On May 6, 2025, the High Court of Kenya at Nakuru delivered a significant ruling in Kenya Revenue Authority v. Salsa Global Investment Company Limited & 3 Others (Miscellaneous Application 179 of 2024), granting an application by the Kenya Revenue Authority (KRA) to restore Salsa Global Investment Company Limited to the Register of Companies. This decision underscores the importance of compliance with statutory obligations under the Companies Act, 2015, and tax laws, particularly when dissolving a company.
Case Background
The KRA filed a Notice of Motion on November 16, 2023, seeking to restore Salsa Global Investment Company Limited to the Companies Register after it was struck off on October 14, 2022, via Gazette Notice No. 211, pursuant to Section 897(4) of the Companies Act, 2015. The KRA alleged that Salsa Global failed to notify it, as a creditor, of its dissolution application, breaching Section 900 of the Companies Act. Additionally, the company did not apply for deregistration of its tax obligations or cancellation of its Personal Identification Number (PIN) as required under Section 36 of the Value Added Tax Act and Sections 10 and 14 of the Tax Procedures Act.
The KRA claimed that Salsa Global owed Kshs 38,041,137.26 in unpaid taxes, comprising Kshs 10,341,577.05 in income tax and Kshs 27,699,560.22 in value-added tax, with accruing interest and penalties. The KRA argued that the company’s failure to comply with statutory requirements was an attempt to conceal its dissolution and evade tax liabilities. The application also implicated the company’s former directors, asserting their liability for the company’s tax debts.
Respondents’ Position
Salsa Global opposed the application through grounds filed on November 7, 2024, claiming it was defective, misconceived, and an abuse of court process. However, the respondents failed to provide further submissions or evidence to substantiate these claims, leaving the KRA’s application largely unopposed.
Court’s Ruling
Justice S.M. Mohochi ruled in favour of the KRA, finding that the Respondents’ grounds of opposition were not substantiated. Citing Kennedy Otieno Odiyo & 12 Others v. Kenya Electricity Generating Company Limited [2010] eKLR, the court noted that unrebutted averments in the applicant’s affidavit must be taken as true. The court held that Salsa Global’s non-compliance with Section 900 of the Companies Act and tax laws justified the restoration order. The court ordered the Registrar of Companies to reinstate Salsa Global to the Register of Companies and awarded costs to the KRA.
Implications for Businesses
This ruling highlights critical compliance obligations for companies in Kenya, particularly during dissolution. Companies must notify all creditors, including the KRA, and settle tax obligations before being struck off the Register. Failure to do so may lead to restoration orders, exposing companies and their directors to legal and financial liabilities. The decision reinforces the KRA’s mandate under Article 201 and 210 of the Constitution to ensure fair taxation and accountability.
Recommendations
- Compliance Review: Conduct thorough audits to ensure compliance with the Companies Act and tax laws before initiating dissolution.
- Creditor Notification: Notify all creditors, including the KRA, as required under Section 900 of the Companies Act.
- Tax Clearance: Obtain tax clearance and deregister tax obligations to avoid penalties under the Tax Procedures Act.
- Legal Advice: Engage legal counsel to navigate dissolution processes and mitigate risks.
