https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/7020

**REPUBLIC OF KENYA** **IN THE HIGH COURT OF KENYA AT NANYUKI** **INSOLVENCY PETITION NO. E001 OF 2025** **BETWEEN** **JOSEPH NDERITU WANJOHI................................1ST PETITIONER** **STANLEY WACHIRA WANGOMBE** **(Suing as the Legal Representative** **of the Estate Of** **WANGOMBE NJOGU KINYUNGU………………….2ND PETITIONER** **POLY GACIKU WAGURA** **(Suing as the Legal Representative** **of the Estate of** **CHARLES KIMOTHO MUKUNU……………………...3RD PETITIONER** **AND** **JOHN GAITHO GATUGUTA…………...……………..1ST RESPONDENT** **DANIEL GITONGA KIMONDO……….……………..2ND RESPONDENT** **ROYCE NJOKI MATHENGE…………………….……3RD RESPONDENT** **DANIEL MURAGE NGUITUI………………………..4TH RESPONDENT** **PETER SMDEGWA KAMOCHU………………………5TH RESPONDENT** **NANCY WANGECHI MAINA………………………..6TH RESPONDENT** **EUNICE MURXNGI KIHIA…………………………..7TH RESPONDENT** **CHARLES GICHUHI NGARZ…………………………8TH RESPONDENT** **JUDGEMENT** 1. By way of a Petition dated 28th April 2025, the Petitioners seek the following orders; 2. **North Tetu Farmers Company Limited be liquidated under the provisions of the Insolvency Act.** 3. **That this Honourable court appoint an Insolvency Practitioner as the Liquidator.** 4. **All the assets of North Tetu Farmers Company Limited be sold and distributed to the shareholders in their respective shareholding.** **IN THE ALTERNATIVE** 1. **A declaration does issue that North Tetu Farmers Company Limited belongs to Kirori Motoku, Elijah Waichanguru Mutuku, Andrew Ndirangu Kagoya, Joseph Ndiritu Wanjohi, Phan's Ngunjiri Gam, Wango'mbe Njogu, Charles Kimotho Mukunu, Samson Ndiangui Njagi & Hoses Kimamo Kimathi.** 2. **A permanent injunction restraining the Respondents from allocating shares without the consent of the initial subscribers or their legal representatives.** 3. **Any other remedy or relief that this Honourable Court deems fit to grant.** 4. The Petitioners contend that at all material times relevant to this suit, North Tetu Farmers Company Limited was incorporated on 5th November, 1971 and the first subscribers North Tetu Farmers Company Limited who were its founding directors and shareholders were; * 1. Kirori Motoku - now deceased - holding .1 share; 2. Elijah Waichanguru Mutukui - now deceased - holding 1 share; 3. Andrew Ndirangu Kagoya - now deceased - holding 1 share; 4. Joseph Ndiritu Wanjohi - 1st Plaintiff - holding 1 share; 5. Phans Ngunjiri Gauri - now deceased - holding 1 share; 6. Wango'mbe Njogu - now deceased - holding 1 share; 7. Charles Kimotho Mukunu - now deceased - holding 1 share; 8. Samson Ndiangui Njagi - now deceased - holding 1 share; 9. Hosea Kimamo Kimathi - now deceased - holding 1 share; 5. Further, that the said initial founders have never ceased being shareholders and members of North Tetu Farmers Company Limited and they duly appear in the register of members. They urged that the Respondents are the current Directors of North Tetu Farmers Company Limited and they hold zero shares in the Company. They have never involved them or called them for any Annual General Meeting, or involved them in the running and management of the affairs of the North Tetu Farmers Company Limited. 6. The Petitioners averred that it is just and equitable to wind up North Tetu Farmers Company Limited for the following reasons; 1. The Petitioners have equal amount of shares (1 share each) 2. The Respondents do not hold any shares in North Tetu Farmers Company Limited operates. 3. The Respondents being the Directors operate the Company's business without involving the Petitioners 4. The Petitioners have suffered mental and financial strain due to the actions of the Respondents. 5. The Petitioners and Respondents cannot agree on the manner of running the affairs of the Company. 6. The substratum has gone. 7. It is impossible to carry on company's business owing to internal disputes which have produced a state of deadlock. 8. The Directors have withheld information from shareholders in circumstances which give rise to that suspicion that they are attempting to buy their share at an undervalue. 7. In a joint supporting affidavit, Joseph Nderitu Wanjohi, Stanley Wachira Wang’ombe and Poly Gaciku Wagura, deponed that they bring this suit as the as the administrators and the legal representatives of the estate of the fate Wang’ombe Njogu Kinyungu (deceased) and the administrator and the legal representative of the estate of the late Charles Kimotho Mukunu (deceased) respectively, annexing and marking as "JWW1 & JWW 2" copies of the Limited Grant of Letters of Administration Ad Litem. 