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Charitable and Other Companies Under Kenya Company Law

Where it is proved to the satisfaction of the Attorney-General (through the objects clause of the memorandum of association) that an association about to be formed as a limited company is to be formed for promoting commerce, art, science, religion, charity or any other useful object, and intends to apply its profits, if any, or other income in promoting its objects, and to prohibit the payment of any dividend to its members, the Attorney-General may by licence direct that the association may be registered as a company with limited liability, without the addition of the ‘limited’ to its name, and the association may be registered accordingly and shall, on registration, enjoy all the privileges and (subject to the provisions of the Companies Act) be subject to all the obligations of limited companies (with regard to reporting requirements and audits).

This provision is only of importance in that it does away with the requirement for the nameof the company to include the term “limited”. Other than this, it is of no actual relevant importance, as all other requirements of limited liability companies have to be complied with.Whereas companies may be registered for non-profit objects, this is not a common occurrence in Kenya as the companies are nevertheless obliged to be run as other ‘for profit’ companies. They are required to file annual returns, required to have directors and a company secretary and are subject to taxes like any other ‘for profit’ company.

Community Based Organizations (CBOs) Umder Kenya Company Law

Community based organizations are administered in Kenya by the Department of Social Services under the Ministry of Culture and Social Services.The civic organizations ordinarily registered under this option consist of community groups operating in fairly limited administrative areas such as locations and divisions within the district.The majority of such organizations are self-help groups that are involved in commercial or developmental activities for the benefit of a community in a geographical area.Such organizations operate in a relatively ad-hoc manner and do not have a constitution or any rules that govern them.enewal of the registration is required to be made annually, although the District Social Development office rarely enforces this requirement.Whereas CBOs are not registered as societies under the Societies Act, where the activities of a particular CBO is deemed by the Registrar of Societies to be of a nature requiring that it be registered as a society, then he may, by notice, require that the CBO concerned apply for registration as a society under the Act.

Companies with Unlimited Liability under Kenya Company Law

Under the Kenya company law,a company may be registered as an unlimited liability company, in which case there is no limitationof the members’ liability for the debts of the company. Such companies are not often formed today. The company is obliged to register articles with the memorandum of association. The articles must state the number of members with which the companyproposes to be registered and, if the company has a share capital, the amount of the share capital. The name will not, of course, include the word ‘limited’ and there will be no limitation of liability clause in the memorandum.If the company has a share capital it must make an annual return like any other limited liability company. If the company has no share capital, it must make returns similar to that made by a company limited by guarantee that has no share capital (as had been earlier defined).

Public Limited Companies Under Kenya Company Law

Public limited companies under Kenya company law are registered companies that have a minimum number of seven members. Most public companies are initially private companies that are subsequently converted to public companies when they invite members of the public to subscribe to their shares and debentures.

There is a requirement under the Companies Act that when the membership of a private company exceeds fifty, then it must convert to a public company.Public companies are seldom used except in the case of companies quoted on the NairobiStock Exchange and for purposes related to the control of dealings in agricultural land. Even then, it is usual to incorporate as a private company and convert subsequently.

Definition of a Company Under the Kenya Company Law

A company can be defined as a group of persons associated together for the purpose of attaining a common objective, social or economic.According to Lord Justice Lindley a companyis “an association of many persons who contribute money or money’s worth to a common stock and employs it in some trade or business and who share the profit and loss there from. The common stock so contributed is denoted in money and is the capital of the company.

The persons who contribute it or to whom it belongs are members. The proportion of capital to which each member is entitled is his share. The shares are always transferable although the right to transfer is often more or less restricted”Justice Marshall defines a company as an artificial being, invisible, intangible,existing only in contemplation of the law. Being a mere creation of law, it possesses only the properties, which the charter of its creation confers upon it,either expressly or as incidental to its very existence.

According to Haney “a company is an incorporated association which is an artificial person created by law, having separate entity, with a perpetual succession and a common seal”.Section 2 (1) of the Kenya company Act (cap 486) provides that “a company means a company formed and registered under this Act or an existing company”. Existing company only means a company formed andregistered under any of there pealed ordinances. For the purposes of companies Act of Kenya the companies includes: -a)A registered company under this Act.b)An existing company.c)An unregistered company covered under section 357-364.d)A produce company covered under section388.e)A foreign company covered under section 365-381

The Law Relating to Societies Under Kenya Company Law

The law relating to societies in Kenya is contained in the Societies Act Cap 108 of the Laws of Kenya. A Society is defined to include any club, company, partnership or other association of ten or more persons, whatever its nature or object, established in Kenya or having its headquarters or chief place of business in Kenya, and any branch of a society, but does not include,*.A company or a foreign company as defined under the Companies Act.*.Any corporation incorporated by or under any other written law.*.A registered trade union within the meaningof the Trade Unions, including a branch of atrade union registered under that Act.*.A company, firm, association or partnership consisting of not more than twenty persons, formed and maintained with a view to carrying on business for profit.*.A co-operative society registered as such under any written law.*.A school registered under the Education Act, advisory council, Board of Governors, District Education Board, school committeeor similar organization established under orin accordance with the provisions of any written law relating to education.*.A building society as defined by the Building Societies Act.*.A bank licensed under the Banking Act.*.Any international organization of which Kenya is a member, or any branch, section or organ of any such organization.*.Any combination or association which the Minister may, by order, declare not to be a society for the purposes of this Act.The effect of the foregoing is that the type of organizations that may be registered as societies is severely limited by the Act. However, this is the primary method (other than as NGOs) by which charitable and not for profit organizations may be registered.A society may be a registered society or an exempt society. Societies are exempt when they do not have to comply with certain requirements of societies such as rendering accounts and annual returns to the Registrar.Applications for registration or for exemptionfrom registration for societies are made to the Registrar of Societies together with a copy of the society’s constitution and rules.The Registrar shall consider every application for registration of a society or forexemption from registration and shall communicate his decision thereon to the society within one hundred and twenty days of receipt of the application.Upon registering a society or exempting it from registration, the Registrar shall issue to the society a certificate of registration or exemption from registration in the prescribedform.The Registrar of Societies is given a wide andunfettered discretion in registering or refusing registration to organizations, although a society aggrieved by the decision of the Registrar may appeal first to the Minister and thereafter to the High CourtIn Kenya, the type of organizations that are registered as societies include political parties, self-help groups, neighborhood associations and a wide variety of charitable associations. Registration is often easily granted to most such organizations, except for political parties, which are thoroughly scrutinized and vetted before they are registered or refused registration.

