ROAD MAP TO VOLUNTARY WINDING UP OF A COMPANY BY ITS DIRECTORS 

Highlights 

✔ A company may be voluntarily wound up by its members by passing a special  resolution approved by at least 75% of the shareholders of the company. ✔ Of paramount importance is that the company needs to be solvent and able to clear  all its debts within 12 months. 

✔ Voluntary liquidation commences upon passing of a resolution to wind up. ✔ Upon commencement of the process of voluntary liquidation of a company, the  company should cease to carry on business, except in so far as may be necessary  for its beneficial liquidation. Further no share transfers can be made unless with  the approval of the liquidator. 

✔ The procedure for winding up a company is provided for by the Insolvency Act,  Act No. 18 of 2015 as below. 

Procedure 

⮚ Identify an insolvency practitioner to act as a liquidator for purposes of liquidating  the company’s affairs and distributing its assets; 

⮚ The directors of a company make a declaration of solvency stating that they have  made: – 

o a full inquiry into the company’s affairs; and  

o having done so, they have formed the opinion that the company will be able  to pay its debts in full, together with interest at the official rate, within 12  months.  

o The declaration should include a statement of the company’s assets and  liabilities as at the latest practicable date before the making of the  declaration.

o It should be made either on the date of passing the resolution to wind up the Company or no more than 5 weeks before the date of passing the  resolution. 

o If a director is found to have made a false declaration he is liable to a fine  not exceeding two million shillings or to imprisonment for a term not  exceeding five years, or to both. 

⮚ A special resolution to wind up the Company is then passed by 75% of the  shareholders of the Company in a properly convened special general meeting. 

⮚ The Company should also appoint at the meeting appoint the identified insolvency  practitioner to act as a liquidator. On appointment of the liquidator all the powers  of the directors’ cease. 

⮚ If The Company Has Any Creditors Secured by a Debenture, then a notice should then  be issued to the creditor notifying the creditor of the resolution to wind up the  company. The resolution will be deemed to have being passed when the creditor  consents to the winding up in writing or upon the lapse of 7 days from the date of  issuance of the notice. 

⮚ If the Company has no registered debentures, then it should proceed to gazette a notice  of its resolution to wind up the company within 14 days once in the Kenya Gazette;  once in at least two newspapers circulating in the area in which the company has  its principal place of business in Kenya; and on the company’s website (if any). 

⮚ The Company should also within 14 days of the passing of the resolution proceed  to register the declaration of solvency with the Registrar of Companies;

⮚ The Liquidator will then do his part of liquidating company assets, paying  company creditors and thereafter distribute the remaining assets to the  shareholders. 

⮚ Should the liquidation take more than 12 months the liquidator will within 3  months of the lapse of 12 months convene a general meeting where he shall lay  before the meeting an account of his acts and dealings, and of the conduct of the  liquidation, during the year. This would thereafter happen after every 12 months. 

⮚ Upon completion of the process of liquidation the liquidator shall prepare an  account of the liquidation showing how it has been conducted and how the  company’s property has been disposed of; and then convene a general meeting of  the company for the purpose of laying before it the account and giving an  explanation of it.  

⮚ The liquidator is supposed to shall convene the meeting by publishing, at least  thirty days before the meeting, an advertisement specifying the date, place and  purpose of the meeting; once in the Gazette; once in at least two newspapers  circulating in the area in which the company has its principal place of business in  Kenya; and on the company’s website. 

⮚ The liquidator is thereafter supposed to Within seven days after the meeting, the  liquidator shall lodge with the Registrar of Companies a copy of the accounts,  together with a return giving details of the holding of the meeting and of its date. 

⮚ The Registrar of Companies will then strike off the name of the company from the  register of companies and as soon as practicable publish in the Kenya Gazette a  notice that the company’s name has been struck off the Register and the date of the  striking off. On the date of publication of the notice, the company is dissolved.

⮚ However, If the appointed liquidator forms the opinion that the Company cannot  pay its debts within 12 months or such shorter period as may be stated in the  Declaration of Solvency, then he will convene a creditor’s meeting and the  liquidation is converted to a creditor’s voluntary liquidation.  

Get in touch with us for further advise on voluntary winding up of your company.