https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/8661

**THE REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT NAIROBI** **MILIMANI LAW COURTS** **COMMERCIAL AND TAX DIVISION** **HCCOMM PETITION NO. E019 OF 2025** **IN THE MATTER OF SECTIONS 238 (2) (B), 780 AND 782 OF THE COMPANIES ACT** **FATMA WANDIA NJOROGE …………… PETITIONER/APPLICANT** **VERSUS** **FAT RAIN FILMS LIMITED……………………..….. 1ST RESPONDENT** **THE VILLAGE CREATIVE LIMITED …………... 2ND RESPONDENT** **ANDREW JOHN LAIRD WHITE ……………..…. 3RD RESPONDENT** **THOMAS JOHNSON KUTO KALUME ……….... 4TH RESPONDENT** **CARL WAMBASI MAKOKHA ………………..…... 5TH RESPONDENT** **FRA PRODUCTIONS LIMITED …………….....… 6TH RESPONDENT** **RULING** 1. This Court is called upon to determine the Notice of Motion dated 6th August, 2025, filed by the Petitioner/Applicant under Orders 16, rule 6, 40 rules 1 and 2, and 51 rule 1 of the Civil Procedure Rules, as well as Section 239(1) of the Companies Act. The Applicant seeks, inter alia: injunctive and preservatory orders to restrain the Respondents from interfering with the affairs and assets of the 1st Respondent company, orders compelling restoration of her participation in the company’s operations, completion of certain share transfers, leave to institute a derivative action, and production of specified corporate documents. 2. The application is premised on the grounds set out on its face and is supported by the Applicant’s affidavit. The gist of her case is that she is a shareholder and director of the 1st Respondent, Fat Rain Films Limited, holding a 20% stake. She avers that the 2nd to 4th Respondents are co-shareholders and directors, the 5th Respondent serves as a Director and Legal advisor while the 6th Respondent is a separate entity allegedly established to carry on competing business. 3. The Applicant deposes that her relationship with the 1st Respondent commenced in 2013 and later evolved into formal employment in 2016. She asserts that she was allocated shares in 2017 and that, together with the Respondents, entered into a shareholders’ agreement on 1st January, 2019. She further states that the company operated on the basis of mutual trust and cooperation until disputes arose in May 2024 when the Respondents proposed the dissolution of the company. 4. According to the Applicant, no valid resolution to dissolve the company was passed, as due process was not followed. She contends that despite her efforts to propose alternatives to dissolution, the Respondents ignored such proposals and instead embarked on a course of conduct aimed at winding up the company and transferring its assets. She alleges that the Respondents have also sought to dispose of the company’s shareholding in Fat Rain Films (EPZ) Limited. 5. A central grievance raised by the Applicant is her alleged exclusion from the management and operations of the company. She claims that she was denied access to the company’s communication platforms and information relating to ongoing projects, thereby effectively locking her out of its affairs. 6. The Applicant further alleges that the 2nd to 5th Respondents incorporated the 6th Respondent, FRA Productions Limited, on 19th July, 2024, to carry out business identical to that of the 1st Respondent and that the Respondents have been using the company’s confidential information, clientele, goodwill, assets and personnel to advance the interests of the new entity. She contends that the Respondents have diverted business opportunities, clients, and resources from the 1st Respondent to the 6th Respondent. In support of this allegation, she cites specific projects, including the ICEA Lion advertising project and the Safisha Rada campaign, which she claims were initiated through the 1st Respondent but executed and invoiced under the 6th Respondent. 7. It is the Applicant’s case that the Respondents’ conduct amounts to unfair prejudice, oppression of a minority shareholder, and breach of fiduciary duties. She maintains that the Respondents have undermined the company’s goodwill, reduced its value, and deprived her of income and shareholder benefits. She further asserts that the Respondents have failed to complete the agreed transfer of her shares in Mookh Africa Limited which are currently held by the 1st Respondent’s company. She states that attempts to resolve the dispute amicably have been unsuccessful. 8. The Applicant contends that such conduct is oppressive and unfairly prejudicial to her interests as a minority shareholder. She further asserts that it is impracticable for the company to institute proceedings due to the Respondents’ control, thereby necessitating leave to pursue a derivative action. 9. In opposition, the Respondents filed Grounds of Opposition and a Replying Affidavit sworn by the 5th Respondent. They contend that the application is misconceived, arguing that the reliefs sought are personal in nature and therefore inconsistent with the purpose of a derivative action. They further challenge the Court’s jurisdiction in respect of employment-related claims and dispute the existence of any enforceable employment contract or shareholders’ agreement. 