Offices of Foreign Companies Under Kenya Company Law

Representative Offices of foreign companies
A representative office is registered as a foreign company under Section 365 of the Companies Act. A certified true copy of the constitution of the company or a translation of the same (notarized if not from a commonwealth country), names of directors and their addresses are required for registration of the office.There is also required the name and address of the person in Kenya who will accept service on behalf of the company. There is requirement for a form to be signed and filledin with the above details. There is no requirement for stamp duty, but filing and registration fees are payable.After all these formalities are fulfilled, then one obtains a Certificate of Compliance with Sections 365 and 366 of the Companies Act. It takes three weeks or so to obtain such certificate. The representative office requires a trade license, an immigration certificate, but no other licenses other than these.Representative offices can be used for non-profit purposes, as they are not liable to pay local taxes where there is no income generated by them as all contracts entered into by them may be deemed to be contracts of the parent company.

Kenya Company Law: Companies Limited by Guarantee

Under the Kenya company law,a company limited by guarantee may be formed either with or without a share capital, but is usually formed without a share capital. Under Section 5 (3) of the Companies Act, the memorandum of a company limited by guarantee must state that each member undertakes to contribute a specified sum towards the assets of the company in the event of its being wound up while he is a member, or within one year after he ceases to be a member.The amounts which the members have agreed to contribute in a winding up cannot be mortgaged or charged while the company is a going concern.Every company limited by guarantee, whetherit has a share capital or not, is obliged to register articles of association with the memorandum.The memorandum or articles of a company limited by guarantee and not having a share capital cannot give any person a right to participate in the divisible profits of the company, except than as a member, and every provision in the memorandum or articles purporting to divide the undertaking of the company into shares or interests is treated as a provision for share capital, notwithstanding that the nominal amount or number of the shares is not specified.If the company has a share capital, it must make an annual return like any other limited liability company. If it has no share capital, it must make an annual return stating (under Section 126 of the Companies Act)-*.The address of the registered office.*.If the register of members is not kept at the registered office, the address of the place where it is kept.*.The particulars of the directors and the secretary, which are required to be kept in the register of directors and secretaries.*.Particulars of the total amount of the company’s indebtedness in respect of all mortgages and charges required to be registered with the Registrar.Such companies are usually formed to incorporate professional, trade and research associations, and clubs supported by annual subscription. They can also be utilized for registration of charitable and not for profit organizations.As a matter of administrative practice, the Registrar of Companies will not incorporate companies which are limited by guarantee without prior clearance from Special Branch (a police department under the Office of the President). The process for obtaining this clearance is time-consuming and uncertain, and as a result very few of such companies, if any at all, have been registered as such.

Private Limited Companies Under Kemya Company Law

A private company is defined in the Act (Section 30) as one which by its articles(a) Restricts the right to transfer its shares; and(b) Limits the number of its members to fifty, exclusive of persons in the employment of the company and of persons formerly in the company’s employment;(c) Prohibits any invitation to the public to subscribe for any shares or debentures of the company, and certifies in its annual return that it has not issued any prospectus to the public to subscribe to its shares or debentures.

Further, a private company may be an ordinary private company or an exempt private company.An exempt private company is a private company which satisfies the following conditions-
*.No body corporate holds any of its shares or debentures.
*.No person other than the holder has any interests in its shares or debentures.
*.The number of debenture holders does not exceed fifty.No body corporate is a director.
*.No person other than the directors, members or debenture holders can determine the company’s policy.
*.The benefits of any private company are that it need only have two members and may have only one director (although it must have a secretary, and the sole directorcannot be the secretary).
*.Further, a private company can commence business (and make binding contracts, and exercise its borrowing power, if any), immediately on incorporation.

Another advantage is that a private company need not hold a statutory meeting or send a statutory report to its members Sec 130 (10).Exempt private companies in addition enjoy certain other benefits such as with regard to reporting requirements and auditing requirements.This type of company is preferred by most ‘for profit’ organizations as it has relatively easy procedures for registration under the Companies Act, and the requirements for reporting are easier and less stringent than for public companies.

Kenya Company Law: Companies Limited by Shares

A company under Kenya company law is limited by shares where the liability of a member to contribute to the company’s assets is limited to the amount, if any, unpaid on his shares.Such companies must have a share capital. These types of companies are the most common and prevalent in Kenya. Companies limited by shares are commonly registered as ‘for profit’ organizations and are of two types-
1.Private limited Companies
2.Public limited companies

Types of Companies under Kenya Company Law

The most common forms of companies in Kenya are:*.a company limited by guarantee. Commonly used where companies are formed for non-commercial purposes, suchas clubs or charities.

The members guarantee the payment of certain (usually nominal) amounts if the company goes intoinsolvent liquidation, but otherwise they have no economic rights in relation to the company .
*.a company limited by guarantee with a share capital. A hybrid entity, usually used where the company is formed for non-commercial purposes, but the activitiesof the company are partly funded by investors who expect a return.
*.a company limited by shares.

The most common form of company used for business ventures.
*.an unlimited company either with or without a share capital. This is a hybrid company, a company similar to its limited company (Ltd.) counterpart but where the members or shareholders do not benefit from limited liability should the company ever go into formal liquidation

An Introduction To Kenya Company Law

Kenya company lawis that body of rules which regulates corporations formed under the Kenya Companies Act.A company is a business organisation which earns income by the production or sale of goods or services. This entry also covers rules by which partnerships and trusts are governed in Kenya, together with (albeit in less detail) cooperatives and sole proprietorships.

The most prominent kind of company, usually referred to as a "corporation", is a "juristic person", i.e. it has separate legal personality, and those who invest money into the business have limited liability for any losses the company makes, governed by corporate law.

The largest companies in Kenya are usually publicly listed on stock exchanges around the world. Even single individuals, also known as sole traders may incorporate themselves and limit their liability in order to carry on a business.The formation and winding up of a company in Kenya is governed by the Company’s Act Cap 486 of the Laws of Kenya.

The company legislation in Kenya owes its origin to the English company law. The companies Act of Kenya which came into force on 1stJanuary 1962 is based on English companiesAct of 1948.This Act is still applicable together with later amendments. The Act provides a basic legal framework for the regulation of companies in Kenya. It makes provision for the legal incorporation of companies and lays down rules for their constitution, management and winding up.

A part from the companies Act, there is also case law which has been developed by the courts such doctrines of ultra vires. The caselaw and companies practice have developed so many rules which are useful for filling in the gaps which have not been provided by the companies Act.

