https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/9841

Mahammadali v Kumar & 3 others (Commercial Case E894 of 2021) [2026] KEHC 9841 (KLR) (Commercial and Tax) (2 July 2026) (Ruling) Neutral citation: [2026] KEHC 9841 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Commercial Courts) Commercial and Tax Commercial Case E894 of 2021 RC Rutto, J July 2, 2026 Between Punjani Riyaz Mahammadali Plaintiff and Shailesh Rai Kumar 1st Defendant Ranjeeta Rai Pandey 2nd Defendant Bellmac Consulting Llp 3rd Defendant and Heritage Flowers Limited Nominal Defendant Ruling 1.Before this Court for determination is a Notice of Motion Application dated 18th October, 2023, seeking orders that: -1.Spent2.Spent3.Spent4.Spent5.Pending the hearing and determination of the suit herein, this Honourable court be pleased to issue an order barring and or restraining the 1st Defendant who is facing charges of stealing by directors, money laundering and forgery from running the operations of the Nominal Defendant.6.Pending the hearing and determination of the suit, this Honourable court be pleased to issue an order restricting the 2nd Defendant who have been expunged from the company register by the Registrar of Companies from purporting to act as a director of the Nominal Defendant.7.Pending the hearing and determination of the suit herein, this Honourable court be pleased to issues an order barring and or restraining the 3rd Defendant who have been expunged from the company register by the Registrar of Companies from purporting to act as a secretary of the Nominal Defendant.8.Pending the hearing and determination of the suit herein, this Honourable court issues an order directing that a forensic audit of the Nominal Defendant’s financial accounts and reports be done by reputable forensic audit firm from year 2019 to the present date of to such a date as the court may direct and9.Costs of this application be provided for against the Defendants/Respondents. 2.The application is premised on the grounds set out on its face and supported by the affidavit sworn by the Applicant. The Applicant states that he is the majority shareholder of the Nominal Defendant, holding fifty (50) ordinary shares, while the 1st and 2nd Defendants each hold twenty-five (25) ordinary shares. He avers that he and the 1st Defendant are the only lawful directors of the company. 3.The Applicant contends that the 1st Defendant unlawfully appointed the 2nd Defendant as a director and the 3rd Defendant as the Company Secretary and caused the said appointments to be registered in the company's records. Following a complaint lodged with the Registrar of Companies, the Registrar invoked Section 862 of the Companies Act and rectified the company's register by expunging the appointments of the 2nd and 3rd Defendant as Director and Company Secretary respectively. Despite this rectification, the 2nd and 3rd Defendants allegedly continue to hold themselves out as director and Company Secretary respectively, attend directors' meetings, execute resolutions and perform functions associated with those offices. 4.The Applicant further asserts that the 1st and 2nd Defendants have incorporated and are operating a competing entity known as Rosalia Blooms Limited, and are also associated with another entity, Meridian Flowers Limited, in contravention of their fiduciary duties and the company’s Articles of Association. He further deposed that the 1st and 2nd Defendants are facing criminal charges in Milimani Criminal Case No. E604 of 2023 Republic versus Shailesh Kumar Rai & 4 others relating to offences of stealing by directors, money laundering and forgery. 5.It is the Applicant’s case that unless restrained, the Defendants’ actions will occasion mismanagement, diversion of business, devaluation of his shareholding and possible insolvency of the Nominal Defendant. He further avers that the Defendants have denied him access to company records, and financial information, and have instead threatened contempt proceedings. It is therefore the Applicant's case that the orders sought are necessary to preserve the affairs of the Nominal Defendant, prevent further prejudice to the company and its shareholders and ensure that the company's operations are conducted lawfully pending the hearing and determination of the suit. 6.The application is opposed by the 1st and 2nd Defendant through a Replying Affidavit sworn by the 1st Defendant in September 2025. He describes the application as being based on scandalous and unsubstantiated allegations, and contends that it improperly seeks final orders at an interlocutory stage. 7.The 1st Defendant denies unlawfully appointing the 2nd and 3rd Defendant and avers that the 2nd Defendant was duly appointed and her appointment ratified at an Extra Ordinary General Meeting on 15th October, 2021. He explains that the Applicant’s signature does not appear on the minutes as he was absent with apology. 8.The 1st Defendant further denies that the Applicant has been denied access to the company’s affairs, stating that no formal request was made and that the Applicant has access to financial records through the Xero accounting system. 9.The 1st Defendant also contends that the suit is incompetent, as it constitutes a derivative action instituted without leave of the Court and contrary to the provisions of Part XI of the Companies Act. He further argues that the Court should not interfere with the internal management of the company, as the matters raised are for determination by shareholders in a general meeting. 10.The 1st Defendant states that the Applicant has acted in bad faith by refusing to attend company meetings while alleging exclusion. He deposes that, by virtue of his experience, he was lawfully appointed Managing Director on 1st April, 2019, with the approval of the Applicant. 11.He avers that the Applicant had expressed an intention to exit the company and offered to sell his shares for Kshs. 200,000,000/-; but later withdrew the offer and attempted to sell to third parties contrary to the Articles of Association. 12.Regarding the Registrar of Companies' rectification, the 1st Defendant asserts that the Registrar later indicated that the letter relied upon by the Applicant had been issued in error and referred the matter to the Business Registration Service Committee, where it remains unresolved. 