10. The Respondents admit the Applicant’s status as a shareholder but deny that the company remained financially viable. They assert that the company had become commercially unsustainable, prompting a collective decision by shareholders in May 2024 to wind it up. They maintain that the Applicant participated in these discussions and supported the resolutions, and is therefore estopped from challenging them. 11. The Respondents deny excluding the Applicant from the company’s affairs and contend that she voluntarily disengaged from its operations. They further assert that any access to company systems was retained solely for purposes of winding up its affairs. They also deny any diversion of business to the 6th Respondent, stating that by the time it was incorporated, the 1st Respondent had effectively ceased operations. 12. With respect to the incorporation of the 6th Respondent, the Respondents maintain that the parties had agreed to pursue independent ventures following the decision to dissolve the company. They deny any misuse of the 1st Respondent’s assets, goodwill, or intellectual property, and assert that the Applicant has already benefited from the winding-up arrangements, including the transfer of a company vehicle. They further reiterate that the alleged Shareholders’ Agreement never existed and therefore any reliance on restrictive covenants contained therein is misplaced. 13. They maintain that the 1st Respondent company is effectively defunct, no longer commercially viable, and incapable of continuing as a going concern. The deponent (5th Respondent)therefore states that the appropriate remedy is liquidation rather than preservation of the company. He asserts that the transfer of the Applicant’s shares in Mookh Africa Limited is already underway and will be completed. 14. The deponent denies any oppression, bad faith, breach of fiduciary duty or ultra vires conduct on the part of the Respondents. He opposes the Applicant’s request for production of signed agreements, describing it as a fishing expedition and urges the Court to dismiss the application. In the alternative, he proposes that any audit sought by the Applicant be conducted at her expense, that the ongoing transfer of the Mookh Africa Limited shares proceed and that the Court issue a liquidation order and appoint the Official Receiver as liquidator of the 1st Respondent. He ultimately prays that the application be dismissed with costs. 15. The Applicant, in her further affidavit sworn on 17th March, 2026, disputes the Respondents’ assertions and maintains that both the shareholders’ agreement and employment contract exist and were acted upon by the parties. She argues that the Respondents cannot deny their existence after having relied on them. 16. With regard to her employment, the Applicant states that the existence of an employment relationship is beyond dispute and has instituted separate proceedings before the Employment and Labour Relations Court, but stresses that the present proceedings concern her rights as a shareholder and director rather than her employment relationship. 17. She further denies that a valid dissolution resolution was passed and contends that the alleged resolution is fabricated. She maintains that her proposals were aimed at preserving the company and not facilitating its dissolution. 18. The Applicant reiterates her claims of exclusion from the company’s affairs and maintains that the Respondents have continued to operate the company’s business through the 6th Respondent. She argues that such conduct amounts to diversion of corporate opportunities and breach of fiduciary duties under the Companies Act. 19. The application was canvassed by way of written submissions filed by both parties and is now ripe for determination. ***Applicant’s Submissions*** 1. The Applicant identifies five issues for determination, namely: whether she has met the threshold for grant of interlocutory injunctive relief; whether the Court should compel the transfer of her shares in Mookh Africa Limited held by the 1st Respondent; whether leave ought to be granted to institute and prosecute a derivative action on behalf of the 1st Respondent against the 6th Respondent; whether the Court should compel production of the executed Shareholders’ Agreement dated 1st January, 2019, and the Employment Contract; and who should bear the costs of the application. 