Company Law: Limited Partnership Act Cap 30

CHAPTER 30
THE LIMITED PARTNERSHIPS ACT
ARRANGEMENT OF SECTIONS
Section
1—Short title.
2—Interpretation.
3—Definition and constitution.
4—Registration required.
5—Modifications of general law.
6—Law as to private partnership to apply subject to this Act.
7—Manner and particulars of registration.
8—Registration of changes in partnerships.
9—Notice of general partner becoming a limited partner or of
assignment of share of limited partner to be advertised.
10—Ad valorem stamp duty on contributions by limited partners.
11—Making false returns to be an offence.
12—Registrar to file statement and issue certificate of registration.
13—Register and index to be kept.
14—Inspection of statements registered.
15—Rules.

Kenya Company Law

This section gives you details on Kenya Company law.Below are some topics and a comprehensive introduction to the Kenya Company Law.

Company law in Kenya: An introduction
Kenya company law is that body of rules which regulates corporations formed under the Kenya Companies Act.A company is a business organisation which earns income by the production or sale of goods or services. This entry also covers rules by which partnerships and trusts are governed in Kenya, together with (albeit in less detail) cooperatives and sole proprietorships.The most prominent kind of company, usually referred to as a "corporation", is a "juristic person", i.e. it has separate legal personality, and those who invest money into the business have limited liability for any losses the company makes, governed by corporate law. The largest companies in Kenya are usually publicly listed on stock exchanges around the world. Even single individuals, also known as sole traders may incorporate themselves and limit their liability in order to carry on a business.

The formation and winding up of a company in Kenya is governed by the Company’s Act Cap 486 of the Laws of Kenya. The company legislation in Kenya owes its origin to the English company law. The companies Act of Kenya which came into force on 1
st
January 1962 is based on English companies Act of 1948.This Act is still applicable together with later amendments. The Act provides a basic legal framework for the regulation of companies in Kenya. It makes provision for the legal incorporation of companies and lays down rules for their constitution, management and winding up.

A part from the companies Act, there is also case law which has been developed by the courts such doctrines of ultra vires. The case law and companies practice have developed so many rules which are useful for filling in the gaps which have not been provided by the companies Act.
Definition of a Company
A company can be defined as a group of persons associated together for the purpose of attaining a common objective, social or economic.

According to Lord Justice Lindley a company is “an association of many persons who contribute money or money’s worth to a common stock and employs it in some trade or business and who share the profit and loss there from. The common stock so contributed is denoted in money and is the capital of the company. The persons who contribute it or to whom it belongs are members. The proportion of capital to which each member is entitled is his share. The shares are always transferable although the right to transfer is often more or less restricted”

Justice Marshall defines a company as an artificial being, invisible, intangible,existing only in contemplation of the law. Being a mere creation of law, it possesses only the properties, which the charter of its creation confers upon it,either expressly or as incidental to its very existence.

According to Haney “a company is an incorporated association which is an artificial person created by law, having separate entity, with a perpetual succession and a common seal”.

Section 2 (1) of the Kenya company Act (cap 486) provides that “a company means a company formed and registered under this Act or an existing company”. Existing company only means a company formed and registered under any of there pealed ordinances. For the purposes of companies Act of Kenya the companies includes: -

a)A registered company under this Act.

b)An existing company.

c)An unregistered company covered under section 357-364.

d)A produce company covered under section 388.

e)A foreign company covered under section 365-381

The most common forms of companies in Kenya are:

a company limited by guarantee. Commonly used where companies are formed for non-commercial purposes, such as clubs or charities. The members guarantee the payment of certain (usually nominal) amounts if the company goes into insolvent liquidation, but otherwise they have no economic rights in relation to the company .
a company limited by guarantee with a share capital. A hybrid entity, usually used where the company is formed for non-commercial purposes, but the activities of the company are partly funded by investors who expect a return.
a company limited by shares. The most common form of company used for business ventures.
an unlimited company either with or without a share capital. This is a hybrid company, a company similar to its limited company (Ltd.) counterpart but where the members or shareholders do not benefit from limited liability should the company ever go into formal liquidation

Companies limited by shares A company under Kenya company law is limited by shares where the liability of a member to contribute to the company’s assets is limited to the amount, if any, unpaid on his shares.
Such companies must have a share capital. These types of companies are the most common and prevalent in Kenya. Companies limited by shares are commonly registered as ‘for profit’ organizations and are of two types-
Private limited Companies
A private company is defined in the Act (Section 30) as one which by its articles
(a) Restricts the right to transfer its shares; and
(b) Limits the number of its members to fifty, exclusive of persons in the employment of the company and of persons formerly in the company’s employment;
(c) Prohibits any invitation to the public to subscribe for any shares or debentures of the company, and certifies in its annual return that it has not issued any prospectus to the public to subscribe to its shares or debentures.
Further, a private company may be an ordinary private company or an exempt private company.
An exempt private company is a private company which satisfies the following conditions-

No body corporate holds any of its shares or debentures.
No person other than the holder has any interests in its shares or debentures.
The number of debenture holders does not exceed fifty.
No body corporate is a director.
No person other than the directors, members or debenture holders can determine the company’s policy.
The benefits of any private company are that it need only have two members and may have only one director (although it must have a secretary, and the sole director cannot be the secretary).
Further, a private company can commence business (and make binding contracts, and exercise its borrowing power, if any), immediately on incorporation. Another advantage is that a private company need not hold a statutory meeting or send a statutory report to its members Sec 130 (10).

Exempt private companies in addition enjoy certain other benefits such as with regard to reporting requirements and auditing requirements.
This type of company is preferred by most ‘for profit’ organizations as it has relatively easy procedures for registration under the Companies Act, and the requirements for reporting are easier and less stringent than for public companies.
Public limited companies
Public limited companies under Kenya company law are registered companies that have a minimum number of seven members. Most public companies are initially private companies that are subsequently converted to public companies when they invite members of the public to subscribe to their shares and debentures.
There is a requirement under the Companies Act that when the membership of a private company exceeds fifty, then it must convert to a public company.
Public companies are seldom used except in the case of companies quoted on the Nairobi Stock Exchange and for purposes related to the control of dealings in agricultural land. Even then, it is usual to incorporate as a private company and convert subsequently.

