OMBETA OGONYO & CO.

ADVOCATES

TO

BORDELINK VENTURES LIMITED

LEGAL OPINION

IN RESPECT TO DEREGISTRATION & VOLUNTARY STRIKE- OFF OF A

PRIVATE LIMITED COMPANY
Introduction:
After trying your hand at running a business entity and it doesn’t work, how do you
dissolve it? It takes more than just closing the doors to the physical location and
calling it a day.

This article addresses the legal procedures of deregistering a registered business

entity in Kenya.

Grounds for De-registration of a Company:

 Compulsory winding up which may be as a result of a Court order.

 Through Voluntary Dissolution where shareholders and directors of the company
apply to the Registrar of Companies to have the company dissolved.
 When the company is declared insolvent and it is longer able to carry on
operations.
 Where the Directors of the Company or majority of the directors make an
application to the Registrar of Companies to have the company struck off.
 Where the company is under liquidation and it has been wound up, the
Registrar may strike off the Company’s name from the Register.

Voluntary Strike-off and Dissolution

Section 897 of the Companies Act, 2015 provides that a company may apply to the
Registrar to be struck off the register and be dissolved.

As a matter of practice, a company may apply to the Registrar to be struck off the
register and dissolved if:

 it is dormant or no longer trading, and has no assets or liabilities; or

 if the shareholders decide that they no longer wish to continue with the
company and would like it struck off the register.

The Process of De-registration of a Company in Kenya

Deregistration of a company begins with a special meeting of the board of directors,

in which a resolution to dissolve the company is passed.

The minutes of this meeting are required to be submitted, together with the
resolution itself, in the form of a CR19 form, an application to be struck out of the
companies register (form CR18), and the company’s statement of annual returns.  
There should also be a statement to the effect that the company is cleared from all
charges and credit.

Important to note:

 The company must be linked/ automated through the e-citizen portal since the
application is lodged online. The application is done on the directors e-citizen
account and for a foreign-owned company, the application is done through the
company secretary’s account.
 The company is expected to file its secretarial annual returns up to date.
 A meeting of the Board of Directors should be held in which a resolution to
dissolve the company is passed.
 An application to the Registrar of Companies is made in the prescribed form,
stating the intention of the company to wind up its affairs. The application
should be accompanied by the necessary resolutions (Form CR19 and Form
CR18).
 The application is reviewed for verification purposes.
 Upon approval by the Registrar of Companies, the de-registration is published
in the Kenya Gazette for intended dissolution: for a period of three (3) months
to invite any outstanding claims owed to creditors by the company for
settlement.
 Removal from the Register of Companies: If there are no claims brought
forward, the Registrar proceeds to strike off the company from the Register of
Companies in Kenya. The process takes 6-12 months.
 Filing of Closure accounts to KRA for the outstanding period.
 De-registration of the company KRA PIN Certificate and all other obligation i.e.
PAYE, VAT is done once: the company is stuck off at the Companies Registry.
The directors therefore apply for de-registration of the company pin upon
settling any outstanding taxes owed to KRA.

Once the applications have been submitted, the registrar will strike the business
entity from the register, and will gazette a notice to that effect.

After this, the business is deemed as dissolved, with the only exception being that the
liabilities must be cleared.

Section 898 and 899 of the Companies Act,2015 sets out the circumstances in which
the company may not apply to be struck off.  A company may not make an application
for voluntary strike off if, at any time, in the last 3 months, it has:
 Carried on business;
 Changed its name;
  Made a disposal for value of property that immediately before ceasing to carry
on business, it held for the purpose of disposal for gain in the normal course of
carrying on business. For example, a company in business to sell cars could not
sell cars during that 3-month period but it could sell the showroom where the
cars were displayed.
 Engaged in any other activity except one which is necessary or expedient for
the purpose of:

i. making an application for strike off or deciding whether to do so (for

example, a company may seek professional advice on the application
and pay the costs of submitting the ‘Application by Company to Have its
Name Struck Off the Register’ Form CR 18)
ii. concluding the affairs of the company;
iii. complying with any statutory requirement; or
iv. an order published in the Kenya Gazette by the Cabinet Secretary
  
A company cannot apply to be struck off if it is the subject, or proposed subject, of:
 a voluntary arrangement under the insolvency Act which has not been
concluded
 Under administration
 Under liquidation- voluntary or by the Court which has not been concluded

What should I do before apply?

There are safeguards for those who are likely to be affected by a company’s
dissolution. You should warn the company’s shareholders, directors, creditors,
employees, managers, or trustees of any employee pension fund before applying as
any of them may object to the company being struck off.

You should deal with any pending items, such as closing the company’s bank account,
the transfer of any domain names before you apply for the strike-off.

You may notify any other organisation or party who may have an interest in the
company’s affairs otherwise they might later object to the application.  For instance,
the Kenya Revenue Authority, the County Government, particularly if the company is
under any obligation involving planning permission or health and safety issues.

N/B: Section 905 of the Act states that from the date of dissolution, any assets of a
dissolved company which have not been distributed or disclaimed will belong to the
State. The company’s bank account will be frozen and any credit balance in the
account will pass to the State.

How do I apply?
 You must complete the ‘Application by Company to Have its Name Struck Off the
Register’ Form CR 18. 
 The form (CR 18) should be dated and must be signed by:
 the sole director, if there is only one; or
 by both, if there are two; or
 by all, or the majority of directors, if there are more than two.
 The application is accompanied by a company’s resolution (Form CR 19).
 The application is lodged on the e-Citizen portal using the log in details of one of
the directors upon payment of the requisite fee.

What happens when the Registry of Companies receives the application?

The Registry examines the application and if it meets the requirements, the Registrar
shall cause to publish in the Kenya Gazette an intention to strike off the company to
allow interested parties the opportunity to object.

A copy of this notice will be placed on the company’s public record.  If there is no
reason to delay, the registrar will strike the company off the register not less than
three months after the date of the notice.  The company will be dissolved on
publication of a further notice stating this in the relevant Kenya Gazette.

 Can anyone object to dissolution?

 Any interested party can object to the registrar.

How and why can they object?

Objections or complaints must be in writing and sent to the registrar with any
supporting evidence, such as copies of invoices that may prove the company is
trading.  Reasons could include:

 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, or
afterwards

 if the directors have not informed interested parties

 if any of the declarations on the form are false

 if some form of action is being taken, or is pending, to recover any money

owed (such as a winding up petition)

 if other legal action is being taken against the company

Conclusion.
If all claims are settled or if no claims are brought forward, the registrar then
proceeds to remove the company from the Companies Register of Kenya.

This process could take 6-12 months.

Then after successful, the company files for the closure of KRA accounts for the
outstanding period.

The company’s KRA pin and other taxing obligations like VAT are de-registered. Then
the company owners apply for the deregistration of the company’s pin, this is after
settling all tax arrears to the KRA.