Dissolution of a company in Kenya

Dissolution of a company in Kenya, also known as striking off is a legally mandated process of ending a company’s existence. This involves settling debts, distributing assets to shareholders and officially removing the company’s name from the Registrar of Companies’ register, as outlined in the Companies Act, 2015. This ensures a transparent closure for creditors and shareholders and frees you from any ongoing legal obligations associated with the company.

Key Players in Dissolution of a company in Kenya

Dissolving a company in Kenya is a collaborative effort. While the company itself initiates the process, the official closure requires the involvement of a key government entity. Let’s break down the key players:

Company Directors: The company directors initiate the dissolution process by convening a board meeting to pass a special resolution formally declaring the company’s intention to dissolve. Additionally, they oversee the entire process, ensuring compliance with all legal requirements.
Creditors: Creditors have a significant stake in the dissolution process. They are notified of the company’s intention to dissolve and participate in a meeting to discuss outstanding debts and agree on a repayment plan. Settling all outstanding debts is crucial before the company can be officially dissolved.
The Registrar of Companies: This is the government body, under the Ministry of Trade, Industrialization and Cooperatives which plays a vital role in finalizing the dissolution. They maintain the official register of companies in Kenya. The Registrar reviews the dissolution application ensuring all legal requirements are met, and ultimately removes the company’s name from the register upon completion of the process. This official “striking off” signifies the company’s legal closure.

Why Dissolve a Company?

Several reasons might prompt the dissolution of a private company in Kenya. Here are a few common scenarios:

Ceased Operations: Your business has stopped trading and you no longer plan to resume activities.
Change in Direction: The company’s objectives have shifted, and dissolving the current structure is necessary.
Financial Difficulties: The company may be facing financial challenges that make continuing operations unsustainable.
Merger or Acquisition: Your company is merging with another or being acquired hence the dissolution of the existing structure.

Key Steps for Company Dissolution in Kenya

Dissolving a company in Kenya involves several steps mandated by the Companies Act, 2015. Here’s a breakdown of the key stages:

Pre-consideration:Ensuring Up-to-Date Filings:

Before initiating dissolution, all company annual returns must be submitted and any outstanding fees settled. This ensures your company’s records are current with the Registrar of Companies (Kenya)

1. Board Resolution:

The company directors must convene a board meeting and pass a special resolution formally declaring the intention to dissolve the company.
This resolution serves as the official starting point of the dissolution process.

2. Creditors’ Meeting:

The company must convene a meeting with its creditors. This meeting serves as a platform to discuss outstanding debts and reach an agreement on a repayment plan.
Creditors have a significant stake in the dissolution process, and their claims must be addressed before the company can be officially dissolved.

3. Application to Registrar of Companies:

The company must submit a formal application to the Registrar of Companies (Kenya) requesting removal from the Company Registry. This application involves two key forms:

CR 19 (Notice of Special Resolution): This form details the special resolution passed by the board, formally declaring the company’s intention to dissolve.
CR 18 (Application to Strike Off Company): This form initiates the official removal process from the register. It requires a clear statement of the reasons for dissolving the company.

4. Public Notice:

A public notice announcing the company’s impending dissolution needs to be published in a national newspaper for a designated period. This notification serves a dual purpose:

Informs the public: It lets creditors and other stakeholders know about the company’s closure.
Opportunity for claims: This period allows any creditors with outstanding claims against the company to come forward and settle their debts.

5. Asset Distribution:

Once all outstanding debts are settled, the remaining company assets can be distributed to shareholders according to their shareholding agreements.
This distribution should be documented and follow established legal guidelines.

6. Strike Off:

Upon fulfilling all legal requirements and ensuring creditor satisfaction, Next,the Registrar of Companies will officially strike the company’s name off the companys registry.
This signifies the company’s legal closure and formal removal from the official records.

Mandatory Notifications for Dissolution of a company in Kenya:

Within seven days of initiating the dissolution process, the company directors and shareholders are legally obligated to notify a specific group of individuals under Section 900 of the Companies Act and here is the breakdown of the individuals;

Shareholders: All company shareholders must be informed about the dissolution.
Creditors: Any outstanding debts owed to creditors (banks, suppliers, employees, etc.) need to be addressed and settled before closure.
Employees: All company employees must be notified of the dissolution, potentially impacting employment terms.
Pension Fund Managers: Trustees of any employee pension funds must be informed to ensure proper handling of employee benefits.
Directors and New Stakeholders: Any directors who haven’t signed the dissolution forms and any new directors, members, creditors, or employees joining during the process must also receive notification.
Relevant Resources

Conclusion

NOTE: Don’t confuse company dissolution with simply ceasing operations!

Even if a company stops trading, it remains a legal entity with ongoing obligations until formally dissolved. This process, known as dissolution, ensures a transparent and accountable closure. It protects creditors by ensuring their debts are addressed and guarantees proper distribution of any remaining company assets.

Dissolving a company can be complex. Seek professional guidance to navigate the process smoothly! Contact Afrilink Consultants today for a consultation on dissolving your private company in Kenya