AVOIDING PENALTIES: WHAT TO DO WITH A COMPANY YOU DON'T USE

By Geoffrey E. Odongo, Managing Partner at Ameli Inyangu & Partners Advocates

In today's fast-paced business environment, it’s not uncommon for entrepreneurs to find themselves with a company they no longer wish to operate. Whether the initial business goals have been achieved, or circumstances have changed, it's crucial to know how to properly dispose of a dormant company to avoid ongoing statutory obligations and potential penalties.

1. Understanding Your Statutory Obligations

Even if a company is not actively trading, it still has statutory obligations. These include: 

• Filing Tax Returns: All registered companies must file tax returns, even if they are dormant.
• Filing Annual Returns: Companies are required to submit annual returns to the Registrar of Companies.
• Holding Annual General Meetings: While these can be waived under certain conditions, the obligation still exists. 

Failure to comply with these requirements can result in significant penalties for the company's directors.

2. Steps to Strike Off a Company

If you decide that striking off the company is the best course of action, the process is straightforward but must be done carefully:

1. Initiate the Process via eCitizen Portal: The application to strike off a company should be made online through the eCitizen portal. This is the primary platform for business-related registrations and applications in Kenya.
2. Clear All Obligations: Ensure that all annual returns and any outstanding tax obligations are filed. The company must be in good standing with the Registrar of Companies and the Kenya Revenue Authority (KRA).
3. Prepare Required Documents: You will need a company resolution to strike off the company and complete statutory forms CR18 (Notice of Cessation) and CR19 (Application for Voluntary Strike Off).

3. Notification and Publication

Once the application is submitted and initially approved:

• Kenya Gazette Notice: The Registrar will publish a notice in the Kenya Gazette to inform the public about the intended strike-off. This notice lasts for 90 days, during which any objections can be raised.
• Final Strike-Off: If no objections are received, the company will be officially struck off the register, and a final notice will be published in the Kenya Gazette.

4. Restrictions and Special Considerations

Certain conditions restrict a company from applying for a strike-off:

• The company has conducted business or changed its name in the last three months.
• The company is involved in legal proceedings, is undergoing reconstruction, or is in the process of liquidation.

5. Importance of Legal Advice 

Handling the strike-off process correctly ensures that directors avoid personal liability and financial penalties. Seeking legal advice is highly recommended to navigate the requirements effectively and ensure compliance with all legal obligations.

CONCLUSION 

Striking off a company that is no longer needed can save time and money, but it must be done in accordance with Kenyan law. By using the eCitizen platform and ensuring all statutory obligations are up to date, you can effectively manage the process. Legal guidance can further ensure that the process is smooth and compliant. 

For expert advice on company dissolution and other legal matters, contact Geoffrey E. Odongo at odongo@aip-advocates.com or call +254 722 367647.