13.He further accuses the Applicant of approaching the Court with unclean hands, alleging that he refused to sign company cheques, thereby jeopardizing company operations and exposing it to liabilities. The 1st Defendant further alleges that the Applicant has established competing businesses, namely Agrichem Africa Limited and Zee Flora Limited, and has engaged in the misappropriation of the company’s trade secrets and intellectual property. 14.The Defendants maintain that no fraud has been established to warrant Court intervention in the internal affairs of the company, and urge the Court to dismiss the application with costs. 15.In the Applicant’s Supplementary Affidavit, the Applicant responds to the assertions made in the 1st and 2nd Defendant’s Replying Affidavit and maintains that the orders sought are purely interlocutory and intended to preserve the status quo pending the hearing and determination of the suit. He depones that the 2nd Respondent is not a director of the Nominal Defendant as per the current CR12 and that the 3rd Respondent's appointment as Company Secretary was expunged by the Registrar of Companies through the letter dated 12th November, 2021. He nevertheless asserts that the two Respondents continue to unlawfully hold themselves out as director and company secretary respectively. He contends that the orders sought are necessary to restrain their continued unlawful assumption of office and prevent the suit from being rendered nugatory. He further denies that the application seeks to usurp the powers of the Annual General Meeting, asserting instead that it aimed at halting ongoing unlawful acts pending the determination of the suit. 16.The Applicant further disputes the 1st Respondent's assertion that he was lawfully appointed as the Company's Managing Director. He avers that no valid notice convening a general meeting for such appointment was ever issued as required by the Articles of Association, that no minutes exist evidencing a shareholders' resolution appointing the 1st Respondent as Managing Director. He further states that the purported letter dated 1st April, 2019, does not constitute a valid board resolution and is inconsistent with Clause 46 of the Articles of Association. Additionally, he points out that the letterhead appearing on the alleged appointment letter was not in existence at the date the document is purported to have been executed, thereby raising concerns that the document was backdated or fraudulently prepared. 17.The Applicant also denies that he resigned from the company. He states that resignation as a director is a formal statutory process requiring compliance with the Business Registration Service procedures, and that his name continues to appear as a director and majority shareholder in the company's records. He explains that, his letter dated 1st July, 2021, was merely a transfer notice issued pursuant to Article 25 of the Articles of Association to initiate the sale of his shares at a proposed price and did not constitute a resignation. He contends that the Defendants deliberately misconstrued the transfer notice as a resignation letter and even requested him to execute formal resignation documents thereby demonstrating that no resignation had taken place. 18.The Applicant further states that the purpose of the contemplated board meeting under the Articles was to deliberate on the proposed share price or procure an independent valuation, and not to effect resignation. He further avers that the company’s former secretaries, Equatorial Secretaries and Registrars, confirmed by a letter dated 19th August, 2021, that the meeting allegedly held on 10th August, 2021, lacked quorum and that all resolutions purportedly passed therein, including the appointments of the 2nd and 3rd Respondents, were invalid. 19.He reiterates that the Registrar of Companies subsequently invoked Section 862 of the Companies Act and rectified the company register by expunging the said appointments, and that the rectification has never been set aside. He therefore maintains that the Respondents continue to hold unlawful meetings and pass invalid resolutions, and that the assertion that the Registrar’s letter was issued in error is unsupported by any lawful decision. 20.The Applicant further accuses the Respondents of engaging in a scheme to divert the business and finances of the Nominal Defendant. He avers that the 1st and 2nd Respondents operate competing companies, namely; Rosalia Blooms Limited and Meridian Flowers Limited, through which they have redirected clients and company funds without valid board resolutions. He also alleges that the 1st Respondent executed a trust deed on behalf of the Nominal Defendant in favour of Rosalia Blooms Limited without board approval, resulting in the Nominal Defendant's clients funds being held in Rosalia's bank accounts. He further states that Rosalia Booms Limited subsequently borrowed against those funds under a loan agreement dated 22nd February, 2022, thereby exposing the Nominal Defendant to financial loss. He also relies on the criminal charges facing the 1st and 2nd Respondents in Milimani Criminal Case No. E604 of 2023 as further evidence of the alleged fraudulent scheme. 21.The Applicant contends that unless the Respondents are restrained, their continued conduct will further devalue the Nominal Defendant, diminish his shareholding and potentially render the company insolvent. He denies any association with Agrichem Africa Limited or Zee Flora Limited, asserting that such allegations are false and intended to divert attention from the Respondents' conduct. He therefore urges this Court to grant the interlocutory orders sought in order to safeguard the affairs of the Nominal Defendant pending the hearing and determination of the suit. 22.Pursuant to the directions issued by this Court, the application was canvassed by way of written submissions. The Applicants filed submissions dated 19th November, 2025, and the Respondent filed submissions dated 15th December, 2025. The submissions were highlighted. Applicant’s submissions 23.The Applicant identifies three issues for determination, namely: whether the 2nd and 3rd Defendants should be restrained from acting as director and Company Secretary respectively following their removal by the Registrar of Companies under Section 862 of the Companies Act; whether the 1st Defendant should be restrained from acting as a director in light of the criminal charges he faces; and whether