Introduction
The High Court of Kenya has consistently upheld the principle that unregistered foreign companies are barred from instituting legal proceedings or being subjected to litigation within Kenyan courts as per section 974(1) of the //new.kenyalaw.org/akn/ke/act/2015/17/eng@2024-12-27">Companies Act, Cap 486. These rulings are anchored in the Companies Act, specifically Part XXXVII, which outlines the compliance framework governing foreign entities seeking to conduct business within Kenya's jurisdiction.
Recent High Court Decisions
- //new.kenyalaw.org/akn/ke/judgment/kehc/2024/9931/eng@2024-07-25">Stichting Rabo Bank Foundation v Ava Chem Limited & another [2024] KEHC 9931 (KLR)
Rabo Bank Foundation (Rabo), a company incorporated in the Netherlands, advanced some money to Ava Chem, which later defaulted on repayment. Seeking to recover the outstanding amounts, Rabo initiated legal proceedings. However, Ava Chem objected, arguing that Rabo lacked the requisite legal standing to sue, as it was not registered as a foreign company in Kenya under the Companies Act 2015.
The High Court upheld Ava Chem's objection, ruling that Rabo, being unregistered in Kenya, had no legal existence within the jurisdiction and was consequently incapable of maintaining a suit. As a result, the court dismissed Rabo’s claim.
- //new.kenyalaw.org/akn/ke/judgment/kehc/2024/2701/eng@2024-03-01">Turn Key International Trade Limited v Sunmatt Limited (Sundip Shah) [2024] KEHC 2701 (KLR)
Turn Key filed suit seeking payment for goods allegedly supplied to Sunmatt. However, Sunmatt contested Turn Key’s legal standing, arguing that it was not a recognized entity under Kenyan law, specifically under Sections 973 to 985 of the Companies Act 2015.
The court upheld Sunmatt’s objection, dismissing the suit on the grounds that a non-existent entity lacks legal capacity to sue or maintain a cause of action (see paragraphs 21-23).
- //new.kenyalaw.org/akn/ke/judgment/kehc/2021/8897/eng@2021-02-26">Tasmac Limited v Nassau Limited & 4 others [2021] KEHC 8897 (KLR)
Tasmac sought interlocutory reliefs against the Respondents, prompting the Respondents to file a preliminary objection challenging its legal standing. One key objection was that Tasmac, incorporated in Mauritius, had failed to register in Kenya as mandated by the Companies Act.
The court upheld the objection and dismissed the application, ruling that Tasmac lacked the legal capacity to sue in Kenya. It further noted that no evidence had been presented to confirm the company’s compliance with local registration requirements, rendering its suit legally untenable.
Implication of the Decisions
These decisions set precedent, reinforcing the requirement that foreign companies must be registered in Kenya as foreign companies under the Companies Act 2015 before they may institute legal proceedings. The rulings emphasize that entities lacking legal recognition within the jurisdiction cannot sue or maintain a cause of action, safeguarding the integrity of corporate regulation and judicial process.
Additionally, they serve as a caution to businesses engaging in commercial activities in Kenya, highlighting the necessity of formal registration to access legal remedies. For local litigants, the decisions provide a strong defense against claims brought by unregistered foreign entities, ensuring adherence to statutory provisions.
Notably however, the decision in Rabo Bank is on appeal at the Court of Appeal for a determination on the issue.
Disclaimer: The above information is for general informational purposes only and does not constitute legal advice. Readers are encouraged to seek professional legal counsel for specific advice tailored to their individual circumstances. The author disclaims any liability for any actions taken or not taken based on the contents of this document.
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