2. On the question of injunctive relief, the Applicant submits that she satisfies the principles set out in **Giella v Cassman Brown & Co. Ltd *[1973] EA 358***. She contends that she has established a prima facie case with a probability of success, on the basis that, despite being a shareholder and director of the 1st Respondent, she was excluded from the management and operations of the company after raising concerns regarding its financial affairs. She further submits that the 2nd to 5th Respondents diverted business opportunities, projects, and revenue from the 1st Respondent to the 6th Respondent, thereby prejudicing both the company and her interests as a minority shareholder. She argues that such conduct is oppressive and unfairly prejudicial, warranting the Court’s intervention. Relying on **Nguruman Limited v Jan Bonde Nielsen & 2 others** ***[2014] eKLR*,** she asserts that at the interlocutory stage, she is only required to demonstrate the existence of a genuine dispute concerning the violation of her right and not to prove her case conclusively. 3. The Applicant further submits that she stands to suffer irreparable harm if the orders sought are not granted. She argues that the Respondents may proceed with the winding up of the 1st Respondent and continue diverting its business opportunities without proper valuation of its assets and ongoing projects. On the balance of convenience, she contends that greater prejudice would be occasioned to her and the company if the injunction is denied, as opposed to the Respondents if it is granted. She urges the Court, relying on **Paul Gitonga Wanjau v Gathuthi Tea Factory Ltd & 2 others *[2016] eKLR*,** to preserve the status quo, pending the hearing and determination of the Petition. 4. On the transfer of her shares in Mookh Africa Limited, the Applicant submits that the Respondents have failed to complete a transaction that had already been agreed upon. She argues that her beneficial interest in those shares is undisputed and that the delay in effecting the transfer is inequitable. She invites the Court to compel completion of the transfer, invoking the equitable principle that equity regards as done that which ought to be done. 5. Regarding leave to institute a derivative action, the Applicant relies on Section 238(2)(b) of the Companies Act and submits that the circumstances justify the grant of such leave. She contends that the 2nd to 5th Respondents, who are in control of the 1st Respondent, have diverted corporate opportunities to the 6th Respondent. In her view, this renders it impracticable for the company itself to initiate proceedings. She maintains that this falls within the exceptions to the rule in **Foss v Harbottle *[1843] 67 ER 189***and cites **Dadani v Manji & 3 Others [2004] KLR 95** and **Ghelani Metals Ltd & 3 Others v Elesh Ghelani Natwarlal & Another *[2017] eKLR*** to support the proposition that a shareholder may bring a derivative action where those in control are alleged wrongdoers. She further contends that the Respondents’ conduct amounts to a breach of fiduciary duties under Section 143 of the Companies Act and that a derivative action is necessary to protect the company’s interests and recover any losses suffered. 6. On the issue of production of documents, the Applicant submits that the Court should compel the 2nd to 5th Respondents to produce executed copies of the Shareholders’ Agreement and the Employment Contract. She argues that these documents are in the Respondents’ possession and are essential for the just determination of the dispute. She relies on **ABN Amro Bank N.V v Kenya Pipeline Company Ltd [2014] eKLR,**submitting that the documents sought are identifiable, are known to be in the Respondents’ custody, and are necessary for the protection and enforcement of her rights. She therefore urges the Court to exercise its powers under Order 16, rule 6 of the Civil Procedure Rules. 7. On costs, the Applicant submits that costs should follow the event. She contends that she was compelled to move the Court due to the Respondents’ conduct and should therefore be awarded the costs of the application if it succeeds. ***Respondents’ submissions*** 1. The Respondents submit, that the Applicant’s claim is predominantly personal in nature and not brought for the benefit of the 1st Respondent company. They contend that all shareholders, including the Applicant, participated in deliberations concerning the winding up of the company and agreed on the disposal of certain assets. Although formal dissolution has not been concluded, they assert that there was consensus on the need to wind up the company. They further state that the Applicant benefited from those arrangements, including the transfer of a company motor vehicle in settlement of alleged dues. The Respondents further note that they have no objection to an audit of the 1st Respondent’s company provided the costs are borne by the Applicant. 2. It is the Respondents’ position that the Applicant has failed to establish a prima facie case to warrant the grant of injunctive relief. They argue that the application is predicated on personal grievances rather than a genuine attempt to vindicate the rights of the company. Relying on Sections 238 and 241 of the Companies Act and the decisions in ***Isaiah Waweru Ngumi & 2 Others v Muturi Ndung’u******[2016] eKLR*** and ***Ghelani Metals Limited & 3 Others v Elesh Ghelani Natwarlal & Another [2017] eKLR***, they submit that a derivative action may only be sustained where it is brought in good faith, advances the interests of the company, and relates to a cause of action vested in the company. They argue that the Applicant has not satisfied these prerequisites. 