the Court should order a forensic audit of the Nominal Defendant’s accounts and reports by a reputable forensic audit firm. 24.On the first issue, the Applicant submits that Section 862 of the Companies Act vests the Registrar of Companies with the authority to rectify the register by removing entries that are invalid, ineffective or made without proper authority. Counsel submits that following complaints regarding the unlawful appointment of the 2nd Defendant as director and the 3rd Defendant as Company Secretary, the Registrar afforded all parties an opportunity to be heard before concluding that the appointments were irregular. It is argued that there was no vacancy to justify the appointment of an additional director, that the board meeting held on 10th August, 2021, lacked the requisite capacity and quorum to appoint a director and that the subsequent appointment of the 3rd Defendant as Company Secretary was equally invalid. The Registrar therefore lawfully expunged the appointments and restored the register to reflect only the Applicant and the 1st Defendant as directors. 25.The Applicant further submits that the Registrar’s decision has not been challenged under Section 862(6) of the Companies Act and therefore remains valid and binding. Consequently, the continued participation of the 2nd and 3rd Defendants in the affairs of the company is unlawful, rendering any meetings, resolutions or actions undertaken by them null and void. The Court is urged to restrain them from continuing to hold themselves out as director and Company Secretary. Reliance is placed on Exclusive Living East Africa Limited & another v Bulimu & others [2025] KEHC 12478 (KLR), where the High Court upheld the Registrar’s powers to expunge unauthorized entries in the company register. 26.On the second issue, the Applicant submits that the 1st Defendant has breached his statutory and fiduciary duties under Section 143(1)(f) of the Companies Act. It is contended that the 1st and 2nd Defendant have engaged in conduct intended to disenfranchise the Applicant by incorporating and operating competing entities, namely Rosalia Blooms Limited and Meridian Flowers Limited, and diverting the Nominal Defendant's business and clientele to those entities 27.The Applicant further submits that the Respondents unlawfully redirected client’s payments from the Nominal Defendant's Bank of India account to Rosalia Blooms Limited's account held at Diamond Trust Bank, thereby circumventing existing court orders preserving the company's bank mandates and excluding the Applicant from oversight of the company's finances. 28.The Applicant further submits that the diversion of funds was concealed through a trust deed between Heritage Flowers Limited and Rosalia Blooms Limited, which vested control of the Nominal Defendant’s funds in Rosalia conferred extensive powers upon Rosalia. 29.It is further alleged that Rosalia advanced a loan of USD 88,495 to the 1st Defendant using the Nominal Defendant’s funds, and that the loan agreement was unlawfully executed by the 2nd Defendant while purporting to act as a director. The Applicant also relies on the pending criminal charges against the 1st and 2nd Defendants in Milimani Criminal Case No. E604 of 2023 involving offences of stealing by directors, money laundering, and forgery. He notes that an attempt to quash those proceedings through HCJR Case No. E110 of 2023 was unsuccessful. On that basis, the Court is urged to restrain the 1st Defendant from managing the affairs of the company pending determination of the suit. 30.On the prayer for a forensic audit, the Applicant submits that there is sufficient evidence of diversion of company funds, unlawful execution of corporate resolutions, operation of competing businesses, and continued mismanagement of the company's affairs despite the Registrar's rectification of the register. It is argued that a forensic audit is necessary to establish the true financial position of the Nominal Defendant, ascertain the status of its accounts, and determine the extent of any financial impropriety. The Applicant relies on Directline Assurance Company Limited v Macharia & 11 others (Civil Case E328 of 2024) [2024] KEHC 11885 (KLR) and also cites Mokosio & another v Vadera & 3 others (Petition 13 of 2020) [2021] KEHC 56 (KLR) to support the proposition that a forensic audit is an appropriate remedy in circumstances where the integrity of a company’s financial management is in question. 31.In conclusion, the Applicant submits that the interlocutory reliefs sought are interlocutory in nature and intended to preserve the company and prevent ongoing unlawful conduct, rather than to usurp the authority of the Annual General Meeting. He therefore prays that the Court grants prayers (5), (6), (7), and (8) of the Notice of Motion together with costs. Respondent’s submissions 32.The Respondent identified the following issues for determination namely; whether the suit and the present application are properly instituted as a derivative claim; whether the application meets the threshold for interlocutory relief and whether the court should interfere in the company’s management. 33.On the first issue, the Respondents submit that both the suit and the application are, in substance, derivative proceedings brought on behalf of the company for alleged breaches of duty by its directors. They contend that the Plaintiff seeks relief in respect of alleged wrongs against the company, including challenges to the appointments of directors and allegations of embezzlement, which fall within the scope of a derivative claim as contemplated under Sections 238 to 241 of the Companies Act. 34.They argue that the Applicant was therefore required to obtain leave of the Court before instituting the proceedings and to demonstrate that the claim disclosed a prima facie case and is in the best interests of the company. It is their position that in the absence of such leave, the suit and the application are incompetent and amount to an abuse of the court process. They further submit that the Nominal Defendant has been improperly joined as a nominal party rather than as the proper Plaintiff. 