Company Strike-Off Risks in Kenya: What Lenders, Families & Multinationals Must Know

Company Strike-Off Risks in Kenya: What Lenders, Families & Multinationals Must Know

Advisory from CM Advocates LLP | July 2025

In April 2025, Kenya’s Registrar of Companies intensified enforcement against non-compliant entities by issuing notices warning that failure to file annual returns or update Beneficial Ownership (BO) registers could lead to strike-off from the register under Section 894 of the Companies Act, 2015. This provision allows the Registrar to remove a company that is reasonably believed not to be carrying on business or in operation.

Concurrently, Section 93A of the Companies Act mandates all companies to maintain and lodge a register of their beneficial owners. Non-compliance invites severe sanctions, including dissolution and asset forfeiture under the doctrine of bona vacantia (ownerless property).

These compliance obligations have direct and compounded implications for:

• Financial institutions with security interests in affected entities,

• Legacy family businesses that lack succession clarity or documentation, and

• Multinational firms operating in Kenya through subsidiaries or holding companies.

At CM Advocates LLP, we offer integrated legal, compliance, and asset protection solutions to help stakeholders mitigate these escalating risks.

Specific Risks for Financial Institutions

Banks, DFIs, microfinance lenders, and private equity funds must be vigilant:

• Collateral Exposure: Charges over land or shares become unenforceable when borrower companies are struck off.

• Impaired Enforcement: Struck-off companies cannot be compelled to repay or perform obligations without being restored by court.

• Registration Gaps: Inactive companies may have unregistered securities or outdated BO records, violating AML/KYC protocols.

• Reputational & Regulatory Risk: Lending portfolios with dissolved companies undermine governance ratings and risk assessments.

Our Advisory:
CM Advocates LLP advises financiers to conduct periodic compliance reviews of all borrower companies and initiate pre-emptive rectification where risks are flagged.

Compliance Challenges for Legacy Family-Owned Companies

For Kenyan families that use companies to hold land, investments, or manage trusts:

• Deadlocked Decision-Making: Deceased directors or shareholders prevent filing of BO registers or passing resolutions.

• Probate Delays: Without Letters of Administration or Grants of Probate, shares cannot be transferred nor new directors appointed.

• Loss of Ancestral Assets: Strike-off without rectification may permanently disconnect heirs from family wealth.

• Administrative Confusion: Unverified data on BRS makes succession and restructuring highly complex.

Our Advisory:
We offer succession planning, probate litigation, and corporate restructuring to help preserve family-held business and land assets through proper compliance and governance.

Risks for Multinational Compliance & Legal Teams

Global companies using Kenyan subsidiaries, JVs, or holding vehicles face jurisdictional compliance pitfalls:

• Hidden Liability: Non-compliant Kenyan entities may trigger cross-border audit queries, affect consolidated group reporting, or breach global SOX or ESG frameworks.

• Regulatory Blacklisting: Failing to update BO registers or file tax returns can lead to reputational damage and fines from both local and foreign regulators.

• Asset Loss: Where subsidiaries hold land, leases, trademarks, or key licenses, strike-off renders these assets at risk of state forfeiture.

Our Advisory:
CM Advocates LLP works with general counsel, regional compliance officers, and tax teams to design cross-jurisdictional compliance solutions, ensure BO register conformity, and prepare contingency litigation or restoration filings as needed.

Tax Compliance & Strike-Off for Dormant Companies

Under the Tax Procedures Act, companies no longer operational must apply for:

• Strike-off from the company register, and

• PIN deregistration from KRA

Failure to do so can attract penalties, assessments, and enforcement action from the Kenya Revenue Authority—even if the company is inactive. This is a critical risk area for all institutions with legacy SPVs or shelf companies.

Proactive Mitigation Measures for All Stakeholders

CM Advocates LLP strongly recommends:

1. Portfolio Audit: Identify at-risk, dormant, or non-compliant entities.

2. File Outstanding Annual Returns & BO Registers

3. Apply for PIN Deregistration for Dormant Companies

4. Initiate Succession or Estate Proceedings for Deceased Shareholders

5. Conduct BRS Record Updates & Rectifications

6. Consider Voluntary Liquidation or Restructuring

7. Engage a Company Secretarial Partner:
   Bellmac Consulting LLP (Contact: Mrs. Anne Otunga at ceo@bellmacconsulting.com) handles filings, updates, and BRS compliance.

How CM Advocates LLP Can Support You

We offer:

• Legal audits and compliance reviews

• Restoration of struck-off companies

• BO register preparation and shareholder rectification

• Succession and probate advisory

• KRA PIN deregistration and tax clearance

• Lender-side due diligence and enforcement strategies

• Cross-border compliance coordination for multinational clients

• Liaison with BRS and Registrar to unlock locked company accounts

Request a Customized Compliance Checklist

To support your institution or family office in ensuring full compliance and avoiding strike-off, CM Advocates LLP can provide a tailored compliance checklist covering:

• BO register templates

• Annual return timelines

• Director/shareholder verification procedures

• Succession compliance triggers

• Tax and PIN deregistration workflow

• Lending security red flags

• Restoration application requirements

To request your checklist, contact us directly or write to law@cmadvocates.com

Contact Us

Head Office Nairobi
I&M Bank House, 7th Floor, 2nd Ngong Avenue
E: law@cmadvocates.com

Mombasa Office
Links Plaza, 4th Floor, Links Road, Nyali
E: mombasaoffice@cmadvocates.com