3. The Respondents further submit that the matters complained of were authorized or are capable of ratification by the company. They contend that the decision to wind up the company arose from shareholders deliberations in which the Applicant participated and acquiesced. Accordingly, they argue that, under Section 241 of the Companies Act, leave to pursue a derivative claim ought to be refused where the impugned acts have been duly authorized or ratified. 4. The Respondents also invoke the doctrine of estoppel, arguing that the Applicant is precluded from challenging resolutions relating to dissolution and asset disposal having participated in the discussions and accepted benefits arising therefrom. They contend that correspondence demonstrates her awareness of, and participation in, decisions relating to dissolution, transfer of shares in Mookh Africa Limited, and disposal of company assets. In their view, the Applicant cannot approbate and reprobate by accepting benefits while repudiating the underlying resolutions. 5. The Respondents maintain that no illegality has been demonstrated. They submit that the Companies Act permits shareholders to resolve to dissolve a company, and that the Applicant has not established any unlawful conduct warranting judicial intervention. They therefore urge the Court not to interfere with decisions lawfully made by shareholders regarding the company’s affairs. 6. On the allegation of oppression, the Respondents deny that the Applicant was excluded and instead contend that she was actively involved in discussions concerning dissolution, termination of staff, and disposal of assets. They further assert that the incorporation of the 6th Respondent arose from proposals discussed among shareholders and that the Applicant had indicated her intention to disengage from the company due to irreconcilable differences. They argue that her claim of exclusion is inconsistent with her prior conduct and correspondence. 7. With respect to allegations of diversion of business and misappropriation of assets, the Respondents submit that no credible evidence has been tendered to support those claims. They contend that the company’s assets were of minimal value and that the Applicant herself participated in discussions regarding their disposal and benefited therefrom. They therefore argue that her allegations are unsupported and inconsistent with her conduct. 8. Concerning the alleged Shareholders’ Agreement and Employment Contract, the Respondents submit that no executed versions have been produced. They argue that the absence of signed documents renders any claims founded thereon untenable and that the burden of proving their existence lies with the Applicant. They further contend that the request for production amounts to a fishing expedition. In addition, they submit that matters relating to employment fall within the jurisdiction of the Employment and Labour Relations Court and cannot properly be determined in these proceedings. 9. The Respondents also contend that the application is tainted by unreasonable delay. They note that the Applicant acknowledges that dissolution discussions occurred in May 2024, yet the present proceedings were not instituted until August 2025, without satisfactory explanation. They argue that equitable relief should not be granted to a party who has delayed in asserting her rights. They further maintain that the 1st Respondent is financially distressed and no longer a going concern, and that dissolution, rather than preservation, is the appropriate course. They note that the Applicant relies on financial statements from 2020 rather than current records and point to her own correspondence acknowledging that the Company’s remaining assets are of limited value and that outstanding obligations to employees and creditors remain unpaid 10. On irreparable harm, the Respondents submit that the Applicant will suffer no prejudice if the orders sought are denied, as the law governing winding up provides adequate safeguards, including asset valuation and distribution. They contend that the balance of convenience favour allowing the dissolution process to proceed and urge the Court to dismiss the application with costs. ***Applicant’s Supplementary Submissions*** 1. In supplementary submissions filed by the Applicant, she identifies four additional issues, including whether prayers 3, 5 and 7 negate the derivative action claim, whether a valid resolution authorising winding up was passed, whether the Court is being invited to assume the jurisdiction of the Employment and Labour Relations Court, and whether the application is defeated by the doctrine of laches. 2. In response, she submits that the impugned prayers are distinct and severable from the derivative claim and do not undermine it. She contends that the derivative action is directed against the 6th Respondent for the benefit of the company, with the aim of recovering diverted corporate opportunities. 