The Deregistration of Companies in Kenya.

Introduction

A company registered in Kenya can be deregistered. Deregistration involves the removal or striking off of the company’s name from the register of companies. Under the Companies Act, it is either the directors of the company or the Registrar of Companies that can initiate the deregistration process.

Bear in mind that the deregistration of a company is distinct from insolvency – the winding up of a company by its creditors. For this reason, a company under adminis­tration, a voluntary arrangement or liquidation, whether voluntary or not, is not qualified to make such an application until the insolvency process is complete.

In this article, we delve into the deregistration of companies. It is a brief overview of the various reasons for deregistration, the process, and the main documents used in the deregistration process.

Reasons for the Deregistration of a Company

By a Simple Majority of its Directors

The directors of the company must by a simple majority pass a special resolution for dissolution of the company. The special resolution must give the reason for the decision to dissolve the company.

Some of the most common reasons include: 

1. Financial instability – A company may become financially unviable forcing the owners to shut down the business.
2. Completed objectives – After completing the project, the directors of a company formed as a special purpose vehicle for a specific project can apply for its deregistration.
3. Inactivity – If a company is no longer carrying on business, its owners may opt to deregister it to avoid having to maintain it (taking out licenses, filing annual returns, and filing tax returns) and any other future legal and regulatory obligations that may leave it open to liabilities such as fines and penalties.
4. Mergers and acquisitions – When companies merge or are acquired, a company is extinguished. It then becomes necessary to deregister the entity that is no longer in operation.

By the Registrar of Companies

The Registrar of Companies may deregister a company for any reason provided by the Act. These reasons include:

• The company is dormant, not carrying on business or operating;
• If a company is under liquidation, if the Registrar believes that the company is fully wound up or there is no acting liquidator for a period exceeding 6 months;
• The company fails to comply with its legal obligations under the Act such as the annual filing of returns; and
• By order of a court (courts maintain the power to order the deregistration of a company even when this is not stipulated by the Act).

Documents in the Deregistration Process

The documents required during the deregistration process are as follows:

1. Form CR-18: Application for Striking Out of the Companies Register;
2. Form CR-19: Minutes of Meeting with Special Resolution;
3. Proof of settlement of all debts and liabilities: Before making an application for deregistration ensure all the company’s debts, liabilities, and other obligations are settled. A company with outstanding liabilities may face objections to its application by unsatisfied creditors rendering the entire process moot. Nevertheless, it is possible to have unknown liabilities. In such cases and the case of any other unsettled liabilities, the company will continue to be liable for these liabilities despite its dissolution.
4. A Notice in The Kenya Gazette:

Once an application for deregistration is filed with the Registrar, a notice of deregistration is published in the Kenya Gazette. This notice informs the public and creditors, if any, that the company is seeking deregistration. Creditors have 90 days to file objections if they have any claims against the company.

If there are no objections raised within the stipulated period, the company is struck off from the register of companies. Thereafter, a Certificate of Deregistration is issued. This Certificate formally marks the end of the company’s legal existence.

Conclusion

Although deregistering a company has lasting consequences, several persons have the power to apply for its restoration. Applications for restoration can be made to a court or the Registrar of Companies subject to meeting the requirements under that part of the Act. For example, the directors and shareholders of a company may apply for a company’s restoration within six years from the date of dissolution.

Despite dissolution, the directors and shareholders of a company remain liable for any debts and liabilities that were outstanding on the date of dissolution.

Reach out to us for further information and personalised legal advice on the deregistration of companies. You can reach us by Booking a Consultation, through our Contact Us page, or via email info@wacumureithiadvocates.co.ke.