A guide to company law in Kenya.

01

A company is its own legal person

Once incorporated under the Companies Act, 2015 , a company becomes a body corporate. It can own assets, employ people, borrow, contract, sue and be sued in its own name. Its existence continues despite changes in membership or management.

Members of a company limited by shares are generally liable only to the extent of unpaid amounts on their shares. That does not authorise misuse of the company. Personal guarantees, fraud, breach of duty, statutory liability or other exceptional circumstances can create direct exposure.

Preserve the separation

Use company bank accounts and contracts, record decisions, identify the company correctly on documents and avoid treating corporate assets as founders’ personal property. Weak separation creates accounting, tax, evidential and governance problems.

02

The company’s constitutional rulebook

The Companies Act and the company’s articles form the core governance framework. The articles regulate matters such as director decision-making, shareholder meetings, voting and share transfers. Model articles may apply where bespoke provisions have not been adopted.

A shareholders’ agreement can supplement the articles by addressing commercial arrangements among owners: reserved decisions, board appointments, funding, transfer restrictions, founder departure, information rights, deadlock and exit. It binds its parties as a contract but should be aligned with the articles and mandatory law.

03

Directors: power comes with duties

Directors generally manage the company’s business and exercise its powers, subject to the Act and articles. A person can be treated as a director because of the role performed, not merely the title used. The Act codifies general duties owed to the company.

• Act within powers: use powers for their proper purpose and within the constitution.
• Promote the success of the company: act in good faith for members as a whole while considering the statutory factors.
• Exercise independent judgment: do not surrender responsibility to a founder, shareholder or outside interest.
• Use reasonable care, skill and diligence: meet both the objective standard and the standard justified by the director’s actual knowledge and experience.
• Avoid conflicts of interest: identify and handle situations in which personal or third-party interests conflict with the company’s interests.
• Reject improper benefits and declare interests: disclose interests in proposed or existing transactions as the Act requires.

Board minutes should record information considered, conflicts declared, deliberation and resolutions. Minutes are not ceremonial paperwork: they are evidence of how authority was exercised.

04

Shareholders own shares—not company assets

A shareholder owns an interest in the company represented by shares. The company owns its own assets. Shareholders exercise voting, economic and information rights under the Act, articles and the terms of their shares.

Some decisions are made by ordinary resolution; others require a special resolution or another threshold set by law or the constitution. Written resolutions may be available to private companies subject to statutory rules. Proper notice, eligibility, quorum, voting and records matter.

Majority power has limits

Minority shareholders may have statutory remedies where company affairs are conducted in an oppressive or unfairly prejudicial manner. Derivative proceedings may allow a member, with the court’s permission, to pursue a claim on the company’s behalf in defined circumstances. Governance disputes are easier to prevent when information, reserved matters and exit routes are agreed before relationships deteriorate.

05

Shares, capital and distributions

Before issuing or transferring shares, confirm the authority, pre-emption rights, class rights, approvals, valuation, consideration and filing consequences. A casual spreadsheet update does not complete a legal allotment or transfer.

Transactions involving a company’s own shares, reductions of capital or financial assistance can engage detailed statutory rules. Obtain advice before using capital restructurings to solve a commercial problem.

06

Records, accounts and Registrar filings

A company should maintain its registered office, registers, accounting records, resolutions, minutes, ownership documents and supporting transaction records. The required location, retention and inspection rights vary by record.

Annual returns keep the public register current; they are distinct from tax returns and financial statements. Changes to directors, secretaries, registered office, share capital, charges and other particulars may trigger separate notices. The BRS forms catalogue reflects many event-driven filings, while services are generally completed through the current online platform.

Companies must prepare, approve and where required lodge financial statements and related reports in accordance with their classification and applicable exemptions. Tax filings do not replace Companies Act reporting.

07

Beneficial ownership is an active duty

The registered shareholder is not always the natural person who ultimately owns or controls the company. The Act and the Beneficial Ownership Information Regulations require companies to investigate, identify, record and lodge prescribed particulars of beneficial owners.

Ownership, voting rights, appointment rights and significant influence or control can all be relevant. Companies should not wait for an annual filing to correct changes. They need a process for requesting information, updating the internal register and notifying the Registrar within applicable periods.

08

When the company approaches financial distress

Directors should monitor solvency, cash flow, creditor pressure and the reliability of financial information. Continuing to incur obligations without a credible basis for payment can deepen losses and personal risk. Duties and priorities can change as insolvency becomes probable.

The Insolvency Act, 2015 provides rescue and closure mechanisms, including administration, company voluntary arrangements and liquidation. Early advice preserves more options than action taken after enforcement or statutory deadlines have advanced.

GOVERNANCE CHECKLIST

Keep the company legally healthy

1. Keep the articles and shareholders’ agreement aligned.
2. Define board and shareholder reserved matters.
3. Maintain registers, minutes, resolutions and share records.
4. Record conflicts and declarations of interest.
5. File annual returns and event-driven changes on time.
6. Review beneficial ownership whenever control changes.
7. Separate company property and finances from personal affairs.
8. Track licences, tax, employment and data obligations alongside company-law compliance.
9. Review solvency and material risks at board level.
10. Obtain advice before capital changes, related-party transactions, disputes or distress.