8. They urged that the Directors have withheld information from shareholders in circumstances which give rise to that suspicion that they are attempting to buy their share at an undervalue. **Petitioners’ submissions** 1. Counsel for the Petitioners laid down a brief background of the suit and identified the issues for determination, proceeding to submit on the same. 2. On whether the circumstances justify winding up the Company under the "just and equitable" ground provided for in Section 424(1)(f) of the Insolvency Act, 2015, Counsel urged that part VI of the Insolvency Act, 2015 provides for liquidation of companies and Section 423 of Insolvency Act gives this Court the jurisdiction to supervise the liquidation of companies. That the petition herein has been brought pursuant to Section 424 (a) and 425(1) (a)of the Insolvency Act, which permits and provide for liquidation of a Company by the Court. 3. Counsel urged that Section 424 (1) of the Insolvency Act 2015 gives scenarios where a company may be liquidated by Court. While Section 425 of the Insolvency Act provides for persons eligible to apply to the Court for liquidation. Furthermore, that Section 492 of the Companies Act, 2015 provides that every member of a company is entitled to; 1. Receive notice of, attend, and vote at general meetings; 2. Receive a share of the profits (dividends); and 3. Participate in decisions affecting the Company's constitution and affairs. 4. It is the Petitioners’ case that the suit herein has been brought by the Petitioners in their capacities as subscribers of North Tetu Farmers Company Limited and shareholders as they duly appear in the register of members of the North Tetu Farmers Company Limited. While the 1st to 9th Respondents despite being the current Directors of the Company, hold zero shares as per the copy of CR12. 5. Counsel posited that the Petitioners have stated that the Respondents have never involved them in the affairs of the company neither do the Petitioners participate in any Annual General Meeting. That the Respondents have not produced any evidence of any shares they hold in the company and further, that the Respondents allegation that the company has over 3000 membership and that the company has settled over 1500 members is not supported by any material evidence. As a matter of fact, the Respondents replying affidavit confirms there has been internal wrangles within the company which has rendered conducting business and running of the affairs of the company untenable. 6. Counsel submitted that in Omondi vs. National Bank of Kenya Ltd & Others [2001 ] eKLR, the Court of Appeal held that shareholders are entitled to oversight and participation in corporate decision-making, and any unlawful exclusion of such rights is actionable. Further, that Section 424(1) (f) of the Insolvency Act allows winding up where "it is just and equitable that the company should be liquidated." He cited Ebrahimi v. Westbourne Galleries Ltd (1973) AC 360 in this regard and urged that the Petitioners, as original members or legal representatives of original members, are the true owners of the Company. That the register of members, under Section 93 of the Companies Act, is prima facie evidence of membership and notably, the Respondents hold no shares in the Company. 7. Further, that it is clear from both the supporting affidavit and the Respondent's replying affidavit that the relationship of the parties herein has irretrievably broken down and the substratum of the company is gone and it is only fair, just and equitable that the company be liquidated. Counsel urged that loss of substratum is also a recognised basis, citing Re German Date Coffee Co (1882) 20 Ch D169 and Re Yenidie Tobacco Co Ltd (1916) 2 Ch 426 and further, urged that the facts here satisfy this legal test. 8. The Petitioners’ case is that the conduct of the Respondents amounts to oppression, unfair prejudice, and disregard of the Petitioners' rights as shareholders hence entitled to the prayers as per the petition by virtue of Section 780 of the Companies Act, 2015 which empowers the Court to grant relief where a company's affairs are conducted oppressively, unfairly prejudicially, or in disregard of a member's interests. Reliance was placed on Re Five Minute Car Wash Service Ltd (19661) WLR 745 and Re H.R. Harmer Ltd (19591) WLR 62. The Court found oppression where a dominant shareholder (or entrenched directors) excluded others from the management of the company. 9. Counsel submitted that the Respondents' conduct; failure to convene AGMs, withholding financial records, making unilateral decisions; mirrors such oppressive conduct. Counsel cited Re Jermyn Street Turkish Baths Ltd (19711) 1 WLR 1042 in this regard. Further, that the present facts show systemic exclusion, mismanagement, and disregard of statutory rights, squarely within the scope of Section 780. 