3. She further submits that the authorities relied upon by the Respondents in fact support the grant of leave, arguing that she made efforts to resolve the dispute and that the alleged diversion of business to the 6th Respondent constitutes a breach of fiduciary duties warranting a derivative action. 4. On the alleged dissolution, the Applicant disputes the validity of any such resolution, contending that it was not included in the meeting agenda and did not meet the requisite shareholder approval threshold. She asserts that the purported resolution is procedurally defective and invalid, and therefore incapable of ratification under Section 241 of the Companies Act. 5. The Applicant also rejects the application of estoppel. While relying on the cases of ***Mycredit Limited v Micro and Small Enterprises Tribunal’; African Herbal Ingredient Wholesalers Limited (Interested Party) [2026) KEHC 1206 (KLR)*** she submits that the necessary elements namely representation, reliance, and detriment suffered as a consequence, have not been established. 6. In response to the jurisdictional objection, the Applicant clarifies that she does not seek determination of an employment dispute, but merely the production of her employment contract as documentary evidence, which the Court is empowered to order under Order 16, rule 6 of the Civil Procedure Rules. 7. She further contends that the doctrine of laches does not apply, as the alleged wrongdoing is ongoing and she acted promptly upon discovering the incorporation of the 6th Respondent and the alleged diversion of business in March 2025. 8. Finally, while relying on the case of ***Muchanga Investments Limited v Safaris Unlimited (Africa) Ltd & 2 others [2009] KECA 453 (KLR),*** the Applicant submits that the Respondents are not entitled to equitable relief as they have approached the Court without clean hands. She maintains that the proceedings are not an abuse of process but are aimed at protecting her rights as a minority shareholder and safeguarding the interests of the company. ***Analysis and Determination*** 1. Having considered the affidavits in support of and in opposition to the present application, together with the annexures thereto and the written submissions filed by the parties, the issues that arise for determination are as follows: 2. ***Whether the Applicant has established a sufficient basis for the* *grant of interlocutory injunctive and preservatory reliefs.*** 3. ***Whether the Applicant has met the requisite threshold for the grant of leave to institute a derivative action.*** 4. ***Whether this Court should compel the production of the duly executed Shareholders’ Agreement and the Employment Contract.*** 5. ***Whether this Court should order the completion of the transfer of the Applicant’s shares in Mookh Africa Limited.*** 6. **Whether the Applicant has established sufficient basis for the grant of interlocutory injunctive and preservatory orders.** 7. The Applicant seeks interlocutory orders restraining the Respondents from proceeding with the winding up of the 1st Respondent, dealing with its assets, and allowing continued use of its resources, personnel, and business opportunities by the 6th Respondent, pending the hearing and determination of the Petition. 8. The principles governing the grant of interlocutory injunctions are well settled. In ***Giella v Cassman Brown & Co. Ltd******[1973] EA 358***, the Court held that an Applicant must establish: a prima facie case with a probability of success; that irreparable injury would result if the injunction is not granted; and, if the court is in doubt, the matter is to be decided on a balance of convenience. A prima facie case was defined in ***Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] KLR 125*** as one which, on the material presented, discloses an apparent infringement of a right calling for rebuttal. 9. The Applicant’s case is that she remains a shareholder and director of the 1st Respondent, holding 20% of its issued shares, and that the Respondents have embarked on a scheme to exclude her from management, divert the company’s business opportunities and assets to the 6th Respondent, and ultimately strip the company of value under the guise of dissolution. The Respondents, on their part, maintain that the 1st Respondent became commercially unsustainable and that shareholders, including the Applicant, collectively resolved in May 2024 to wind up the company, a process which, according to them, is already underway. 10. From the material on record, several facts are not in dispute: that the Applicant is a shareholder and director of the 1st Respondent; that the 2nd to 5th Respondents exercise control over its affairs; that the 6th Respondent was incorporated on 19th July, 2024, by some of the Respondents; that disputes have arisen regarding the future of the 1st Respondent; that the Applicant has been excluded from certain operational systems and communications; and that discussions have indeed taken place concerning dissolution, asset disposal, and transfer of certain interests. 