Charitable and other companies

Where it is proved to the satisfaction of the Attorney-General (through the objects clause of the memorandum of association) that an association about to be formed as a limited company is to be formed for promoting commerce, art, science, religion, charity or any other useful object, and intends to apply its profits, if any, or other income in promoting its objects, and to prohibit the payment of any dividend to its members, the Attorney-General may by licence direct that the association may be registered as a company with limited liability, without the addition of the ‘limited’ to its name, and the association may be registered accordingly and shall, on registration, enjoy all the privileges and (subject to the provisions of the Companies Act) be subject to all the obligations of limited companies (with regard to reporting requirements and audits).
This provision is only of importance in that it does away with the requirement for the name of the company to include the term “limited”. Other than this, it is of no actual relevant importance, as all other requirements of limited liability companies have to be complied with.
Whereas companies may be registered for non-profit objects, this is not a common occurrence in Kenya as the companies are nevertheless obliged to be run as other ‘for profit’ companies. They are required to file annual returns, required to have directors and a company secretary and are subject to taxes like any other ‘for profit’ company.

Companies limited by guarantee

The address of the registered office.
If the register of members is not kept at the registered office, the address of the place where it is kept.
The particulars of the directors and the secretary, which are required to be kept in the register of directors and secretaries.
Particulars of the total amount of the company’s indebtedness in respect of all mortgages and charges required to be registered with the Registrar.

Such companies are usually formed to incorporate professional, trade and research associations, and clubs supported by annual subscription. They can also be utilized for registration of charitable and not for profit organizations.
As a matter of administrative practice, the Registrar of Companies will not incorporate companies which are limited by guarantee without prior clearance from Special Branch (a police department under the Office of the President). The process for obtaining this clearance is time-consuming and uncertain, and as a result very few of such companies, if any at all, have been registered as such.

Companies with unlimited liability

Under the Kenya company law,a company may be registered as an unlimited liability company, in which case there is no limitation of the members’ liability for the debts of the company. Such companies are not often formed today. The company is obliged to register articles with the memorandum of association. The articles must state the number of members with which the company proposes to be registered and, if the company has a share capital, the amount of the share capital. The name will not, of course, include the word ‘limited’ and there will be no limitation of liability clause in the memorandum.
If the company has a share capital it must make an annual return like any other limited liability company. If the company has no share capital, it must make returns similar to that made by a company limited by guarantee that has no share capital (as had been earlier defined).

Representative Offices of foreign companies

A representative office is registered as a foreign company under Section 365 of the Companies Act. A certified true copy of the constitution of the company or a translation of the same (notarized if not from a commonwealth country), names of directors and their addresses are required for registration of the office.
There is also required the name and address of the person in Kenya who will accept service on behalf of the company. There is requirement for a form to be signed and filled in with the above details. There is no requirement for stamp duty, but filing and registration fees are payable.
After all these formalities are fulfilled, then one obtains a Certificate of Compliance with Sections 365 and 366 of the Companies Act. It takes three weeks or so to obtain such certificate. The representative office requires a trade license, an immigration certificate, but no other licenses other than these.
Representative offices can be used for non-profit purposes, as they are not liable to pay local taxes where there is no income generated by them as all contracts entered into by them may be deemed to be contracts of the parent company.

Societies

A company or a foreign company as defined under the Companies Act.
Any corporation incorporated by or under any other written law.
A registered trade union within the meaning of the Trade Unions, including a branch of a trade union registered under that Act.
A company, firm, association or partnership consisting of not more than twenty persons, formed and maintained with a view to carrying on business for profit.
A co-operative society registered as such under any written law.
A school registered under the Education Act, advisory council, Board of Governors, District Education Board, school committee or similar organization established under or in accordance with the provisions of any written law relating to education.
A building society as defined by the Building Societies Act.
A bank licensed under the Banking Act.
Any international organization of which Kenya is a member, or any branch, section or organ of any such organization.
Any combination or association which the Minister may, by order, declare not to be a society for the purposes of this Act.

The effect of the foregoing is that the type of organizations that may be registered as societies is severely limited by the Act. However, this is the primary method (other than as NGOs) by which charitable and not for profit organizations may be registered.
A society may be a registered society or an exempt society. Societies are exempt when they do not have to comply with certain requirements of societies such as rendering accounts and annual returns to the Registrar.
Applications for registration or for exemption from registration for societies are made to the Registrar of Societies together with a copy of the society’s constitution and rules.
The Registrar shall consider every application for registration of a society or for exemption from registration and shall communicate his decision thereon to the society within one hundred and twenty days of receipt of the application.
Upon registering a society or exempting it from registration, the Registrar shall issue to the society a certificate of registration or exemption from registration in the prescribed form.
The Registrar of Societies is given a wide and unfettered discretion in registering or refusing registration to organizations, although a society aggrieved by the decision of the Registrar may appeal first to the Minister and thereafter to the High Court
In Kenya, the type of organizations that are registered as societies include political parties, self-help groups, neighborhood associations and a wide variety of charitable associations. Registration is often easily granted to most such organizations, except for political parties, which are thoroughly scrutinized and vetted before they are registered or refused registration.
Community Based Organizations (CBOs)
Community based organizations are administered in Kenya by the Department of Social Services under the Ministry of Culture and Social Services.
The civic organizations ordinarily registered under this option consist of community groups operating in fairly limited administrative areas such as locations and divisions within the district.
The majority of such organizations are self-help groups that are involved in commercial or developmental activities for the benefit of a community in a geographical area.
Such organizations operate in a relatively ad-hoc manner and do not have a constitution or any rules that govern them.
enewal of the registration is required to be made annually, although the District Social Development office rarely enforces this requirement.
Whereas CBOs are not registered as societies under the Societies Act, where the activities of a particular CBO is deemed by the Registrar of Societies to be of a nature requiring that it be registered as a society, then he may, by notice, require that the CBO concerned apply for registration as a society under the Act.