35.In support of this position, the Respondents rely on the rule in Foss v Harbottle (1843) 2 Hare 461. They further cite Jane Wambui Weru v Overseas Private Investment Corporation & 4 others [2012] eKLR, where the High Court emphasized that leave must be obtained to institute and continue derivative proceedings, and that such leave is to be determined inter partes upon establishment of a prima facie case. The Respondents maintain that the Plaintiff has failed to comply with the mandatory statutory requirements governing derivative actions. 36.On whether the threshold for interlocutory relief has been met, the Respondents submit that the Plaintiff has failed to satisfy the established principles for the grant of an interlocutory injunction. They contend that no prima facie case has been demonstrated, as the documentary evidence shows that the impugned appointments were lawfully undertaken and ratified in accordance with the company’s Articles of Association. They further submit that there is no evidence of fraud, embezzlement, or other unlawful conduct warranting the Court’s intervention. It is also their argument that any injury alleged by the Plaintiff is compensable in damages and does not amount to irreparable harm. Additionally, they assert that the balance of convenience favours maintaining the status quo, as granting the orders sought would disrupt the company’s operations, affect over 230 employees, and effectively determine substantive issues at an interlocutory stage. They further argue that the application seeks final relief in the guise of interlocutory orders. 37.The Respondents further submit that the Court ought not to interfere with the internal management of the company. They argue that matters concerning the appointment of directors and company secretaries fall within the remit of shareholders acting through general meetings and that judicial intervention is unwarranted in the absence of illegality or ultra vires conduct. They contend that the Applicant is improperly inviting the court to substitute its judgment for that of the company's shareholders and board of directors. In support this position, they rely on Burland v Earle [1902] AC 83 and reiterate the principle in Foss v Harbottle [1843] 2 Hare 261, that courts will not interfere with the internal management of companies acting within their lawful authorities. 38.Finally, the Respondents submit that the Applicant has approached the Court with unclean hands and is therefore not deserving of equitable relief. They contend that the Applicant expressed an intention to exit the company, unlawfully withdrew his transfer notice, refused to cooperate in the management of the company by declining to sign cheques, engaged in competing businesses, and misappropriated the company’s trade secrets. They argue that the Applicant’s own conduct has contributed to the challenges facing the company and that he cannot properly invoke the Court’s equitable jurisdiction while acting in bad faith. On that basis, they urge the Court to dismiss the application with costs. Analysis and Determination 39.I have considered the rival affidavits filed by the parties together with their respective written and oral submissions. It is apparent from the record that there exists a deeply rooted dispute between the Applicant and the Respondents regarding the governance and management of the Nominal Defendant, Heritage Flowers Limited. The dispute centers on, inter alia, the legality of the appointment of the 2nd Defendant as director and the 3rd Defendant as Company Secretary; the legal effect of the rectification of the company’s register by the Registrar of Companies under Section 862 of the Companies Act; allegations of diversion of the company’s business and finances to competing entities; the management of the company’s affairs by the 1st Defendant; and whether the circumstances warrant the grant of preservatory relief pending the hearing and determination of the main suit. It is equally evident that each party accuses the other of acting contrary to the interests of the company and in breach of their fiduciary obligations as shareholders and directors. 40.Having considered the application and submissions made, I am of the view that the following issues arise for determination are as follows: -1.Whether the present application constitute a derivative action requiring the leave of the Court and if so, whether the omission to obtain such leave renders the application incompetent.2.Whether the Applicant has satisfied the principles governing the grant of interlocutory relief restraining the 1st Defendant from managing the affairs of the Nominal Defendant and restraining the 2nd and 3rd Defendants from acting as director and Company Secretary respectively pending the hearing and determination of the suit.3.Whether the Applicant has established sufficient grounds to warrant an order directing a forensic audit of the Nominal Defendant's accounts pending the determination of the suit. Whether the present application constitute a derivative action requiring the leave of the Court and if so, whether the omission to obtain such leave renders the application incompetent. 41.The Respondents have raised the issue of competence as a threshold question. Their argument is that the Applicant seeks to litigate wrongs allegedly committed against Heritage Flowers Limited and that the reliefs sought concern alleged breaches of directors' duties, diversion of company assets, unlawful appointments of directors and mismanagement of the company's affairs. According to the Respondents, these are wrongs committed against the company itself and therefore fall squarely within the ambit of a derivative claim under Sections 238 to 241 of the Companies Act. Consequently, they argue that the Applicant was required to obtain leave of the Court before proceeding and that the failure to do so renders both the suit and the present application incompetent. 42.The Applicant takes a contrary position. He submits that he is not merely seeking to vindicate the rights of the company but is also seeking protection of his personal rights as the majority shareholder and lawful director. It is his case that the Respondents have unlawfully assumed corporate offices after the Registrar of Companies expunged their appointments from the register and that unless restrained, they will continue undertaking unlawful acts that will render the suit nugatory. He therefore contends that the application principally seeks preservatory orders pending trial rather than substantive relief on behalf of the company. 