10. On whether the alternative reliefs sought by the Petitioners ought to be granted under Section 782 of the Companies Act, 2015, Counsel urged that if winding up is not ordered, the Court has wide powers under Section 782 of the Companies Act to remedy shareholder oppression. That the remedies include: * + - Regulating the conduct of the Company's affairs; - Ordering a buyout of members' shares at fair value; - Restraining specific corporate actions; - Declaring rights of members. 11. Counsel urged that in Re Bird Precision Bellows Ltd (1984) CJ 419 the Court held that where relationships are irretrievably broken, ordering a buyout may be the fairest solution. He pointed out that here, the Petitioners seek declarations and injunctive relief to prevent unlawful allocation of shares, reliefs squarely within Section 782's scope. Counsel urged the court to allow the Petition as prayed as the Petitioners have proved their case. **Respondents’ Submissions** 1. Counsel for the Respondents submitted on whether the circumstances justify winding up under Section 424(1)(f) of the Insolvency Act, 2015, urging that the section permits the winding up of a company only where it is shown that it is "just and equitable" to do so. He cited Re Garnets Mining Co. Ltd [1978] eKLR, and submitted that in the present case, the evidence demonstrates that North Tetu Farmers Company Limited remains fully operational. The Company has over 3,000 members, continues to allocate land to its members, convenes Annual General Meetings, and conducts its affairs in accordance with its Articles of Association and the Companies Act, 2015. These facts are undisputed and clearly show a functioning enterprise. 2. That the Petitioners' claims are based on allegations of exclusion, mistrust, and internal disagreements. However, mere dissatisfaction with management or historical disputes does not amount to loss of substratum, operational paralysis, or deadlock. Furthermore, that the 1st Petitioner's removal from office was conclusively determined in Nyeri HCCC No. 13 of 2014 and upheld on appeal in Civil Appeal No. E067 of 2022, dismissed on 7th February 2025. The legality of the current directors is therefore settled. That this Petition constitutes an impermissible attempt to reopen finalized disputes under the guise of insolvency proceedings. Accordingly, the statutory threshold of demonstrating that it is "just and equitable" to wind up the Company has not been met. 3. Counsel urged that entitlement to the prayers sought in the Petition is not automatic. It must be founded on a legally enforceable right and demonstrable wrongdoing warranting the remedies sought. The Petitioners have established neither. That the Petitioners allege oppression, exclusion, and mismanagement. However, as demonstrated above, the Company continues to operate as a going concern. He cited Foss v Harbottle (1843) 2 Hare 461, 67 ER 189 in support of this submissions and urged that the principle therein was reaffirmed by the High Court of Kenya in Amin Akberali Manji & 2 others v Altaf Abdulrasul Dadani & another [2015] KECA 356 (KLR). 4. Counsel submitted that similarly, injunctive relief requires a prima facie legal right and a real risk of imminent violation. Reliance was placed on Giella v Cassman Brown & Co Ltd [1973] EA 358 and counsel posited that the Petitioners have not established such a case, nor shown any violation of a legally protected right, nor have they demonstrated any imminent risk justifying injunctive relief. That moreover, the principles from Amin Akberali Manji & 2 others v Altaf Abdulrasul Dadani & another [2015] KECA 356 (KLR) on derivative actions confirm that a shareholder may only sue on behalf of a company where the company itself is incapable of acting due to fraud, stalemate, or control by wrongdoers. No such circumstances exist here. 5. For these reasons, Counsel urged, the Petitioners are not entitled to the drastic remedies sought, including liquidation, declaratory orders, or permanent injunctive relief, and this Issue should be resolved in favour of the Respondents. 6. On whether the alternative reliefs sought by the Petitioners are available or grantable under section 782 of the Companies Act, 2015, Counsel urged that the said Section empowers this Court to grant relief where the affairs of a company are being conducted in a manner that is oppressive or unfairly prejudicial to members. The threshold for such intervention is therefore high and must be supported by cogent evidence. That the Petitioners seek a declaration that the Company "belongs to the original subscribers." Ownership and control of a company are determined by its shareholding and constitutional documents, not by historical association or sentiment. The declaratory relief sought therefore has no foundation in company law. Counsel cited Re Winding Up of Tatu City Limited [2013] eKLR in this regard, where the Court emphasized that remedies under Section 782 are intended to protect members from actual unfair prejudice, not to disrupt lawful corporate governance. 