Trusts

Incorporation of trustees is provided for in Kenya by The Trustees (Perpetual Succession) Act Cap 164 of the Laws of Kenya. Section 3 (1) of the Trustees Act states that Trustees who have been appointed by any body or association of persons established for any religious, educational, literary, scientific, social, athletic or charitable purpose, or who have constituted themselves for any such purpose, may apply to the Minister (in this case, the Attorney General) in the manner provided in this Act for a certificate of incorporation of the trustees as a body corporate. The trustees are required to furnish-

The objects and constitution of the trust concerned, together with the date of, and parties to, every deed, will or other instrument, if any, creating constituting or regulating it.
A statement and short description of the property or interest therein which at the date of the application is held or intended to be held by the trustees.
A statement as to whether the trust concerned is a society registered or exempted from registration under the Societies Act, or is incorporated under the Companies Act, together with the relevant certificate of registration, exemption or incorporation.
The names and addresses of the trustees.
The proposed title of the corporate body, of which title the words ‘trustees’ and ‘registered’ shall form part.
The proposed device of the common seal and the regulations for the custody and use of the common seal.If the Attorney General, having regard to the extent, nature and objects and other circumstances of the trust concerned, considers incorporation expedient, he may grant a certificate accordingly, subject to such conditions or directions generally as he thinks fit to insert in the certificate, and particularly relating to the qualifications and number of the trustees, their tenure and avoidance of office, the mode of appointing new trustees, the custody and use of the common seal, the amount of movable or immovable property which the trustees may hold, and the purposes for which that property may be applied.The trustees shall thereupon become a body corporate by the name described in the certificate, and shall have perpetual succession and a common seal, and power to sue and be sued in their corporate name and, subject to the conditions and directions contained in the certificate, to hold and acquire, and by instruments under the common seal to convey, transfer, assign charge and demise any movable or immovable property or any interest therein then or thereafter belonging to, or held for the benefit of, the trust concerned in the same manner and subject to such restrictions and provisions as trustees might so do without incorporation. The property of the trust shall then vest in the Trustees as a body corporate.
The body corporate shall then be administered according to the objects and constitution (the trust deed) of the particular trust concerned that were furnished to the Attorney General prior to the incorporation of the trust.
Thus, one or more trustees may be incorporated to represent a non-profit organization, and there is no requirement for a minimum number of members of the organization.
There is no requirement of capital or minimum capital for the organization. The procedure for incorporation is well laid out, and in Kenya, once the Attorney General’s consent has been obtained, incorporation of the trust can usually be accomplished within a relatively short period of time.

Trade Unions

Trade Unions in Kenya are regulated under the Trade Unions Act Cap 233 of the Laws of Kenya. A trade union is defined as
(a) An association or combination, whether temporary or permanent, of more than six persons (other than a staff association, employees’ association, or employees’ organization not deemed to be a trade union), the principal objects of which are under its constitution the regulation of the relations between employees and employers, or between employees and employees, or between employers and employers, whether such combination would or would not have been deemed to have been an unlawful combination by reason of some or more of its purposes being in restraint of trade.
(b) An association or combination of trade unions.
Trade Unions in Kenya are required to be registered under the Act to acquire juridical capacity.
All such applications for registration are to be made to the Registrar of Trade Unions in the forms prescribed under the Act, and shall be signed by at least seven members of the union.
No trade union shall perform any act in furtherance of the purposes for which it has been formed unless application has been made by that union for registration.
If any trade union does not apply for registration then the trade union shall not enjoy any of the rights, immunities or privileges of a registered or probationary trade union but shall be subject to any liabilities incurred by the trade union and shall be dissolved as from the date required by any notice in writing from the Registrar requiring such dissolution.
Registered trade unions acquire juridical capacity and immunity from civil suits in respect of any act done in contemplation or furtherance of a trade dispute to which a member of the trade union is a party on the ground only that the act induces some other person to break a contract of employment, or that it is in interference with the trade, business or employment of some other person or with the right of some other person to dispose of his capital or of his labour as he wills.
Further, a suit against a registered trade union or against any member or officer thereof on behalf of themselves and all other members of the trade union in respect of any tortious act alleged to have been committed by or on behalf of the trade union shall not be entertained by any court.
As such, trade unions may be registered as not for profit organizations to be engaged in the regulation of the relations between employers and employees.

Characteristics of a company
Separateness

Under the Kenya company law,a company is separate from its employees, in that the connection between them is, usually, a mere contract of employment, which may be terminated, leaving both parties to go their own ways. The same generally applies, however, to those businesses which are not companies. There is also, more importantly, usually a separation between the company and its owners.

The locus classicus for the principle that a company is a separate entity from its directors and shareholders is the landmark English case of Salomon v Salomon. Shareholders are the owners of one or more units of equal value into which the company is divided and which are usually sold in order to raise capital, either for the company itself or for its founders. A share carries with it a defined set of rights and duties: most notably the right to receive a share of the company's profits and the right to receive a share of the company's assets if the company is wound up.

The separation between the shareholder and the company under the Kenya company law has one other important consequence. If a company is wound up, its shareholders will lose their stake, but their separateness from the company will prevent its creditors from pursuing them for fulfilment of the its debts. If, on the other hand, an unincorporated business should go bankrupt, its owners, who do not enjoy such separation, will be liable for its debts.

Because a company under the Kenya Company law can do certain things—it can acquire rights and duties and assets and liabilities—albeit only through the actions of human beings who are authorised to act on its behalf, the company is itself regarded as a juristic person. It has rights and duties, but not the body, of a natural person.

Immortality

Another consequence of the separation between the company and the individual shareholders is that, unlike an unincorporated business, companies do not die with their owners. This does not mean that companies go on always and forever. They can "die," too, through takeovers, mergers or bankruptcy, or when their owners decide to close them down.

Size

Companies range from the very small to the very large. There are no very large businesses which are not companies.Part of what allows companies to become so much bigger than other businesses is their ability to raise capital more easily (which is in turn connected to their separation from their owners and their immortality), and the fact of their being better regulated than other businesses, which gives confidence to investors.

Shareholders

It is important at the outset to appreciate what, exactly, is meant by "holding a share in a company." The fact that a person is a shareholder of Pick 'n Pay does not entitle him to go along to one of its branches and leave it with an unpaid-for basket of groceries in his possession. His share in Pick 'n Pay does not take the form of its stock.

Shareholders are the owners of one or more units of equal value into which the company is divided and which, usually, have been sold in order to raise money either for the company itself or for its founders.

Kenya company law: Duties of a director of a company

The duties of director under Kenya law are usually considered under two broad categories, namely: -

(i) Duties of care, skills and diligence.

(ii) Fiduciary duties.

(1) Duty of Care, Skill and Diligence

Directors under Kenya laws should carry out their duties with reasonable care and exercise such degree of skill and diligence as is reasonably expected of persons of their knowledge and status. The directors are not liable for mere errors of judgment.

Case Law: Brazilian Rubber Plantation Estates Ltd (1911)

In this case, the directors of the company decided that the company should invest in some rubber estates in Brazil. They accordingly issued a prospectus inviting members of the public to come forward and subscribe for the shares and debentures of the company, the purpose of invitation being to raise money from the subscription in order to finance the rubber estate project.

