Closing a Company in Kenya? Here’s the Legal Process You Must Follow

Business owners in Kenya may at some point need to close their companies, a process that is regulated under the Insolvency Act, known as liquidation, either due to insolvency, financial challenges, or strategic decisions by shareholders.

Liquidation involves closing a company, selling its assets, paying creditors, and distributing any remaining funds to shareholders, and can be initiated voluntarily by shareholders or through a court order.

Liquidation in Kenya: What Business Owners Need to Know

To start the Liquidation process, a company is required to clear all outstanding liabilities, finalize its tax obligations, and obtain a Tax Compliance Certificate (TCC) from the Kenya Revenue Authority (KRA).

Meanwhile, in cases of a voluntary liquidation, directors must pass a board resolution, and if the company is solvent, they must also sign a declaration of solvency.

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Shareholders must then pass a special resolution, which requires at least 75 % approval, to wind up the company and appoint a licensed liquidator.

However, if the company is insolvent and directors fail to act, creditors, contributories, or the Attorney-General may petition the High Court for a liquidation order.

Step 2: Submit Documents

During this stage, the company will file the necessary documents with the Business Registration Service (BRS).

These include Statement of Affairs, Board and shareholder resolution, liquidator’s consent letter, and identification documents.

In addition, a company is required to ensure that a notice of the liquidation and appointment of the liquidator is published in the Kenya Gazette to inform the public.

Step 3: Payment of Creditors

A liquidator is then appointed and takes control of the company’s affairs and assets.

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The assets are sold and converted into cash, which is used to pay creditors according to the order of priority set out in law, and the remaining is distributed among shareholders.

Step 4: Dissolution of the Company

After everything is completed, the liquidator prepares a final account and submits it to the Registrar of Companies.

The Registrar then publishes a notice of dissolution in the Kenya Gazette, and following a statutory waiting period, usually 90 days, the company is struck off the register and officially ceases to exist.

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How to File for Liquidation of a Company.Photo/ file