7. Counsel submitted that the Petitioners' allegations are not supported by evidence of any conduct that is legally oppressive or unfairly prejudicial. The Company continues to operate in accordance with its Articles of Association and the Companies Act, 2015, and the management of its affairs remains lawful and proper. Accordingly, the alternative reliefs sought by the Petitioners are legally untenable and cannot be granted under Section 782. 8. Counsel urged the court to dismiss the Petition with costs. **Analysis & Determination** 1. The issue that arise for determination is whether the Petitioners are entitled to the orders sought. 2. The petition as framed raises a fundamental contradiction which goes to the very propriety and competence of the proceedings. The Petitioners’ case appears to be that the Respondents have no shares in the company and therefore no lawful proprietary interest in its affairs. If that position is correct, then the inevitable legal consequence is that the Respondents cannot purport to control, direct, or run the company in the absence of authority from the company itself through its lawful organs. 3. A company is a distinct legal person separate from its directors, managers, or alleged controllers. Its affairs are ordinarily conducted through resolutions of shareholders and decisions of directors duly appointed in accordance with the company’s Articles and the Companies Act. Where there exists a dispute as to shareholding, directorship, or control, the proper mechanism is ordinarily the convening of a lawful meeting of shareholders or recourse to remedies under company law to ascertain membership and governance rights. Insolvency proceedings are not designed to become a substitute for corporate governance disputes or contests over ownership and management. 4. The Court must therefore interrogate the internal inconsistency in the Petitioners’ position. On the one hand, they contend that the Respondents are strangers to the company with no shares therein. On the other hand, they simultaneously accuse the Respondents of running and controlling the company. Such a position invites the obvious question: by whose authority are the Respondents allegedly managing the company if indeed they are neither shareholders nor duly appointed directors? 5. If the company still has lawful shareholders and directors, then the proper course would have been for the company to invoke its internal governance structures. The shareholders ought to convene a general meeting, ascertain the true state of the company’s affairs, appoint or remove directors where necessary, and resolve on the future direction of the company including, if warranted, voluntary insolvency procedures. It would be contrary to settled principles of company law for parties to bypass corporate organs and invite the Court to determine what is essentially a contest over control disguised as an insolvency cause. 6. Indeed, insolvency jurisdiction should not be invoked oppressively or tactically in aid of shareholder disputes. Courts have repeatedly cautioned that insolvency proceedings are not debt collection devices nor mechanisms for resolving internal company wrangles. Where the substratum of the dispute concerns who legitimately owns or controls the company, that issue must first be resolved before the drastic remedies available under insolvency law can properly arise. 7. Further, if the Petitioners maintain that the Respondents are complete strangers to the company, then logically the company itself — acting through its recognized shareholders and directors — ought to have moved the Court against the alleged usurpation of management. The absence of evidence of any duly convened shareholders’ resolution or corporate authorization weakens the propriety of the petition and lends credence to the view that the matter may in substance be a corporate control dispute rather than a genuine insolvency process. 8. The Court must therefore guard against permitting insolvency proceedings to mutate into a forum for determining contested questions of shareholding and management without first exhausting the mechanisms provided under company law. In the circumstances, the failure to demonstrate who the lawful shareholders are, who authorized the petition, and how the company’s affairs came to be conducted by persons alleged not to be shareholders creates serious doubt as to the bona fides and procedural propriety of the petition. 9. Section 424(1)(f) of the Insolvency Act, 2015 grants the court discretion to make orders necessary for the proper conduct of insolvency proceedings, but that discretion must be exercised in furtherance of the objects of insolvency law and not to aid parties who lack a legal or proprietary basis to seek dissolution of a company. The Petitioners’ own pleadings and assertions in this petition are fundamentally inconsistent with the drastic remedy of dissolution sought against the company. 