43.The law relating to derivative actions is now codified under Part XI of the Companies Act, 2015. Section 238 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 behalf of the company. Sections 239 and 241 establish the procedure for obtaining permission to continue such proceedings. The statutory provisions embody the long-established common law rule in Foss v Harbottle (1843) 2 Hare 461 that where a wrong is alleged to have been done to a company, the proper Plaintiff is ordinarily the company itself. This principle exists to preserve the doctrine of separate corporate personality and to prevent individual shareholders from usurping the authority of the company to determine whether litigation ought to be commenced. 44.The Court in Jane Wambui Weru v Overseas Private Investment Corporation & 4 Others [2012] eKLR reiterated that a shareholder seeking to pursue a derivative claim must first obtain leave of the Court upon demonstrating that the intended proceedings disclose a prima facie case and are in the interests of the company. The law requires leave where a shareholder seeks to pursue a cause of action vested in the company by way of a derivative claim, it is equally settled that not every dispute involving shareholders constitutes a derivative action. Where the complaint concerns the infringement of a shareholder's personal rights as a member of the company, or seeks to vindicate rights personal to the shareholder rather than rights vested in the company, such proceedings are distinguishable from a derivative claim. This distinction was underscored in Qi Zhen Cai v Qinwen He & 2 Others [2017] eKLR, where the Court held that a shareholder may sue in his or her capacity as a member (“qua member”) and in John Muturi Nyaga v Graham Alexander Walsh & 3 Others [2017] eKLR, where the Court emphasized that derivative claims and personal shareholder remedies are separate and distinct causes of action, each serving different legal purposes. 45.The question therefore is whether the present proceedings are purely derivative or whether they also encompass personal rights capable of independent enforcement. 46.In the instant case, the Applicant alleges, inter alia, that the Registrar of Companies rectified the company's register by expunging the appointments of the 2nd Defendant as director and the 3rd Defendant as Company Secretary pursuant to Section 862 of the Companies Act; that despite such rectification the two continue to hold themselves out as officers of the company; that the 1st Defendant has diverted the company's business and finances to competing entities; that company funds have been misappropriated; and that the Court should restrain the Respondents and order a forensic audit. 47.In my considered view, these allegations are not homogeneous. Some of them undoubtedly concern wrongs allegedly committed against the company itself. Allegations relating to diversion of company funds, misuse of corporate opportunities, breach of fiduciary duties by directors and dissipation of company assets are causes of action vested primarily in the company. Such claims ordinarily fall within the statutory framework governing derivative proceedings because the injury complained of is suffered principally by the company. 48.However, the application also raises a distinct complaint regarding the continued occupation of corporate offices by persons whom the Applicant contends were lawfully removed from the company's register by the Registrar of Companies. The Applicant, as a shareholder and director, challenges the legal validity of those appointments and seeks preservation of the company's governance structure pending trial. That complaint is not merely an attempt to recover assets on behalf of the company. Rather, it concerns the legality of the composition of the company's governing organs and the exercise of statutory powers by the Registrar under Section 862 of the Companies Act. It also implicates the Applicant's personal rights as a shareholder and director to participate in the lawful governance of the company. 49.Accordingly, I am not persuaded by the Respondents' submission that the entire application is fatally incompetent merely because some of the allegations touch upon breaches of directors' duties. This Court must look at the substance of each relief sought rather than characterizing the proceedings as wholly derivative. To hold otherwise would elevate form over substance and potentially deny a shareholder access to the Court where he alleges continuing unlawful occupation of corporate office or infringement of his individual rights. 50.That said, I agree with the Respondents that this Court must remain alive to the distinction between preserving the status quo pending trial and determining substantive claims belonging to the company. Reliefs whose effect would amount to final findings on alleged diversion of company assets or breaches of fiduciary duties must be approached cautiously at an interlocutory stage, particularly where leave for a derivative action has not been obtained. 51.Consequently, I find that although certain allegations pleaded by the Applicant bear the characteristics of a derivative claim, the present application cannot, at this interlocutory stage, be struck out in its entirety solely for want of leave. The objection on competence therefore fails to the extent that the Applicant seeks preservatory relief concerning the governance and management of the company pending the hearing of the suit. However, this Court shall remain guided throughout this ruling by the principle that it should not determine substantive derivative claims under the guise of interlocutory relief. Whether the Applicant has satisfied the principles governing the grant of interlocutory relief restraining the 1st Defendant from managing the affairs of the Nominal Defendant and restraining the 2nd and 3rd Defendants from acting as director and Company Secretary respectively pending the hearing and determination of the suit 52.The orders sought in the application are in the nature of interlocutory injunctions intended to preserve the affairs of the Nominal Defendant pending the hearing and determination of the suit. The applicable principles governing the grant of interlocutory injunctions are settled. In Giella v Cassman Brown & Co. Ltd [1973] EA 358, and subsequently redefined in Nguruman Limited v Jan Bonde Nielsen & 2 Others [2014] eKLR. An Applicant must first establish a prima facie case with a probability of success, failing which the Court need not proceed to consider irreparable harm or the balance of convenience. The Court emphasized that the three conditions are sequential rather than conjunctive. 