In the prospectus they declared to the prospective investors that the project in question for which subscription were being invited was viable or had potential success. Soon after subscription the project turned out to be a failure and the company was wound up.

The subscribers brought an action against the directors for inserting a misleading/false statement in the prospectus upon which they had relied or acted upon to their detriment. In their defense, the directors claimed that they had acted in good faith.

It was held that the directors were not liable because they had made an error of judgment about viability of the project and in making the judgment, they had applied the care and skill that men of experience were expected to apply.

Where a director makes an error of judgment, he will be absolved from any liability so long as the judgment he made or decision he took and considering all surrounding circumstances came from past experiences and knowledge which he had; but if a director fails to exercise due care expected of him in the exercise of his duties, he is guilty of negligence.

Standard of Care

The standard of care, skill and diligence depends upon the nature of the company’s business and the circumstances of the case.

The standard of care under Kenya law depends upon:-

(i) The type and nature of work.

(ii) Division of powers between directors and other officers.

(iii) General usages and customs in that type of business.

(iv) Whether directors work gratuitously or remuneratively.

Case Law: City Equitable Fire Insurance Co. Ltd

The directors of insurance company left the management of the company’s affairs almost entirely in the hands of B, the managing director. Owing to B’s fraud, a large amount of company’s assets disappeared. B and the firm in which he was a partner had taken a huge loan from the company and the cash at the bank or in hand included £7,300 in the hands of the company’s stockbrokers, in which B was a partner. The directors never inquired as to how these items were made up.

It was held that the directors were negligent, though the articles protected them from liability.

Romer therefore observed that “in ascertaining the duties of a director, it is necessary to consider the nature of the company’s business and the manner in which the work of the company carried out amongst the directors and other company officials”.

In Dovey vs. Cory, a director was held not liable for negligence merely because he had failed to verify false information regarding the company’s accounts which he had been given by the company’s manager and managing director.

The court stated, “The business cannot be carried on upon principles of mistrust. Men in responsible positions must be trusted by those above them, as well as by those below them until there is reason to distrust them. We agree that care and prudence do not involve distrust”.

(2) Fiduciary Duties

As fiduciaries, the directors must: -

(a) Exercise their powers honestly and bonafide for the benefit of the company as a whole. But if for example the power to issue further shares is exercised by the directors, not for the benefit of the company but simply and solely for their personal aggrandizement and to the detrimental of the company, the court will interfere and prevent the directors from doing so.

(ii) Not to place themselves in a position in which there is a conflict between their duties to the company and their personal interests. They must not make any secret profit out of their position and if they do, they have to account for it to the company.

Case Law: Cook vs. Deek (1916)

Three directors of a company obtained a contract in their own names, under the circumstances which made it breach of trust by them, and constituted themselves trustees of the contract of the company. By their votes as holders of ¾th of the shares, they induced the company to pass a resolution declaring that it had no interest in the contract.

It was held the directors were liable to account to the company for the profit they made on the contract as in equity, it belonged to the company.

Case Law: Regal Hastings Ltd vs. Guilliver (1942)

R. Co. Ltd owned one cinema and wanted to buy two others with a view to selling the three together. It formed a subsidiary company to buy the two cinemas. It was however unable to provide the necessary finances. As such, its directors themselves subscribed for some of the shares in the subsidiary company. The cinemas were acquired and the shares in R Co. Ltd and the subsidiary sold at a profit.

It was held that the directors must account to R. Co. Ltd for the profit they made because it was through the knowledge and opportunity they gained as directors of R.Co. Ltd, that they were able to obtain the shares.

Case Law: Burland vs. Earle (1902)

Burland, a director of a company, bought a property for £21,564 at a public auction. He subsequently sold it to the company for £60,000. The shareholders brought an action against Burland for restoring the profit made by him out of resale of the property to the company.

It was held that Burland was not liable to pay to the company the profit made by him because there was no evidence whatsoever of any mandate to Burland to purchase on behalf of the company, or that he was in any sense a trustee for the company of the purchased property.

But where a director is under mandate to purchase some property for the company, he is in a sense a trustee for the company of the purchased property. If he purchases the property in his own name and then sells it to the company at a higher price thus making a profit, he is liable to account to the company the profit earned.

(3) Duty of Disclosure

Except with the consent of Board of Directors, a director or his relative or any firm in which he is a member or a director, shall not enter into any contract with the company for the sale, purchase or supply of goods. Even in case of urgent necessity contracts, consent must be obtained. It is the duty of the director to disclose to the Board the nature of his interest in any contract or arrangement entered into

(4) Duty to act honestly

A director must not act in manner trying to make personal gain out of a transaction in the name of the company.

(5) Meetings of the Board

A director is not bound to attend all meetings, but he should obviously attend as many as possible.

(6) Delegation of Authority

A director has duty not to delegate his functions except to the extent authorized by the act or the constitution of the company.

Can a director be liable for the mistakes of his colleagues?

A director absented himself from Board meetings for 20 years and during this period, his colleagues paid dividends out of capital. The shareholders brought an action against this particular director arguing that by absenting himself, he was acting negligently because had he been attending the meetings, he would have discovered that dividends were being paid out of capital.

It was held that this director was not negligent in absenting himself unless there were circumstances warranting non-abstention.

Exceptions to this Rule

Whether a director must attend a Board meeting or not is a question of fact. His compulsory attendance depends on the exigencies of the company’s life. If he is a member of committee of the Board, he must attend or is reasonable expected to attend meetings of that committee to deliberate on issues at hand because by being placed in that committee, his input is considered important.

If a director is so expected to attend but he fails, then such a director is negligent.

Can a director be allowed to delegate?

The directors are bound by the principle “delegates no potest delegata”, that is, a delegate cannot sub-delegate- even then, the exigencies of business allow a director at times to delegate his duties, though he cannot delegate all his duties.

However, at times a director can rely on other officers in the company to perform those duties. He shall not be held negligent in such cases once he is satisfied that the various officers of the company are manning those duties property, and he shall not be held liable for negligence in such cases.

Kenya company law: Winding up of a company

The Companies Act Cap. 486 does not define the term winding up or liquidation, however it uses them interchangeable, hence we assume them as synonymous.

Winding up under Kenya laws, means a process of putting an end to the life of a company. It is a proceeding by means of which a company is dissolved and in the course of such dissolution its assets are collected and its debts are paid off out of the assets of the company or from contributions by its members, if necessary. If any surplus is left, it is distributed among the members in accordance with their rights.