10. The remedy of dissolution cannot issue merely because there exists disagreement among persons claiming to manage or control the company. The court must be satisfied that the petitioners possess the requisite legal standing and that the statutory grounds for liquidation or dissolution have been established. Where the Petitioners simultaneously contend that the Respondents are not shareholders, yet accuse them of running the company, the contradiction becomes evident. If indeed the Respondents are strangers to the shareholding of the company, then the lawful course would be for the legitimate shareholders and directors of the company to convene meetings under the company’s Articles and the Companies Act, 2015 to determine the future of the company, including management, restructuring, or winding up. 11. Section 424(1)(f) was never intended to permit the court to bypass the internal governance mechanisms of a company where those mechanisms remain available and operative. Insolvency jurisdiction is not a substitute for corporate governance. The court ought not to dissolve a company merely because parties are in contest over control when no proper shareholders’ resolution or corporate deadlock grounded in proven shareholding has been demonstrated. 12. Further, dissolution is a remedy of last resort. The court is enjoined to consider whether there exist less drastic and more proportionate remedies before extinguishing a corporate entity altogether. In the present matter, the Petitioners have not demonstrated insolvency in the strict statutory sense, inability to carry on business, or that the substratum of the company has failed. Neither have they shown that the company, through its shareholders, resolved that it should be wound up. The petition instead appears to invite the court to take over the internal management and ownership disputes of the company, a course the insolvency court should decline. 13. In the end I must find and hold that the Petitioners are not entitled to the order of dissolution sought. 14. The Petitioners had in the alternative sought an order for declaration of ownership and invoked Section 782 of the Companies Act, 2015. However, in view of the findings already made by this Court, the Petitioners do not merit the grant of such an order within these proceedings. 15. A declaration of ownership under Section 782 presupposes that the party seeking such relief has placed before the court clear, cogent and credible evidence establishing the proprietary interest claimed in the company. The jurisdiction under that provision is not intended to aid speculative or contradictory claims regarding ownership of shares or control of a company. 16. In the present petition, the Petitioners have maintained that the Respondents have no shares in the company, yet at the same time accuse them of running and controlling the affairs of the company. That contradiction goes to the root of the Petitioners’ claim. If indeed the Respondents are strangers to the company, then the lawful shareholders and directors of the company retain the statutory power under the company’s Articles and the Companies Act to convene meetings, regulate the affairs of the company and determine its future. The Petitioners cannot simultaneously deny the Respondents any proprietary interest while invoking the insolvency jurisdiction of the court to resolve questions of ownership and management. 17. A declaration of ownership is a substantive proprietary remedy which must be founded upon clear evidence of allotment of shares, share certificates, company resolutions, CR12 records, registers of members or other documentary proof recognized under company law. The Petitioners did not place before the Court sufficient material capable of conclusively establishing ownership rights warranting declaratory relief under Section 782. 18. The Court also notes that insolvency proceedings are not the proper forum for the determination of contested shareholding disputes where the primary issue concerns ownership, directorship and internal management of a company. Such disputes are more appropriately ventilated in proceedings specifically instituted for that purpose under the Companies Act. 19. Accordingly, having found that the Petitioners failed to establish a proper basis for dissolution of the company and having further failed to place before the Court sufficient evidence upon which ownership of the company can conclusively be declared, the alternative prayer for declaration of ownership under Section 782 of the Companies Act equally fails and is hereby declined. 20. The upshot of the foregoing is that the Petition lacks merit and is dismissed. Each party to bear its own costs. **Dated signed and delivered virtually this 20th day of May 2026** **A.K. NDUNG’U** **JUDGE**