53.A prima facie case was defined, in Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] KLR 125, as one that discloses an arguable case based on the material presented, demonstrating an apparent infringement of a right that calls for a rebuttal. 54.Guided by the foregoing principles, I now consider the reliefs sought. With these principles in mind, I now proceed to consider each of the interlocutory reliefs sought. 55.With respect to the prayer seeking to restrain the 1st Defendant from managing the affairs of the Nominal Defendant, the Applicant alleges that the 1st Defendant has fundamentally breached his fiduciary duties by diverting the company’s business to competing entities, transferring clients and funds without authority, executing a trust deed without board approval, and exposing the company to financial loss. The Applicant further relies on the pendency of criminal proceedings against the 1st Defendant relating to offences of stealing by directors, money laundering and forgery in Milimani Criminal Case No. E604 of 2023. According to the Applicant, these matters demonstrate that the 1st Defendant can no longer be entrusted with the management of the company pending the hearing of the suit. 56.The Respondents on their part, deny these allegations and maintain that the 1st Defendant has lawfully managed the affairs of the company since its inception pursuant to its lawful appointment as Managing Director. They contend that the Applicant voluntarily disengaged from the company's operations; and instead frustrated the company's affairs by refusing to sign company cheques. They further assert that the allegations of diversion of funds, competing businesses and financial impropriety remain unproven and are matters for trial. 57.The Respondents further contend that the existence of pending criminal proceedings does not amount to proof of wrongdoing and cannot, without more, justify removing a director from office before the conclusion of the criminal process. 58.I have carefully considered the competing positions. It is not in dispute that the allegations raised by the Applicant are serious in nature and, if proved, may establish breaches of statutory and fiduciary obligations owed by a director under the Companies Act. 59.I have also considered the Applicant’s reliance on the pending criminal proceedings against the 1st Defendant. While it is correct that the mere existence of criminal charges does not constitute proof of guilt, and the presumption of innocence under Article 50(2)(a) of the Constitution must be upheld. However, in corporate governance, where credible material is placed before the Court demonstrating a real risk of ongoing mismanagement, diversion of company assets, or abuse of office, the Court is entitled, in appropriate circumstances, to take protective measures aimed at safeguarding the company’s interests pending trial. The purpose of such intervention is not to determine culpability, but to prevent further potential harm. 60.In the present case, the orders sought are not punitive but preservatory in nature. The Court must balance the 1st Defendant’s right to participate in the management of the company against the need to protect the Nominal Defendant from the risk of further prejudice. Where allegations of breach of fiduciary duty, diversion of funds, and conflict of interest are not only raised but supported by prima facie material, the Court cannot shut its eyes merely because those matters remain contested. In such circumstances, and bearing in mind that directors occupy positions of trust, it is both prudent and necessary to temporarily restrict the exercise of managerial authority where continued control poses a demonstrable risk to the company. Such limited intervention does not amount to a final determination of the dispute but ensures that the substratum of the suit is preserved and that the company is not exposed to further potential loss pending the full hearing. 61.In the premises, the Applicant has demonstrated that there exists a bona fide dispute warranting investigation at trial, I am satisfied that he has established a clear prima facie case with a probability of success sufficient to justify an interlocutory order restraining the 1st Defendant from managing the affairs of the Nominal Defendant. On whether the 2nd Defendant should be restrained from acting as a director pending the hearing and determination of the suit, 62.The Applicant contends that the 2nd Defendant lacks any legal authority to act as a director of the Nominal Defendant, her appointment having been investigated by the Registrar of Companies and subsequently expunged from the register pursuant to Section 862 of the Companies Act. He submits that despite the Registrar's determination, the 2nd Defendant continues to participate in directors' meetings, execute company resolutions and transact the affairs of the company, thereby exposing the company to unlawful and potentially void corporate actions. 63.The Respondents, on their part, maintain that the 2nd Defendant was validly appointed as a director at the board meeting held on 10th August, 2021, and that her appointment was subsequently ratified by the shareholders at an Extraordinary General Meeting held on 15th October, 2021. They further contend that although the Registrar initially issued the letter dated 12th November, 2021, expunging the appointment, the Registrar later acknowledged that the letter had been issued in error and referred the matter to the Business Registration Service Committee. According to the Respondents, no final determination has been made reversing or affirming that position, and consequently, the 2nd Defendant continues to lawfully hold office. 64.The Applicant has placed before the Court the letter issued by the Registrar of Companies dated 12th November, 2021, together with the current CR12 reflecting only the Applicant and the 1st Defendant as directors of the Nominal Defendant. The Registrar expressly invoked Section 862 of the Companies Act and directed that the appointment of the 2nd Defendant be expunged from the register upon finding that the appointment did not comply with the law. Significantly, the Applicant has also demonstrated that the Registrar's decision has not been set aside or quashed by any competent court. In contrast, while the Respondents assert that the Registrar subsequently revisited the matter, they have not produced any definitive or legally operative decision reversing, varying or nullifying the rectification undertaken pursuant to Section 862. 