To deregister a company is to complete the formal process of striking off or removing the name of a company from the Companies Register held by the Registrar of Companies. A company can be deregistered for varied reasons including the closure of the business voluntarily by the shareholders. In this article, we delve into the step-by-step process of deregistration. Our focus here is to provide an overview that can help save you time and ensure compliance. This guide walks you through the legal framework, the reasons for deregistration and the steps involved in the process.
Legal Framework for Deregistering a Company in Kenya
In Kenya, the deregistration of a company is governed by the Companies Act. The Act provides for the registration, maintenance and deregistration of companies.
A company can be deregistered, either voluntarily by its shareholders or without the shareholders by the Registrar of Companies. The Registrar has the power to deregister a company on order by a court or for any reason provided by the act including failure to comply with its legal obligations such as the annual filing of returns.
A company may seek deregistration for various reasons, including:
- Financial instability – A company may become financially unviable forcing the owners to shut down the business.
- Completed objectives – If a company was formed for a specific project, it becomes necessary to deregister the company once the project is completed.
- Inactivity – Some businesses may become dormant, with owners opting to close them to avoid unnecessary costs.
- Mergers and acquisitions – When companies merge or are acquired, the acquired entity may be deregistered.
Regardless of the reason, the process must be done according to the law to avoid penalties.
The Steps to Deregister a Company
The first step is for the company’s directors or shareholders to pass a board resolution to deregister the company. This decision must be agreed upon by a simple majority of the directors and minutes recorded in the company records.The minutes and the board resolution are important documents required to effect the deregistration.2. Clear Company Liabilities
Before applying for deregistration, all debts, liabilities, and obligations of the company must be settled. A company with outstanding liabilities cannot be deregistered until all creditors are satisfied.However, sometimes the liabilities are unknown. Such liabilities will remain despite the company’s deregistration. It is therefore important that the company diligently aim to settle all liabilities.3. File an Application for Deregistration
Once the company clears all debts and obligations, the directors or shareholders can apply for deregistration to the Registrar of Companies. The application must include the following:
- A formal request for deregistration.
- Reasons for deregistration.
- Proof that all liabilities have been settled.
4. Publication of a Notice in The Kenya GazetteOnce the Registrar receives the application, a notice of deregistration is published in the Kenya Gazette. This notice informs the public and creditors that the company is seeking to deregister. Creditors have 90 days to file objections if they have any claims against the company.5. Issuance of a Certificate of Deregistration
If no objections are raised within the stipulated 90 days, the Registrar will strike off the company from the register. The company will then receive a Certificate of Deregistration, formally marking the end of its legal existence.
The Role of the Registrar of Companies
The Registrar of Companies has the power to initiate deregistration of a company. This can happen if the company has:
- Failed to file annual returns for several years.
- Not conducted business in a while.
- Been dissolved by court order under the Insolvency Act.
In such cases, the Registrar will follow the same process of publishing the notice in the Kenya Gazette and issuing the Certificate of Deregistration once the procedure is complete.
Case Law: The Deregistration Process in Action
In the case of Muchiri & Company Advocates vs Registrar of Companies [2016] eKLR, the court held that a company must fulfil its legal obligations before being deregistered. The company in question had failed to submit tax returns and clear outstanding debts before applying for deregistration. The court ruled in favour of the creditors, showing that compliance with all obligations is critical to deregistering a company.
Key Considerations Before Deregistering a Company
Before initiating deregistration, consider the following:
- Unsettled obligations: Ensure all company obligations, including tax, employee dues, and contractual agreements, are fulfilled.
- Effect on stakeholders: Consider the impact of deregistration on your employees, partners, and other stakeholders.
- Future business opportunities: Once deregistered, restarting the company or conducting business under the same name will require fresh registration.
Conclusion: Ensure a Smooth Deregistration Process
Deregistering a company is a significant legal process with lasting consequences. While it can be done independently, involving a legal expert helps ensure that the company fulfils its obligations under Kenyan law. From filing applications to managing potential disputes, professional advice ensures a smoother, more efficient process. Reach out to a legal professional today and get expert help with deregistering your company in Kenya.
By carefully navigating the complexities of deregistration you protect yourself from potential legal consequences and ensure a clean exit from the market.Wacu Mureithi & Co. Advocates is ready to assist you through each step, ensuring that all your needs are met professionally and in compliance with the law.