>accessed 22 March

[6] ibid

[7] ibid

[8] The Companies Act No. 17 of 2015 Section 912

9] Ibid, S.912

[10] ibid

[11]ibid S.894(1).

[12] ibid

[13] S.894(3)(b).

[14] S.895(1) & (2).

[15] S.897(1)

[16] S.897(2).

[17] S.899(1)

[18] S.905(1)

[19] S.906(1).

[20] S.907(1).

[21] Ltd (2011 (5) SA 14 (WCC)) [2011] ZAWCHC 261

[22] Ibid; also see Rainbow Diamonds Edms Bpk en Andere v Suid-Afrikaanse Nasionale Lewensassuransie maatskappy [1984] ZASCA 41, 1984(3) SA 1(A) at 10C-12G).

[23] 1981(4) SA 291 (W)

[24] ibid

[25] S.912

[26] S.912(2)a

[27] S.912(2)b

[28] S.912(2)c

[29] S.913(2).

[30] S.913(3).

[31] S.913(4).

[32] S.915(1).

[33] S.916(1).

[34] S.916(1)a

[35] S.916(1)b

[36] S.916(1)c

[37] S.916(2)a

[38] S.916(2)b

[39] S.916(2)c

[40] S.916(2)e

[41] S.916(2)f

[42] S.917(1)

[43] S.917(4)

[44] In Re Queensway Investments Limited [2006] eKLR

[45] ibid

[46] ibid

[47] ibid

[48] John Blasious Ogati vs. the Attorney General [2016] eKLR

[49] Jackson Wachuga vs. Eastern Kitui Stores Ltd [2008] eKLR,

[50] See Cap 486(repealed), section 339

[51] supra

[52] ibid

[53] ibid

[54] ibid

[55] Agnator Kanini v Mwalimu Mamundi Autoparts Ltd & another [2017] eKLR.

[56] Section 917 of the Companies Act, 2015 allows aggrieved persons to make applications to court at any time for restoration of de – registered companies.

[57] ibid

[58] Section 3A of the Civil Procedure Act grants courts power to exercise their inherent jurisdiction on matters before them

[59] See Agnator Kanini v Mwalimu Mamundi (supra)

[60] ibid

[61] Cap 486 section 339(6)

[62] See section 339(6) of the repealed Companies Act, Cap 486 vis a vis section 916 or Section 917 of the Companies Act, 2015

[63] Agnator Kanini v Mwalimu Mamundi Autoparts Ltd & another [2017] eKLR

[64]Sections 913(2) and 918 of the Companies Act, 2015.

  1. April 16, 2018

    Insightful and very helpful. Thanks

  2. June 15, 2018

    Kindly advice on how to go about the dissolution of a company. specifically asking for the procedure from beginning to end. I have two Limited Liability companies that I would like to dissolve.

  3. June 20, 2018

    Desolving a company that has not been in any operation from registration.

  4. June 20, 2018

    Hi Bernice & John

    Re : Process of de-registering a company

    The process is done through the eCitizen portal http://ecitizen.go.ke/

    Before you commence the process, you have to do a name search with the Business Registration Service.

    Information you require after the name search
    a. An eCitizen account that belongs to a director of your company – register an eCitizen account here https://accounts.ecitizen.go.ke/register
    b. Company Name and Registration Number
    c. Date of Company Incorporation
    d. Date and Place of meeting at which resolution was passed
    e. Copy or Contents of the Resolution
    f. Details of Directors including Details, Address, Postal Code and Capacity
    g. Certificate of Incorporation

    Once you have successfully created your account, make an application for deregistration.

    For more information Please call Company Registration Queries:
    +254 743 946 150 // +254 790 724 322/0202227461/2251355/0732 529995

    Thank you

  5. July 9, 2018

    Nice article, very helpful.

  6. July 13, 2018

    Thank you for the valuable insights in company law

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