11. The central controversy, however, lies in whether a valid and binding resolution was passed authorising the dissolution of the 1st Respondent and whether the Respondents have improperly diverted corporate opportunities to the 6th Respondent. The Respondents rely on a purported special resolution of 21st May, 2024, and subsequent correspondence to demonstrate the Applicant’s participation in the winding-up process. Nonetheless, the material before the Court raises serious questions as to the validity of that alleged resolution. First, the notice convening the meeting appears to have been limited to a review of executive directors’ employment arrangements, rather than dissolution of the company. Secondly, the Applicant disputes having approved the resolution and points out that it lacks her signature. Thirdly, there is no evidence of compliance with the formal statutory procedures for winding up under the Companies Act. Fourthly, the Respondents themselves concede that the dissolution process has not been completed. 12. At this interlocutory stage, the Court is not called upon to conclusively determine the validity of the alleged resolution. However, the existence of a bona fide and substantial dispute on that issue underscores the necessity for full ventilation at trial. Of equal significance are the allegations of diversion of corporate opportunities. The Applicant has identified specific projects, including the ICEA Lion campaign and the Safisha Rada campaign, which she alleges originated from the 1st Respondent but were subsequently executed and invoiced through the 6th Respondent. While the Respondents deny these allegations, they admit that the 6th Respondent was incorporated by persons who simultaneously control the 1st Respondent and that they retained access to company systems during the winding-up process. 13. These allegations raise serious questions regarding potential diversion of corporate opportunities and breach of directors’ fiduciary duties. Sections 142, 143, and 146 of the Companies Act impose obligations upon directors to act within their powers, promote the success of the company, and avoid conflicts of interest. Where directors establish or participate in a competing entity while still in control of the company’s affairs, the Court is entitled to subject such conduct to close scrutiny. 14. In the circumstances, the Court is satisfied that the Applicant has demonstrated a bona fide and arguable complaint concerning exclusion from the affairs of the 1st Respondent, possible diversion of corporate opportunities, alleged breaches of fiduciary duty, and disputed efforts to dissolve the company. These issues disclose a prima facie case with a probability of success. 15. On irreparable harm, the Court is persuaded that if the Respondents are allowed to proceed with disposal of assets, transfer of shareholdings, completion of the dissolution process, or continued diversion of corporate opportunities before trial, the substratum of both the Petition and the intended derivative claim may be irreversibly compromised. In cases involving alleged dissipation of corporate assets and diversion of business opportunities, preservation of the subject matter is essential to ensure that any eventual judgment is not rendered nugatory. 16. The balance of convenience likewise tilts in favour of preservation. Should the Petition ultimately fail, the Respondents would remain at liberty to proceed with any lawful dissolution process. Conversely, if the orders are refused and the company is wound up or its assets dissipated, the Applicant’s claim and potentially the company’s claim would be irreparably prejudiced. 17. Accordingly, this Court is satisfied that the threshold for the grant of conservatory and preservatory orders has been met. 18. However, the Court declines to grant the prayer seeking to compel reinstatement of the Applicant’s involvement in ongoing projects. Such relief is in the nature of a mandatory injunction and would require the Court to intervene in and supervise the day-to-day management of a private company. The threshold for the grant of a mandatory injunction at an interlocutory stage is considerably higher than that for a prohibitory injunction. As stated in ***Kenya Breweries Ltd v Washington Okeyo [2002] EA 109***, and as cited with approval in ***Maher Unissa Karim v Edward Oluoch Odumbe HCCC No. 91 of 2015***, a mandatory injunction will only issue in clear and exceptional circumstances where the case is straightforward and can be determined at once or where the act complained of is simple and easily remediable. 19. In the present case, the disputed issues are neither simple nor clear-cut, and they require full evidentiary interrogation at trial. The heightened threshold for the grant of a mandatory injunction has therefore not been satisfied. 