Why Ruto government is shutting down companies
3 min read
Ruto government has been on a spree of shutting down companies having closed 338 businesses in the past three months
Ruto government has been on a spree of shutting down companies having closed 338 businesses in the past three months.
The government announced the closure of 67 private and public limited enterprises on Friday, February 3, fueling fears among Kenyans about the country’s precarious economic predicament.
As a result, there were 338 companies that the government deregistered between December 2022 and February 2023, up from 122 that were reported as being closed on January 20, 2023, and 149 that were on the verge of going out of business on Friday, December 9 Gazette notice.
The businesses listed have been given three months to provide justification for why their names shouldn’t be stricken off the registrar’s list, according to Joyce Koech, the Registrar of Companies.
Koech bases the procedural closure of the businesses on Section 894 of the Companies Act 2015; which details the power of the registrar to strike off a company.
The powers granted to the Registrar of Companies are based on three premises:
Not Carrying on Business or in Operation
This means that if the Registrar has reasonable justification to believe that the company is not carrying on business or is not in operation, she is mandated to send a letter of inquiry to the company owners.
If the owners do not respond to the letter, one month after inquiry, a second letter will be sent detailing that the name of the company will be published in the Gazette with a view to striking it off the register if no answer is received to the second letter.
Company Facing Liquidation
According to the Companies Act, the Registrar will strike off a company if they believe that the affairs of the company are fully wound up or that no liquidator is acting.
In this case, the liquidator refers to the person appointed to wind up the affairs of a company or firm.
“The returns required to be made by the liquidator in respect of the company have not been made for six consecutive months, the Registrar shall publish in the Gazette, and send to the company or the liquidator (if any), a notice that at the end of three months from the date of the notice the name of the company will, unless a cause is shown to the contrary, be struck off the Register and the company will be dissolved,” the Company’s Act reads in part.
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Striking off Company Upon Application
On application, the registrar may strike the name of the company of the register. However, the registrar is legally obligated to allow a three-month window from the date of publication in the Gazette notice to allow for the directors to show cause reasons for the companies not to be struck off.
According to the 2022 Economic Survey by the Kenya National Bureau of Statistics (KNBS), the unemployment rate stood at 6.2 percent in 2021 as businesses struggled to revitalize after the ravaging effects of the pandemic.
This indicates the worrying situation with many people on the verge of job losses with the country’s annual average inflation rate standing at 7.95.
This is a rise of 1.87 from the same period the previous year, according to data from the Central Bank of Kenya (CBK).
Despite the rise of economic living, the ruling administration has maintained its stance on providing opportunities for businesses to thrive.
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