[2021] KEHC 12594 (KLR)

[2021] KEHC 12594 (KLR)

The court found that the plaintiffs, as beneficiaries of the deceased shareholders’ estates, are entitled by operation of law to apply for relief as members under section 238(6)(b) of the Companies Act. However, the acts complained of—primarily the borrowing and management decisions—are matters within the company’s management and are capable of being ratified by the company’s majority shareholders. The court emphasized that the majority shareholders, who constitute a significant portion of the company, have not been given an opportunity to consider or ratify the transactions in question. The plaintiffs did not demonstrate that they attempted to requisition a meeting or otherwise seek...

Citation
[2021] KEHC 12594 (KLR)
Parties
Plaintiff: Samuel Mburu Gitere; Plaintiff: Anne Wanjiru Gitere; Defendant: Kenneth Kimari Gitere; Defendant: David Wakangu Gitere; Defendant: National Bank of Kenya; Defendant: Chabrin Agencies Limited; Defendant: Co-operative Bank of Kenya Limited; Defendant: Lucas Waithaka Gitere
Court
High Court
Court Station
High Court at Nairobi (Milimani Commercial Courts)
Jurisdiction
Kenya
Judgment Date
5 February 2021
Case Number
Civil Case 119 of 2016
Procedural Posture
Civil Case / Ruling on Application for Leave to Proceed as Derivative Suit
Outcome
Application for leave to proceed as a derivative suit dismissed; suit struck out with costs to the defendants.
Judges
DAS Majanja
Legal Topics
Derivative Actions, Company Management, Shareholder Rights, Ratification of Directors Acts
Source Language
English
Commercial and Corporate Civil Procedure Derivative Actions Company Management Shareholder Rights Ratification of Directors Acts

Case Brief

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Parties

Samuel Mburu Gitere

Plaintiff

Anne Wanjiru Gitere

Plaintiff

Kenneth Kimari Gitere

Defendant

David Wakangu Gitere

Defendant

National Bank of Kenya

Defendant

Chabrin Agencies Limited

Defendant

Co-operative Bank of Kenya Limited

Defendant

Lucas Waithaka Gitere

Defendant

Procedural Posture

Civil Case / Ruling on Application for Leave to Proceed as Derivative Suit

Legal Issues

  1. 1 Whether the plaintiffs should be granted permission to proceed with the suit as a derivative action under section 238 of the Companies Act.
  2. 2 Whether the acts complained of by the plaintiffs are capable of being ratified by the company and its majority shareholders.
  3. 3 Whether the plaintiffs have standing to bring a derivative action as beneficiaries of shares transmitted by operation of law.

Ratio Decidendi

The court found that the plaintiffs, as beneficiaries of the deceased shareholders’ estates, are entitled by operation of law to apply for relief as members under section 238(6)(b) of the Companies Act. However, the acts complained of—primarily the borrowing and management decisions—are matters within the company’s management and are capable of being ratified by the company’s majority shareholders. The court emphasized that the majority shareholders, who constitute a significant portion of the company, have not been given an opportunity to consider or ratify the transactions in question. The plaintiffs did not demonstrate that they attempted to requisition a meeting or otherwise seek...

Court Disposition

Application for leave to proceed as a derivative suit dismissed; suit struck out with costs to the defendants.

Orders

  • The Amended Notice of Motion dated 11th June 2018 is dismissed.
  • The suit is struck out with costs to the defendants.