20. In the result, the Court grants preservatory orders restraining the Respondents from transferring, disposing of, or otherwise dissipating the assets of the 1st Respondent, and from utilising the 1st Respondent’s assets, business, or projects through the 6th Respondent, pending the hearing and determination of the Petition. 21. **Whether the Applicant has met the requisite threshold for the grant of leave to institute a derivative action.** 22. The Applicant seeks leave, pursuant to Sections 238 and 239 of the Companies Act, to institute a derivative action on behalf of the 1st Respondent against the 6th Respondent. Section 238 of the Act defines a derivative claim as proceedings brought by a member of a company in respect of a cause of action vested in the company and seeking relief on its behalf, arising from acts or omissions involving negligence, default, breach of duty, or breach of trust by a director. 23. From the foregoing statutory framework, it is evident that a derivative claim is only maintainable where the cause of action belongs to the company and the relief sought is for the benefit of the company. Furthermore, such a claim must arise out of conduct attributable to directors or persons in control of the company involving breach of fiduciary or statutory duties. 24. A derivative action constitutes an exception to the rule in ***Foss v Harbottle (1843) 67 ER 189,*** which ordinarily vests the right to enforce corporate causes of action in the company itself. In determining whether to grant leave, the Court is guided by the principles set out in ***Isaiah Waweru Njumi & 2 Others v Muturi Ndung’u [2016] eKLR,*** where the Court captured some of the factors to be considered in determining whether the permission to institute derivative action should be granted as follows:- ***“[21]… Among other things, the Court considers the following factors:*** ***(a) Whether the Plaintiff has pleaded particularized facts which plausibly reveal a cause of action against the proposed defendants. If the pleaded cause of action is against the directors, the pleaded facts must be sufficiently particularized to create a reasonable doubt whether the board of directors’ challenged actions or omissions deserve protection under the business judgment rule in determining whether they breached their duty of care or loyalty;*** ***(b) Whether the Plaintiff has made any efforts to bring about the action the Plaintiff desires from the directors or from the shareholders. Our Courts have developed this into a demand or futility requirement where a Plaintiff is required to either demonstrate that they made a demand on the board of directors or such a demand is excused;*** ***(c) Whether the Plaintiff fairly and adequately represents the interests of the shareholders similarly situated or the corporation. Hence, a shareholder seeking to bring a derivative suit in order to pursue a personal vendetta or private claim should not be granted leave. In the American case of Recchion v Kirby 637 F. Supp. 1309 (W.D. Pa. 1986), for example, the Court declined to let a derivative lawsuit proceed where there was evidence that it was brought for use as leverage in plaintiff’s personal lawsuit;*** ***(d) Whether the Plaintiff is acting in good faith;*** ***(e) Whether the action taken by the Plaintiff is consistent with one a faithful director acting in adherence to the duty to promote the success of the company would take;*** ***(f) The extent to which the action complained against – if the complaint is one of lack of authority by the shareholders or the company – is likely to be authorised or ratified by the company in the future; and*** ***(g) Whether the cause of action contemplated is one that the Plaintiff could bring as a direct as opposed to a derivative action.”*** 1. Accordingly, this Court must consider whether the proposed claim discloses a cause of action vested in the 1st Respondent, whether the Applicant is acting bona fide, whether the action would promote the success of the company, and whether the complaint relates to matters incapable of effective redress through ordinary internal mechanisms. 2. In the present case, the Applicant’s complaint centers on the alleged diversion of business opportunities, misuse of company assets, and breach of fiduciary duties by the 2nd to 5th Respondents. Such claims, by their very nature, belong to the company and not to an individual shareholder. If established, the resultant loss would be suffered by the 1st Respondent. 3. It is further not in dispute that the Respondents, against whom the allegations are directed, are the same individuals who exercise control over the 1st Respondent. In such circumstances, it would be unrealistic to expect the company to initiate proceedings against them. This satisfies the well-established exception to the rule in ***Foss v Harbottle, (supra)*** thereby justifying recourse to derivative proceedings. 