The Court of Appeal Clarifies the Application of Section 974 of the Companies Act
Stichting Rabobank Foundation v AVA Chem Limited & Christopher Irungu Mwangi (Civil Appeal No. E090 of 2025)
The Court of Appeal has recently rendered its judgement in Stichting Rabobank Foundation v AVA Chem Limited & Christopher Irungu Mwangi (Civil Appeal No. E090 of 2025), holding that non-registration alone does not deprive a foreign company of the right to sue in Kenya.
Background
Stichting Rabobank Foundation (Stichting), a Dutch entity, instituted a suit to recover USD 230,868.51 outstanding under a Financial Support Agreement from AVA Chem Limited, a Kenyan company. The respondent raised a preliminary objection that Stichting is a foreign company that is unregistered and therefore has no legal standi.
The High Court struck out the suit on the basis that Stichting was a foreign company that had not registered in Kenya under section 974 of the Companies Act.
On appeal, Stichting argued that non-registration did not affect its legal personality or capacity to sue and that whether it was carrying on business in Kenya was a factual question unsuitable for determination by preliminary objection. The Court of Appeal agreed, overturned the High Court’s decision, and reinstated the suit.
Key Takeaways
- Non-registration under section 974 does not automatically deprive a foreign company of locus standi
The Court held that section 974 imposes a regulatory registration requirement on foreign companies carrying on business in Kenya, but it does not provide that an unregistered foreign company loses its legal personality or its capacity to institute proceedings, maintain an action, recover a debt or enforce a contract. Any restriction on access to the courts would need to be stated expressly in the statute.
The Court also rejected the argument that Stichting was a non-existent entity, holding that a foreign company validly incorporated in its home jurisdiction does not cease to exist merely because it has not registered in Kenya under section 974.
- Carrying on business in Kenya
On the issue of carrying on business, the Court of Appeal did not make a final determination as to whether Stichting’s activities in fact constituted carrying on business in Kenya. However, the Court clarified that while section 974(2) adopts a broad and non-exhaustive definition of “carrying on business”, not every financial transaction automatically constitutes carrying on business in Kenya. Whether a foreign company’s activities amount to carrying on business in Kenya depends on the nature of the transaction and the surrounding circumstances.
Accordingly, the Court held that the High Court could not have reasonably concluded at a preliminary stage and without evidence, that Stitching was carrying on business in Kenya in contravention of section 974.
- Access to justice
The Court of Appeal further noted that, given the constitutional rights of access to justice and a fair hearing, a restriction on a foreign company’s right to sue cannot be implied from section 974. If Parliament intended to bar unregistered foreign companies from accessing the courts, it would have said so expressly.
Outlook
This decision is significant because it affirms the reasoning adopted in the more recent High Court decisions including, Bruton Gold Trading LLC v Anne Atieno Amadi & Others [2025] KEHC 12657 (KLR) and Superon Schweisstechnik India Limited v Oxychem Africa Limited [2025] KEHC 8298 (KLR).
The judgment is binding on the High Court and therefore settles the issue that non-registration under section 974 does not, by itself, deprive a foreign company of standing before Kenyan courts. The Court has expressly distinguished between the regulatory requirement for foreign companies to register and the separate question of their capacity to institute proceedings before Kenyan courts.
The Court has also confirmed that whether a foreign entity is carrying on business in Kenya remains a fact-dependent inquiry. Accordingly, while foreign entities should continue to assess carefully whether their activities trigger registration requirements under the Companies Act, the mere existence of a cross-border commercial relationship with a Kenyan counterparty will not automatically result in a finding that they are carrying on business in Kenya.