The High Court of Kenya has delivered a significant ruling addressing the legal capacity and standing (locus standi) of foreign companies to bring proceedings in Kenyan courts. The Court, in the case of Bruton Gold Trading LLC v Anne Atieno Amadi & Others (HCCC No. E211 of 2023) (Brutton Gold), held that a foreign company’s legal existence is established upon incorporation in its country of origin. Registration in Kenya under section 974 of the Companies Act is not a prerequisite for a foreign company to have the right to sue in Kenya. The Court dismissed preliminary objections raised by the defendants, who argued that the plaintiff, a Dubai-incorporated company, lacked standing to sue because it was not registered in Kenya.
Contrast With Previous Approach: The Stichting Rabo Bank Foundation Case
This decision marks a clear departure from the approach taken in Stichting Rabo Bank Foundation v Ava Chem Limited & Another [2024] KEHC 9931 (KLR), (Stichting). In Stichting, the High Court struck out a suit by a foreign company because it was not registered in Kenya under section 974 of the Companies Act. The Court in that case held that a foreign company could not sue in Kenya without local registration, regardless of its incorporation elsewhere.
This earlier decision caused concern among foreign investors and companies, as it suggested that foreign companies (even those not carrying on business in Kenya but simply seeking to enforce contracts or recover debts) could be denied access to Kenyan courts solely due to non-registration. This was seen as a barrier to justice and a deterrent to international business with Kenyan entities.
Key Points of the Bruton Gold Ruling
- Legal personality: The Court in Bruton Gold affirmed that a foreign company becomes a legal person upon incorporation in its home jurisdiction. Registration in Kenya is not required for the company to be recognised as a legal entity for the purpose of bringing legal proceedings.
- Locus standi: The right to bring an action (locus standi) is not strictly tied to compliance with local registration requirements. The Court emphasised that locus standi is broader, focusing on whether the claimant has a genuine interest in the matter and a right to access justice under the Constitution.
- Constitutional context: The Court referred to the Constitution of Kenya, which guarantees every person (including juristic persons such as foreign companies) the right to access justice and a fair hearing.
- Section 974 of the Companies Act: While this section prohibits unregistered foreign companies from “carrying on business” in Kenya, the Court clarified that this does not extend to barring such companies from seeking legal remedies in Kenyan courts.
Implications of the Ruling
This ruling provides much-needed clarity and reassurance for foreign companies wishing to enforce their rights or pursue remedies in Kenyan courts. It confirms that foreign companies are not barred from instituting legal proceedings in Kenya solely due to lack of local registration, provided they are duly incorporated in their home jurisdiction. The decision restores legal certainty for cross-border commercial transactions and dispute resolution, countering the restrictive and uncertain precedent set by the Stichting case.
Recommendations and Considerations
- Foreign companies contemplating litigation in Kenya should ensure they can demonstrate valid incorporation in their home country.
- While local registration under section 974 of the Kenyan Companies Act is not a prerequisite for instituting proceedings, foreign companies doing business in Kenya should note that it is still necessary for other business activities Kenya.
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