Winding up or liquidation under Kenya law is the process by which the management of the company’s affairs is taken out of its directors’ hands, its assets are realized by the liquidator and its debts are paid out of the proceeds of realization.

Modes of Winding Up

There are three modes under the Kenya laws:-

(i) Compulsory winding up by the court.

(ii) Voluntary winding up:-

(a) Members’ voluntary winding up.

(b) Creditors’ voluntary winding up

(iii) Winding up under the supervision of the court.

(i) COMPULSORY WINDING UP BY THE COURT (Section 219)

This is also known as compulsory winding up.

Under the Kenya laws,this may occur in the following circumstances:-

(a) Special resolution of the company: - If the company has by special resolution resolved that it may be wound up by the court, the court may pass a winding up order. The power of the court in such a case is discretionary. The court may refuse to order winding up where it is opposed to public or company’s interest.

(b) Default in holding statutory meeting or in delivering the statutory report to the registrar: - If a company defaults in delivering a statutory report to the registrar or in holding the statutory meeting, the court may order winding up of the company either on the petition of the registrar or on the petition of a contributory. The petition must not be filed before expiry of 14 days after the last day in which the statutory meeting ought to have been held. However, the court may instead of making a winding up order, direct the statutory report to be delivered or that a meeting shall be held.

(c) Failure to commence or suspension of business: - Where a company does not commence its business within one year from its incorporation, or suspends its business for a whole year, the court may order for is winding up.

The court exercises power in this case only if the company has no intention of carrying on its business or if it is not possible for it to carry on its business.

Case Law: Orissa Trucks and Enamel Works Ltd (1973)

A company’s business remained suspended for 10 years, its capital had been embezzled and its major contributor, the Orissa government refused further help. It was held that the company should be wound up.

Where the suspension of business is temporary or can be satisfactorily accounted for, the court will refuse to make an order.

If a company has not begun to carry on its business within a year from its incorporation, or suspends its business for a whole year, the court will not wind up if:-

(i) There are reasonable prospects of the company starting business within a reasonable time.

(ii) There are good reasons for the delay, that is, the suspension of business is satisfactorily accounted for and appears to be due to temporary causes.

Case Law: Middleborough Assembly Rooms Company (1880)

A company suspended its business for more than 10 years due to depression in trade. A shareholder presented a petition for the winding up of the company a year later. 4/5^th in value of the shareholders opposed the petition. The company intended to continue its operations when trade prospects improved. The petition was dismissed.

(d) Reduction of members below Minimum: -In the case of a private company

below two members and a public company below seven members

If the company carries on business for more than six months while the number is reduced, every member who is cognizant of the fact that it is carrying out business with members fewer than the statutory minimum, will be severally liable for the payment of the whole of the debts of the company contracted after six months.

This is an area in the company where corporation veil is lifted.

(e) Inability to pay debts: - That is,

(i) A creditor to whom the company owes more than Sh. 1,000 has left at the registered office, demand under his hand for the payment of the sum due, and the company has for 3 weeks thereafter reflected to honor the sum.

(ii) Execution or other process in favor of the creditors of a company is returned unsatisfied in whole or in part.

(iii) If it is proved to the satisfaction of the court that the company is unable to pay its debts.

The court will not prove whether assets exceed liabilities, rather whether the company is unable to meet its current demands.

(f) Just and equitable: - This is when the court is of the opinion that it is just and

equitable that the company should be wound up. This clause gives the court very wide powers to order winding whenever the court considers it just and equitable to do.

The following are the instances where the court can issue a winding up order under the clause, “just and equitable”: -

(a) Where there is a deadlock in management.

(b) Where it is impossible to carry on the business of the company except at a loss.

(d) Where the object for which the company is formed is impossible of further pursuit.

(e) Where the minority is being disregarded or oppressed.

(f) Where there is lack of confidence in directors.

(g) Where the company has been conceived and brought forth in fraud.

Just and Equitable clause

The court must be over-cautious before admitting a petition for winding up on the just and equitable clause. It should be allowed as a last resort.

Just and equitable clause depends upon the facts of each case. The court may order winding up under this clause when:-

(a) The substratum of the company is gone

Substratum of a company under Kenya law is said to have disappeared only when the object for which it was incorporated has substantially failed or when it is impossible to carry on business except at a loss, or the existing assets are insufficient to meet the existing liabilities.

Before the court makes a winding up order under this, the court should consider the interest of shareholders as well as creditors.

The substratum of a company disappears when:-

(i) The subject matter is gone.

Case Law: Pirie vs. Stewart

A shipping company lost its only ship, the remaining assets being a paltry sum of £363. Majority shareholders filed a petition for winding up but minority shareholders opposed this and desired to carry on business.

It was held that it was just and equitable that the company be would up.

(ii) When the main object of the company has substantially failed or become impractible

Case Law: German Date Coffee Company (1882)

The object clause of the German Date Coffee Company stated that it was formed for a German patent which would be granted for making a partial substitute for coffee from dates and for acquisition of incidental there and also other inventions for similar purposes. The German patent was never granted but the company did acquire and work on a Swedish patent and carried on business at Hamburg where substitute for coffee was made from the dates, but not under the protection of a patent.

A petition was filed by two shareholders that the main object could not be achieved, and therefore it was just and equitable that the company should be wound up.

(iii) The company carries on business at a loss and there is no reasonable hope that the object of trading can be attained: - Where majority shareholders are against it, the court cannot order a company to be wound up merely because it is making a loss.

(iv) Where the existing and probable assets of the company are insufficient to meet its existing liabilities. Where the company is totally unable to pay off creditors and there is increasing burden of interest and deteriorating state of management and control of business owing to sharp differences between shareholders, the court will order winding up.

(b) When the management is carried on in such a way that the minority is disregarded or oppressed: - This is prejudicing the interests of minority shareholders by majority shareholders.

Case Law: Re Garnets Mining Company Ltd (1977)

The petitioner was Mrs. Beth Wambui Mugo. She wanted the company to be wound up on the “just and equitable” ground. Her reasons were as follows:-

(i) That the affairs of the company were being conducted in a manner which was oppressive to her. Despite her 50% shareholding, she was treated at most times as decorating figure because she was excluded from both the company and board meetings, but nevertheless expected to sign or approve most of the resolutions. When she suggested transferring her shareholding, she was out voted.

