OVERVIEW
To Wind up a Company, to shut down or dissolve a limited Company is commonly referred to as voluntary Winding Up or De-registration of a Limited Liability Company.
Liquidation is a collective insolvency process leading to the end of the company’s existence (dissolution). In the previous legislation, this process was known as winding-up.
The Companies Act 2015 provides for instances when a company may be dissolved. Those instances include: –
- Termination of the Business of the company
- Completion of business for which the company was registered
- Company ceasing to carry on Business for whatever reason
- Company running into losses and becomes unsustainable
- Changes in Business environment.
- Changes in laws and compliance requirements
- HOW TO WIND UP OR DEREGISTER A COMPANY IN KENYA.
To this end, the ways available for a Company winding-up process in Kenya include liquidation, Dissolution, de-registration.
- Liquidation may be done in any of the following two ways:
- Voluntary liquidation
- Liquidation by the Court
- There are two modes of deregistration (striking-off), these include:
- Deregistration by the Registrar’s own accord
- Deregistration through an application by the company
Where the Company is not carrying on business and/or is not in operation, Striking off is the preferred option with minimal obligations for defunct companies or Companies that no longer need to exist.
STRIKING OFF: APPLICATION BY THE COMPANY
Section 897 and 898 of the Companies Act, 2015 provides that a company may through its directors or a majority of them apply to the Registrar of Companies to be struck off the register of companies as it ceases its operations and existence subject to the conditions set out in the Act.
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 application to be struck off the register can only be made if a company has not changed its name or carried on business or engaged in any other activity three months before the application.
What to do before and/or upon applying?
Upon the filing of the striking off application, the directors are obligated to notify the persons associated with the company of the lodging of the application. The persons associated with the company include the shareholders, employees, creditors, directors and a manager or trustee of a pension scheme.
It is safe to presume that, any person who is likely to be affected once the application to strike off has been approved, should be made aware of the process prior to the approval by the Registrar.
Where notification of certain affected persons is impossible or difficult to effect, proof of reasonable steps towards such compliance would be sufficient to discharge the directors of this obligation. Failure by a director to notify the said affected persons or failure to adopt reasonable processes towards this compliance exposes such director to a fine not exceeding fifty thousand shillings upon conviction.
Where there are no employees and/or persons actively associated with the company other than the Directors, a notice to all of them will suffice.
Documentation
The Application is submitted together with the following documents: –
- The minutes of the meeting together with the Special Resolution decision to have the company dissolved/struck off (form CR19)
- The Application for striking out of the companies register (form CR18). The information needed for the CR18 form includes the name and registration number of the company, its date of incorporation, and the names and signatures of the directors making the application.
- The company’s statement of annual returns (form CR29).
- A statement to the effect that the company is cleared from all charges and credit, or that it is able to do so.
- A copy of the application should be given to all the members and employees of the company within seven days.
How to 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:
(a) the sole director, if there is only one
(b) by both, if there are two
(c) 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 director’s upon payment of the requisite fee.
Post-Application Process
After the application has been approved by the Registrar, the applicant is required to apply for publication of the intended dissolution of the company in the Kenya Gazette. The Registrar will then publish a gazette notice notifying the public of the intended dissolution of the company and inviting any person to show cause why the name of the company should not be struck off the Register. This is considered as the first gazettement.
Upon expiry of three months, the Registrar proceeds to publish the second gazette notice confirming that the company’s name has been struck off the Register as of a specified date. It is to be noted however that the second and final gazette notice will only be issued if no objection to the process is raised and sustained in accordance with the Act.
It is expected that the application to be struck off the register is preceded by a clean-up exercise that includes the settlement of existing liabilities by the company including but not limited to settlement of all tax claims by the Kenya Revenue Authority (KRA). Post deregistration, the applicant should follow up with KRA for the cancellation of the tax obligations of the company and deactivation of the company’s Personal Identification Number.
CONCLUSION
From the foregoing, it is apparent that an application for striking a company off the Companies Register is a suitable option to achieve closure; given the simplicity of the procedure, the limited time spent in doing so and being less expensive when a company has stopped operating.
By K. Odundo
This Article is provided free of charge for information purposes only; it does not constitute legal advice and should be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary as set in the article should be held without seeking specific legal advice on the subject matter. If you have any query regarding the same, please do not hesitate to contact us on info@alakonyalaw.co.ke
