Dissolving a company in Kenya is a crucial process. Learn the steps involved and how to ensure a smooth closure. Start the process today with our expert guide!
Running a company can feel like a grand adventure, but like all adventures, some come to a natural end. Whether you’re pivoting to a new opportunity, wrapping up a company that has served its purpose, or liquidating assets after a venture that didn’t go as planned, dissolving a company in Kenya is a structured, legal process that ensures all loose ends are tied up in a professional and compliant manner. After all, business is as much about managing exits as it is about making big entrances!
In this article, we’ll break down the key steps to legally dissolving your company, and show you how F.M. Muteti & Co. Advocates can make the transition smooth, leaving you ready for your next big move.
Step-by-Step Guide to Dissolving a Company in Kenya
Dissolution refers to the formal end of a company’s legal existence. This process removes the company from the official register of companies, effectively ending its life cycle. The type of business entity and the company’s financial position determine the dissolution procedure.
Types of Company Dissolution in Kenya
- Voluntary Dissolution
Voluntary dissolution is initiated under Section 897 of the Companies Act 2015 or Section 393 of the Insolvency Act, 2015 by the company’s shareholders or directors. It usually occurs when the company has achieved its goals, or its owners no longer wish to continue its operations. A special resolution is passed during a board meeting, and the company files the required documents with the Registrar of Companies, including the meeting’s minutes and a statement confirming the company’s solvency or ability to clear all outstanding debts. Once these documents are submitted, the company’s intent to dissolve is published in the Kenya Gazette. If no objections are raised within three months, the company is formally struck off the register.
- Involuntary Dissolution
Involuntary dissolution occurs when the company is dissolved by external forces, such as government authorities, due to non-compliance with regulatory requirements (e.g., failure to file annual returns). The Registrar of Companies may initiate the process to strike off a company from the register after issuing warnings to the directors under Section 894 of the Companies Act. If the company has unresolved liabilities, liquidation may be required before dissolution.
Liquidation: The Precursor to Dissolution
Pursuant to Section 399 of the Insolvency Act, when a company has debts or assets that must be dealt with before it can be dissolved, liquidation is necessary. Liquidation involves winding up the company’s affairs by selling its assets, paying creditors, and distributing any remaining funds to shareholders. After the liquidation process is complete, the company can proceed to dissolution.
Procedures and Documentation
- Filing Documents
The dissolution process begins with a formal decision by the shareholders or directors to close the company. The board must hold a special meeting to pass a resolution to dissolve. The resolution and the minutes of the meeting are submitted to the Registrar of Companies, alongside forms such as CR18 (application to be struck off) and CR19 (resolution to dissolve).
The application includes critical information such as the company’s name, registration number, date of incorporation, and the signatures of the directors. A copy of this application must be shared with all company members and employees within seven days. The application is filed through the eCitizen portal.
- Realization of Assets
For a Company that has undergone liquidation, during the process, the liquidator assesses and sells the company’s assets. The proceeds are used to pay creditors and any remaining funds are distributed to shareholders.
- Winding-Up Process
For limited liability companies, a declaration of solvency must be made, stating that the company can pay off its debts within 12 months as required by Section 398 of the Insolvency Act. After 35 days, the partners pass a resolution to wind up, which is lodged with the Registrar within seven days. This resolution is also published in a national newspaper within 14 days. Upon submission, the company is struck off the register.
Conclusion
Dissolving a company in Kenya is a structured legal process that requires careful attention to regulatory compliance. Dissolution ends the company’s legal existence, while liquidation ensures that the company’s assets are realized and debts settled before dissolution. It’s important to follow these procedures to avoid future liabilities. Whether opting for voluntary or involuntary dissolution, seeking legal advice can help ensure a smooth transition.
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult a qualified legal professional. F.M. Muteti & Company Advocates is here to assist you with your legal needs.