65.Section 862 of the Companies Act empowers the Registrar to remove from the register any information that is incomplete, inaccurate, ineffective or derived from invalid or ineffective acts. Administrative action taken pursuant to that provision carries legal effect unless and until it is lawfully set aside. In the absence of such reversal through the mechanism provided under the Act or by a court of competent jurisdiction, the rectification remains valid and binding. 66.This position was affirmed in Exclusive Living East Africa Limited & another v Bulimu; Exclusive Living East Africa Limited & 3 others (Defendant to the Counterclaim) [2025] KEHC 12478 (KLR), where the court upheld the Registrar's exercise of statutory powers under Section 862 to rectify the register by expunging unauthorized changes made to a company's records.At this interlocutory stage, this Court is not called upon to conclusively determine the legality or otherwise of the 2nd Defendant appointment, that issue properly falls for determination at trial. The Court’s task is limited to determining whether the Applicant has established a prima facie case. In the circumstances, I am satisfied that he has. 67.The Applicant’s complaint against the 2nd Defendant is grounded on an extant administrative determination by the Registrar and supported by the official company records presently in force. The Respondents’ assertion that the Registrar’s decision was erroneous or is under reconsideration remains unsupported by any conclusive or legally cognizable outcome. Consequently, there is, on the material presented, a clear and arguable infringement of the Applicant’s right to have the affairs of the company conducted in accordance with the official statutory register. 68.Having found that a prima facie case has been established, I turn to the question of irreparable harm. The Applicant avers that, notwithstanding the Registrar’s rectification, the 2nd Defendant continues to participate in governance decisions, including board deliberations, execution of resolutions, and management of company finances. If it ultimately transpires that the 2nd Defendant lacks lawful authority, then corporate decisions undertaken with her participation may be liable to invalidation, thereby exposing the company to legal uncertainty, reputational damage, and potential third-party disputes. Such consequences cannot be adequately remedied by an award of damages, as they go to the very legitimacy of the company’s governance framework. 69.I am therefore unable to agree with the Respondents’ submission that any harm is purely compensable in damages. The issue at hand transcends pecuniary loss and concerns the legality and integrity of corporate decision-making. The continued exercise of authority by a person whose appointment has been removed from the statutory register presents a material risk to the company’s operations. Even if there were doubt on irreparable harm, the balance of convenience would favour preserving the status reflected in the official register pending trial. The Court is obliged, where possible, to maintain the prevailing legal position so as to avoid compounding the dispute. At present, the official CR12 reflects only the Applicant and the 1st Defendant as directors, and no binding decision has been presented to this Court reinstating the 2nd Defendant. 70.In the premises, I am satisfied that the Applicant has met the threshold for the grant of an interlocutory injunction restraining the 2nd Defendant from acting or purporting to act as a director of the Nominal Defendant pending the hearing and determination of the suit. For the avoidance of doubt, this finding is interlocutory in nature and is based on the current state of the statutory register and the evidence presently before the Court. It shall not be construed as a final determination on the legality of the 2nd Defendant’s appointment, which remains to be conclusively determined at trial. 71.On whether the 3rd Defendant should be restrained from acting as the Company Secretary pending the hearing and determination of the suit, the basis of this prayer mirrors that advanced in respect of the 2nd Defendant. The Applicant contends that the 3rd Defendant's appointment as Company Secretary was equally investigated by the Registrar of Companies and subsequently expunged from the company's register pursuant to Section 862 of the Companies Act. Notwithstanding the Registrar's determination, it is alleged that the 3rd Defendant continues to attend board meetings, execute corporate documents and discharge the functions of Company Secretary without lawful authority. 72.The Respondents oppose the prayer and maintain that the 3rd Defendant was lawfully appointed following the resignation of the previous company secretaries. They reiterate their position that the Registrar's letter dated 12th November, 2021, was subsequently acknowledged to have been issued in error and that no final determination has been made invalidating the 3rd Defendant's appointment. 73.I have considered the rival positions. As already observed in relation to the 2nd Defendant, the Applicant has exhibited the Registrar's decision made pursuant to Section 862 of the Companies Act together with the current company records, both of which indicate that the impugned appointment was removed from the company's register. While the Respondents challenge the legal effect of that decision, they have not placed before this court any subsequent determination of the Registrar or order any order of a competent court restoring the 3rd Defendant to office or setting aside the rectification. 