Dissolution Diaries: Kicking off 2025 with a Wave of Closures
A lot of companies have and are to be dissolved -- here's how and why it happens.
Is it truly appropriate to start with “Happy 2025!” given the news I’m sharing with you and breaking down for you today?
What’s happening?
[Gazette Notice No.94]: Kenyans should expect a total of 116 companies to be dissolved in three (3) months’ time.
[Gazette Notice No.95 & 96]: The 116 companies will join the bandwagon of the 202 companies that were gazetted to have ceased to exist as from 3 of January, 2025.
In business terms, dissolution means to cease the operations and existence of a company. Simply put, it is shutting down a company. A company, on the other hand, refers to any legal entity set up by one or more persons to engage in business (Perez, 2024).
It is very concerning to kick off a new year with the news of businesses shutting down because it is an indicator of the economy possibly ailing, if not being on life support already.
We could throw our hands up and say, “Welp! President Ruto has f*cked up the economy!”, but it is important to note that there is more than meets the eye when it comes to this situation.
In brief, I will be taking you through how and why dissolution happens, and at the tail end, I will either assert or refute the claim that President Ruto has ruined the Kenyan economy given the number of companies going out of business in 2025 as per the Kenya Gazette.
What is dissolution?
As explained before, dissolution refers to the process of shutting down the operations of and the life of a company.
In Kenya, the Companies Act (2015) lays the blueprint of everything related to companies, from their formation to their closure (dissolution). I will be making reference to it to explain why dissolution takes place, and the process it entails.
Why Companies Get Dissolved
Dissolution of a company is done either by its own members or by the Registrar of Companies as per their mandate stipulated in the Companies Act.
Members may opt to dissolve their company due to a couple of reasons, like:
Having a change in business direction
Being unable to compete in the market
Retirement
Expiration of a company’s purpose
Wrangles within the members/shareholders, and so much more.
The sole reason that the Registrar of Company may list a company for anticipated dissolution is when they have reason to believe that the said company is no longer in business.
Section 897 of the Companies Act (2015) gives two guiding points for this:
When a company fails to submit its annual returns for a period of five (5) years, or
When a company fails to comply with turning in a copy of the register of beneficial ownership as per the Registrar’s directive.
Dissolution Process through the Registrar of Companies
When the Registrar has reason to believe that a company is no longer operational, they will first mail them a letter asking the company to confirm that it is still in business.
If one month elapses without receiving a reply, the Registrar will mail the company a second letter making reference to the first one that went unanswered, and informing the members of the company their intention of listing the company in the Kenya Gazette with the intention of it being struck off.
If another month elapses without a reply, or in the event of the members of the company replying to the letter confirming that the company is no longer in operation, the company is then scheduled for listing in the Kenya Gazette as a company intending to be dissolved through being struck off the register.
After a period of three (3) months since the published gazette notice, the company will be struck off thus becoming a dissolved company.
What it Means for Kenya & the Economy
It is never a good sign to have multiple companies shut down at the same time. It is an indicator of something terribly wrong in the economy.
The International Monetary Fund (IMF) did project our economy slowing down in 2024-2025, and we are now witnessing that projection actualizing right before our eyes.
I hate to say it, but Kenyans will have to buckle up for the bumpy ride ahead.
To answer the million dollar question…
The gazette notice did not give any reasons why the companies got dissolved, so we cannot conclusively state that it completely is the ruling administration’s fault for all these companies going out of business.
Perhaps a couple of those companies had fulfilled their purpose and are now winding up, and others might have been pushed out of business due to stiff competition in the market.
However, how common is it that a huge number of companies experience closure at the same time? It points to the economic climate of the country being the issue, which is the common denominator.
So, my verdict is that the Kenya Kwanza administration has a role to play in this chaos. What do you think?
Either way, what a time for entrepreneurs in the current economy!
If you found this helpful, consider sharing it with a friend that you think will enjoy this. Wishing you a great start to the year.
Reference(s):
The Kenya Gazette Vol. CXXVII-No. 1
The Companies Act (2015)
Perez, Y. (2024, August 8). What Is a Company? Different Types and How to Start One. Investopedia.