4. At this interlocutory stage, the Court is not called upon to make definitive findings on whether the alleged diversion occurred. It suffices that the Applicant has presented a plausible and bona fide claim warranting further investigation. The uncontested fact of the incorporation of the 6th Respondent by persons controlling the 1st Respondent, coupled with allegations of continued handling of projects associated with the 1st Respondent, raises serious questions that cannot be dismissed as frivolous. 5. The Respondents have argued that the Applicant seeks personal reliefs and is therefore disentitled to pursue a derivative claim. While it is true that certain prayers in the application relate to the Applicant’s personal rights, the existence of personal claims does not, in itself, defeat a derivative claim where a distinct corporate cause of action has been disclosed. The two causes of action are severable and can properly coexist within the same proceedings. 6. In the premises, this Court is satisfied that the Applicant has met the threshold set out under Sections 238 and 239 of the Companies Act. Accordingly, leave to institute and prosecute a derivative action on behalf of the 1st Respondent against the 6th Respondent is hereby granted. 7. **Whether the Court should compel production of the duly executed Shareholders’ Agreement and Employment Contract.** 8. The Applicant seeks orders compelling the Respondents to produce executed copies of the Shareholders’ Agreement dated 1st January, 2019, and her Employment Contract. The Respondents deny the existence of executed copies while also asserting that no such agreements were ever signed. 9. Under Order 16, rule 6 of the Civil Procedure Rules, this Court is empowered to issue summons for the production of documents where such production is necessary for the fair and just determination of the proceedings. The documents sought are directly relevant to the issues in dispute, including the governance structure of the company, rights and obligations of shareholders, and the Applicant’s role within the company. 10. The Applicant has sufficiently identified the documents sought and the persons alleged to be in custody thereof. In the circumstances, the request cannot be characterised as a fishing expedition. Indeed, the existence, terms, and legal effect of the said documents constitute central issues in dispute, and their production or confirmation of their non-existence is necessary to resolve those issues. 11. Consequently, this Court finds merit in the prayer and directs the Respondents to produce any executed copies of the said documents within their possession, custody, or control, or in the alternative, to file an affidavit confirming their non-existence. 12. **Whether the Court should order the completion of the transfer of the Applicant’s shares in Mookh Africa Limited** 13. With regard to the transfer of the Applicant’s shares in Mookh Africa Limited, while there is no substantive dispute as to the Applicant’s entitlement to the same, since the Respondents have stated that the transfer process is underway, I find that such an order does not avail itself for issuance at this interlocutory stage. Whether or not the Court is satisfied to issue such an order is among the substantive orders that may ensue if upon filing of the derivative action, it is proved that among the misgiving by the Respondents is the failure to complete the transfer of shares of a minority shareholder to another entity. I therefore defer the determination of this matter at this application stage. 14. In the result, the Court is satisfied that the Applicant has established sufficient grounds for the partial grant of the application. Accordingly, the Court makes the following orders: 15. ***Pending the hearing and determination of the Petition, the 2nd to 5th Respondents are hereby restrained from transferring, disposing of, charging, alienating, or otherwise dealing with the assets of the 1st Respondent, including its shareholding in Fat Rain Films (EPZ) Limited, without leave of the Court.*** 16. ***Pending the hearing and determination of the Petition, the 6th Respondent, whether by itself, its directors, officers, servants, or agents, is restrained from utilising any identifiable assets, property, confidential information, client databases, goodwill, or business opportunities belonging to the 1st Respondent.*** 17. ***Leave is hereby granted to the Applicant to institute and prosecute a derivative action on behalf of the 1st Respondent against the 6th Respondent.*** 18. ***The 2nd to 5th Respondents shall, within thirty (30) days of being served with the derivative action, produce any executed copies of the Shareholders’ Agreement dated 1st January 2019 and the Applicant’s Employment Contract in their possession, custody, or control, or in default, file an affidavit confirming their non-existence.*** 19. ***Costs of the application shall abide the outcome of the Petition.*** 20. Orders accordingly. ***Delivered, Dated and Signed virtually this 18th day of June, 2026*** **RHODA RUTTO** **JUDGE** **In the presence of;** **Court Assistant: Wabwire** **Mr. Gitau for the Respondents** **Mr. Kituku for Petitioner/Applicant**