(ii) The substratum of the company had gone and that the company had no alternative business to engage in. A company had been incorporated to “mirie rubbis”. This business collapsed because Mugo influenced the government to withdraw the mining license as a way of revenging against the Greek directors.

(iii) Because of the differences between her and the rest of the Greek members, the management of the company had broken down completely and consequently there was loss of confidence and proximity in each other to the extent that the company could no longer be managed at all

It was held that though Mugo (petitioner) was partly to blame for sabotaging the business, she was entitled to this order under Section 215.

(c) Where there is deadlock in management of the Company: - When shareholding is equal and there is a case of complete deadlock and there is no hope or possibility of smooth and efficient continuance of the company as commercial concern.

Case Law: American Pioneer Leather Company (1918)

There were only three directors and shareholders in a private company. One of them left the country and the remaining two quarreled among themselves and as a result there was a complete deadlock.

It was held that it was just and equitable that the company be wound up.

Case Law: Yenidje Tobacco Company Ltd (1916)

A and B were the only shareholders and directors of a company with equal rights of management and voting powers. After a time, they become bitterly hostile to each other and disagreed about the appointment of important servants of the company. All communications between them were made through the secretary as they were not in speaking terms with each other. The company made large profits in spite of the disagreement.

It was held that there was complete deadlock in management and the company was ordered to be wound up.

(d) When the company was formed to carry out fraudulent or illegal business, or when the business of a company becomes illegal.

Case Law: Brinsmead (Thomas Edward) & Sons (1897)

Thomas Edward and two of his sons were employed by John Brinsmead & Sons Ltd in the business of piano manufacturing. They left John Brinsmead & Sons Ltd and started a company called Thomas Edward Brinsmead & Sons Ltd for carrying on similar business. They were restrained by a court injunction from using the name Brinsmead on the ground of fraud. A petition for compulsory winding up of the company was presented.

Held that the company was formed to carry out fraud and, therefore, it was just and equitable to be wound up.

(e) In the case of a company incorporated outside Kenya and carrying on business in Kenya, winding up proceedings have been commenced in respect of it either:-

(i) In the country of incorporation.

(ii) In any country in which it has established place of business (Section 219).

Who may Petition for Compulsory Winding Up?

The following persons can file a petition under Kenya law:-

(a) The company: - A company may itself file a petition for winding up after it has passed a special resolution. The directors have no powers to present a petition for winding up.

(b) Creditors: - The word creditor here refers to every person having a pecuniary claim against the company, whether actual or contingent, and such a person is competent to file a petition for the winding up of the company.

Disputed debt: – A creditor whose debt is disputed cannot get a winding up order. The court may either order the petition or stand over until the validity of the debt can be determined, or may dismiss a petition.

(c) Petition by any contributory: - Section 214 defines a contributory as any person liable to contribute to the assets of the company in the event of its being wound up. It however includes all persons who at the date:-

(i) are members of the company or,

(ii) have been members within a year immediately proceeding that date.

(d) By official receiver.

(e) By Attorney General in consequence of a report of inspectors upon the company’s affairs.

Consequence of Winding up Order

(i) Official liquidators are appointed.

(ii) The powers of directors are terminated and

(iii) The company’s servants are “ipso facto” dismissed.

A receiver is not under any obligation to discharge debts even though incurred after the date of his appointment, unless he exceeded his authority or expressly accepted or agreed a personal liability.

(ii) VOLUNTARY WINDING UP

Voluntary winding up under Kenya law means winding up by members, or creditors without interference by the court. They are left to settle their affairs without going to the court. They may, however, apply to the court for any directions, if and when necessary.

A company may under Kenya law be wound up voluntarily when:-

(a) The period fixed by articles for the duration of the company has expired or an event upon which the company is to be wound up has happened and the company in a general meeting has passed an ordinary resolution.

(b) If the company for whatever reason, has passed a special resolution to wind up voluntarily.

Types of Voluntary Winding Up

(a) Members’ voluntary winding up.

(b) Creditors’ voluntary winding up.

(a) Members voluntary winding up

In a voluntary winding up of a company, if a declaration of its solvency is made, it is a members’ voluntary winding up. The declaration shall be made by majority of directors at a meeting of the Board that they have made a full inquiry into the affairs of the company and that having done so, they are of the opinion that:-

(i) The company has no debts.

(ii) That it will be able to pay debts in full within 12 months from the date of commencement of the winding up.

Declaration of solvency: - This should be done before the general meeting passing the resolution for winding up and not after the general meeting. It is a solemn declaration of solvency made by a director that the company is solvent and able to pay all its debts in full within a period of 12 months.

(b) Creditors’ voluntary winding up

Where the declaration of solvency is not made, the winding up is referred to as creditors’ winding up. It is presumed that the company is insolvent. In such a case, a company must call a meeting of creditors on the same day or the following day after the meeting, at which resolution for winding up is to be made or proposed. The directors must lay before the creditors the position of the company.

(iii) WINDING UP SUBJECT TO SUPERVISION OF COURT

Section 304 provides that when a company has passed a resolution to wind up voluntarily, the court may order the continuation of voluntarily winding up subject to their supervision on any terms.

The liquidator will continue to exercise all powers subject to the restrictions laid down by the courts. A petition for the winding up of the company subject to the supervision of the courts may be presented by any person entitled for the compulsory winding up, but before the court refuses or makes a supervision order, they must call a meeting for ascertaining the wishes of creditors and contributories.

The court will usually be called to supervise a voluntary winding up if there is a substantial dispute between the company and creditors, especially where they disagree over the appointment of a liquidator.

Distinction between Voluntary winding up and Compulsory Winding up.

(a) Declaration of solvency is a must in members whereas it is not necessary in creditors winding up.

(b) Mode of discharging liabilities incase of winding up: - The company must pay all costs, charges and expenses property incurred in the winding up including liquidation costs. These expenses rank in priority to other claims. If assets are insufficient to satisfy all the liabilities, the courts may make any order as to the payment of those costs and charges as they deem fit.

(c) Then, preferential creditors must be paid under Section 311. The following preferential creditors must be paid in priority:-

(i) All government and local rates payable within 12 months before the date of winding up.

(ii) All government rent not more than one year.

(iii) Wages and salaries of any servant for services rendered during four months proceeding relevant period not exceeding Sh. 4,000.

(iv) All amounts due in respect of any compensation under workmen’s compensation, which has occurred before the relevant date.

(d) Finally, proceeds left may be given to shareholders and if any portion remains unclaimed, it goes to the public trustee as “Bona vacantia”, that is, ownerless property.