74.In those circumstances, and for substantially the same reasons that informed my findings regarding the 2nd Defendant, I am satisfied that the Applicant has established a prima facie case warranting preservation of the company's governance structure pending trial. The continued discharge of the statutory functions of a Company Secretary by a person whose appointment has been removed from the official register carries the potential of affecting the validity of corporate resolutions, statutory filings and other legal acts undertaken on behalf of the company. Such prejudice cannot adequately be compensated by an award of damages and therefore falls within the category of harm warranting interlocutory protection 75.Further, the balance of convenience favours maintaining the legal position presently reflected in the records maintained by the Registrar of Companies until the issues raised in the suit are conclusively determined. Preserving that position minimizes the risk of compounding irregularities and safeguards the integrity of the company’s governance framework. In the absence of any lawful reinstatement of the 3rd Defendant, it is both prudent and necessary to maintain the status quo as reflected in the official register 76.Accordingly, I find that the Applicant has satisfied the requirements for the grant of an interlocutory injunction restraining the 3rd Defendant from acting or purporting to act as the Company Secretary of the Nominal Defendant pending the hearing and determination of the suit. Whether the Applicant has established sufficient grounds to warrant an order directing a forensic audit of the Nominal Defendant's accounts pending the determination of the suit 77.The Applicant submits that there exists compelling evidence demonstrating diversion of company funds, operation of competing businesses, unauthorised execution of corporate resolutions, and the movement of the Nominal Defendant's clients and revenues to Rosalia Blooms Limited as well as continued financial mismanagement despite the Registrar's rectification of the company's register. He contends that the only effective means of establishing the true financial position of the company and safeguarding its assets pending trial is through an independent forensic audit. 78.The Respondents oppose the prayer and submit that the allegations of embezzlement, diversion of funds and financial impropriety are wholly unsubstantiated. They maintain that the Applicant has always had access to the company's financial records through the Xero accounting system and that the application amounts to an attempt to interfere with the internal management of the company. They further contend that the Applicant has contributed to the company’s challenges by refusing to sign company cheques and by engaging in competing businesses. 79.I have considered the rival arguments. The purpose of the order sought is to independently ascertain the financial position of the company in the face of serious and competing allegations. 80.The material placed before the Court discloses serious allegations and counter allegations regarding the affairs of the Nominal Defendant. The Applicant alleges diversion of funds through trust arrangements, redirection of client payments, and misuse of company resources for the benefit of competing entities. The Respondents deny these allegations and, in turn, attribute the company’s difficulties to the Applicant’s alleged conduct. 81.At this interlocutory stage, the Court is neither equipped nor required to determine the veracity of these competing claims. However, it is evident that serious questions have been raised regarding the management and integrity of the company’s financial affairs. In such circumstances, the Court’s primary concern must be to preserve the company’s assets and protect the interests of all shareholders pending trial. 82.An independent forensic audit serves a neutral and preservatory purpose. It does not assign blame or determine liability; rather, it provides an objective assessment of the company’s financial position, traces the movement of funds, and identifies any irregularities. Such a process enhances transparency and ensures that the Court will ultimately have the benefit of verified financial information at the hearing. 83.Indeed, courts have recognized that where credible allegations of financial impropriety arise in corporate disputes, a forensic audit may constitute the most appropriate preservatory mechanism. In Mokosio & another v Vadera & 3 others [2021] KEHC 56 (KLR), the Court observed that allegations of mismanagement and diversion of company resources are best addressed through an independent forensic audit and inspection of the company's books so as to safeguard the interests of both the company and its shareholders. Likewise, in Directline Assurance Company Limited v Macharia & 11 Others [2024] KEHC 11885 (KLR), the Court held that where allegations of diversion of company funds raise legitimate concerns regarding corporate governance, an independent forensic audit serves the important purpose of establishing the company's true financial position without prejudging the substantive issues pending determination. 84.I am in agreement with that approach. Given the breakdown of trust between the parties and the seriousness of the allegations raised, an independent audit is both reasonable and necessary to protect the interests of the company and its shareholders. 85.The Respondents' argument that the Applicant already has access to the Xero accounting system does not, in my view, sufficiently address the concerns raised. Access to accounting records is not equivalent to an independent forensic audit. I am therefore persuaded that the interests of justice will be best served by directing an independent forensic audit of the Nominal Defendant's accounts pending the hearing and determination of the suit. 86.Accordingly, I allow prayer (8) of the Notice of Motion. For avoidance of doubt, the forensic audit shall be undertaken by an independent forensic audit firm agreed upon by the parties within thirty (30) days of this ruling. The audit shall cover the financial affairs of the Nominal Defendant from the year 2019 to the date of this ruling, unless otherwise directed by the Court. The auditor's report shall be filed in Court within sixty (60) days of appointment and shall form part of the record in these proceedings without prejudice to the parties' right to challenge its contents during the hearing of the suit. 87.Based on the foregoing, the application is allowed in terms of prayer 5, 6, 7 and 8 of the application only. 88.The costs of the application shall abide the outcome of the main suit. 89.Orders accordingly. DELIVERED, DATED AND SIGNED VIRTUALLY THIS 2ND DAY OF JULY, 2026RHODA RUTTOJUDGECourt Assistant: WabwireMs. Onderi holding brief for Mr. Waigwa for the DefendantsNo appearance by the Applicants