[2005] KEHC 2098 (KLR)
The court held that the requirement for a director to hold shares in a company is not absolute and depends on the company's articles of association. In the absence of evidence that the Respondent's articles required directors to be shareholders, there was no basis to disqualify Mr. Kabundu from acting as a director...
Source-derived case information.
- Citation
- [2005] KEHC 2098 (KLR)
- Parties
- Appellant: Ali K. Ahmed t/a Sky Club Restaurant; Respondent: Kabundu Holdings Ltd
- Court
- High Court
- Court Station
- High Court at Mombasa
- Jurisdiction
- Kenya
- Case Number
- Civil Appeal 82 of 2004
- Procedural Posture
- Civil Appeal / Ruling on Preliminary Objection
- Outcome
- Preliminary objection overruled with costs to the Respondent.
- Judges
- DK Maraga
- Legal Topics
- Company Directorship, Corporate Capacity, Company Resolutions
- Source Language
- en
Source-derived case record
Summary, issues, holding and outcome
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Parties
Ali K. Ahmed t/a Sky Club Restaurant
Appellant
Kabundu Holdings Ltd
Respondent
Procedural Posture
Civil Appeal / Ruling on Preliminary Objection
Legal Issues
- 1 Whether a person can act as a director of a company without holding shares in the company.
- 2 Whether Mr. Kabundu had authority to act and file applications on behalf of the Respondent company.
- 3 Whether the resolution authorizing Mr. Kabundu to act for the Respondent was valid.
Ratio Decidendi
The court held that the requirement for a director to hold shares in a company is not absolute and depends on the company's articles of association. In the absence of evidence that the Respondent's articles required directors to be shareholders, there was no basis to disqualify Mr. Kabundu from acting as a director or from passing resolutions on behalf of the company. The Appellant failed to prove that such a shareholding qualification existed. Therefore, the resolution authorizing Mr. Kabundu to act for the Respondent was valid, and the preliminary objection was without merit.
Court Disposition
Preliminary objection overruled with costs to the Respondent.
Orders
- The preliminary objection is overruled.
- Costs awarded to the Respondent.
Full Case Text
Judgment text and source record
15 paragraphs
REPUBLIC OF KENYA IN THE HIGH COURT OF KENYA AT MOMBASA CIVIL APPEAL 82 OF 2004
ALI K. AHMED t/a SKY CLUB RESTAURANT....................APPELLANT
- Versus -
KABUNDU HOLDINGS LTD............................................RESPONDENT
R U L I N G
This is an appeal seeking to upset the ruling of the Chief Magistrate given on 21st July 2004 in Mombasa CMCC No. 2711 of 2004. The appeal is pending. Several applications have been filed in the appeal by both parties amongst which are the Chamber Summons by the Appellant dated the 11th February 2005 for injunction and the Notice of Motion by the Respondent dated the 26th April 2005 seeking, inter alia, to set aside or vacate the order of injunction granted to the Appellant on 17th February 2005 pursuant to his said chamber summons.
When the two applications came up for hearing before me on 12th May 2005 Mr. Malombo, counsel for the Appellant, raised a preliminary objection notice of which he had given arguing that Mr. Kabundu who has been appearing in this appeal on behalf of the Respondent company and has filed several applications on its behalf lacks capacity to act for the Respondent. He argued that for one to institute legal proceedings and or act on behalf of a company one requires a resolution of the company to that effect. In this case, he contended, Mr. Kabundu not having had any such a resolution whatever he has done and continues to do in this appeal is illegal and that he should not only be debarred from purporting to further act for the Respondent but whatever application he has filed on behalf of the Respondent, including the one dated the 26th April 2005, should be struck. He rubbished the resolution dated 14th March 2005 a copy of which is exhibited by Mr. Kabundu’s affidavit sworn on the 26th April 2005 as being of no consequence as it was passed and signed by Mr. Kabundu himself and one Jacob Mwongo purporting to be but are not directors of the Respondent company. The two, he further argued, are shown by a letter dated the 29th November 2004 from the Registrar of Companies to have no shareholding in the Respondent and cannot therefore be directors of the Respondent. According to counsel one cannot be a director of a company unless one holds at least one share in the company.
On his part Mr. Kabundu argued that he is a shareholder and therefore a properly appointed director of the Respondent. He said that by virtue of a Power of Attorney dated the 14th March 1997 and registered on 21st March 1997 annexed to his affidavit sworn and filed herein on 25th January 2005 authorising him to act generally for and on behalf of shareholders with 699 shares in the Respondent company he is a bona fide shareholder.
Mr. Malombo’s preliminary objection, if I understand it well, hinges on the argument that one cannot be a director of a company if one does not hold at least one share in that company. He referred to section 183 of the Companies Act in support of that proposition.
With respect to counsel that argument is not entirely correct. Whether or not a director is required to possess any shareholding at all in the company depends on the provisions of the articles of association of that company. It is when the share qualification requirement is provided for in the articles that section 183 comes into play. When there is no such requirement in the articles, one need not hold any shares in a company for one to be a director. See Halsbury’s Laws of England, 4th Ed. Vol.7 par. 471. Under the Companies Act Article 77 of Table A on the First Schedule the shareholding qualification for directors may be fixed by the company in a general meeting and unless so fixed no qualification is required.
It is a cardinal principle of our law that he who alleges a fact has the burden of proving it. In this case counsel for the Appellant alleges that Messrs Kabundu and Mwongo having no shareholding in the Respondent Company are not directors of the company who could have passed and signed the resolution dated 14th March 2005. The Appellant has, however, not provided any proof that the Articles of Association of the Respondent require any shareholding qualification for its directors. I therefore find that the Respondent passed a proper resolution allowing Mr. Kabundu to appear on its behalf.
Consequently the preliminary objection fails and it is hereby overruled with costs to the Respondent.
DATED and delivered this 10th day of June 2005.
D.K. MARAGA
JUDGE