After months of chasing an unpaid debt, discovering that your debtor company has been struck off the Register of Companies before the claim has been resolved or an existing judgment has been enforced can feel like reaching a dead end. However, even where a debtor company has been struck off the Register and consequently dissolved, an outstanding debt does not necessarily become irrecoverable.
Part XXXIII of the Companies Act, 2015 provides a powerful safeguard for creditors and other affected persons where a company is struck off the register and subsequently dissolved. It establishes a statutory framework for the voluntary striking off and restoration of companies. While the Act allows for the removal of companies that are no longer in operation, it equally contains safeguards intended to protect persons who may be affected by the company’s removal from the Register.
A recent decision of the High Court in Kenya Revenue Authority v Dream Dressing and Household Items Trading Co. Limited & 3 Others (Miscellaneous Application E005 of 2024) [2025] KEHC 3942 (KLR)demonstrates the importance of these safeguards and reinforces an important principle: striking off need not leave a creditor without recourse and that, where the statutory grounds for restoration are established, the company may be restored to the Register to enable outstanding liabilities to be pursued.
Striking Off Under Part XXXIII of the Companies Act
Section 897 of the Companies Act permits a company to apply to the Registrar of Companies to have its name struck off the Register. The application is made on behalf of the company by its directors or a majority of them and is subject to the statutory requirements prescribed under the Act.
The procedure is intended to provide a relatively straightforward mechanism through which companies that are no longer operating can be removed from the Register without undergoing formal liquidation proceedings.
However, the simplicity of the procedure does not dispense with the rights of creditors. The Act imposes specific obligations upon a company seeking voluntary striking off. These obligations are intended to ensure that persons with a legal or financial interest in the company are made aware of the proposed striking off and given an opportunity to take appropriate action.
The striking off process must consequently be considered together with the safeguards contained in sections 898 to 903 of the Act.
The Notification Requirement Under Section 900
One of the most significant protections is found in section 900 of the Companies Act.
Section 900 of the Companies Act imposes a specific obligation upon a person making an application under section 897 on behalf of a company to, within seven days of making the application, serve a copy of that application on specified persons, including every creditor of the company.
This requirement is not a mere procedural formality. Its purpose is to give creditors an opportunity to object, recover outstanding debts, or take appropriate legal action to protect their interests before the company ceases to exist.
The Dream Dressing Decision
The position was recently considered in Kenya Revenue Authority v Dream Dressing and Household Items Trading Co. Limited & 3 Others.
In that matter, Dream Dressing and Household Items Trading Company Limited had applied to be struck off the Companies Register and was subsequently removed from the Register. The Kenya Revenue Authority subsequently sought restoration of the company. Among other grounds, KRA contended that the company had failed to serve it with a copy of the application for striking off as required by section 900. KRA was a creditor of the company in respect of unpaid tax liabilities amounting to Kshs. 125,809,768.43
The High Court considered the requirements of sections 916 and 918 of the Act. Section 916 permits, among others, a person who was a creditor of the company at the time it was struck off or dissolved to apply for restoration. More importantly, section 918 empowers the Court to order restoration where a company was struck off under section 897 and a requirement under sections 898 to 903 was not complied with.
The Court found that the Company had failed to comply with section 900 and consequently ordered the Registrar of Companies to restore Dream Dressing and Household Items Trading Company Limited to the Register.
Restoration Under Sections 916 to 918
The restoration provisions provide creditors with an important avenue of recourse where the striking off of a company has frustrated the enforcement of a legitimate claim.
Section 916 provides for applications to the Court for restoration and expressly recognises the standing of a creditor of the company at the time it was struck off or dissolved.
Section 918 then sets out circumstances in which the Court may order restoration. These include where:
- the company was struck off while carrying on business or otherwise in operation;
- the company was struck off under section 897 and a requirement under sections 898 to 903 was not complied with; or
- in any other case, the Court considers it just to restore the company.
Accordingly, a creditor who discovers that a debtor company has been struck off should not assume that the debt has been extinguished. The circumstances surrounding the striking off should first be examined to determine whether the statutory requirements were followed.
It is also important to note that receiving notice of an intended striking off does not necessarily close the door on a creditor seeking restoration later. Even where the notification requirements under section 900 have been complied with, the Court may still order restoration under section 918 above where the circumstances justify it and it considers it fair to do so. Each case will therefore turn on its own facts, including whether there is an outstanding claim and whether the creditor would suffer prejudice if the company remains dissolved.
However, there is a statutory time limit imposed under Section 917 of the Companies Act which provides that an application for restoration must generally be made within six years from the date of dissolution, subject to the exceptions provided under the Act.
Under Section 919 of the companies Act, once restored, the company is generally treated as though it had never been struck off, enabling creditors to pursue recovery of outstanding debts.
Conclusion
Restoration is therefore an important remedy where the striking off of a company has left a creditor without an effective means of pursuing its claim.
Part XXXIII of the Companies Act provides an avenue through which companies may exit the Register, but that process is subject to statutory safeguards designed to protect creditors. Where the statutory grounds for restoration are established, including where the safeguards governing striking off have not been complied with or where the Court otherwise considers restoration just, the Court may order the company restored to the Register.
A company’s removal from the Register may interrupt a creditor’s recovery efforts, but it does not necessarily bring them to an end.
How can we help?
The Debt Recovery, Restructuring and Insolvency team at CM Advocates LLP has extensive experience in a broad range of debt recovery and insolvency matters. Our services include, among others, recovery of debts, enforcement of guarantees, realization of charged securities, hire purchase recoveries, asset repossession, restructuring and insolvency advisory, as well as enforcement and recovery strategies arising from distressed or insolvent businesses.
We take a practical and solution-oriented approach, tailored to the circumstances of each matter, with a focus on efficient and commercially sensible outcomes. We would be pleased to receive your inquiries and to assist in these and any other areas within our practice.
If you would like to consult on this article or any other related matter, you may contact the Debt Recovery, Restructuring and Insolvency team at drri@cmadvocates.com
Contributors
Caroline Kendi,
Manager, Debt Recovery Restructuring & Insolvency Unit (DRRI),
Email: ckendi@cmadvocates.com
Mary Munjogu,
Associate Advocate,
Email: mmunjogu@cmadvocates.com
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