In Bruton Gold Trading LLC v Anne Atieno Amadi and Six Others (HCC E211 of 2023), the High Court held that the plaintiff, being a foreign company incorporated outside Kenya, did not automatically lose the right to sue in Kenya simply because it had not been registered locally under the Companies Act, Cap. 486 (Companies Act).

Background

Bruton Gold Trading LLC (the plaintiff), a gold trading company incorporated in Dubai, filed a suit in the High Court against several individuals and a bank on account of alleged breach of an agreement to export gold from Kenya to Dubai. The plaintiff alleged that it had been defrauded and subjected to professional misconduct and other unlawful acts in relation to the agreement.

Before the court could hear the main dispute, some of the defendants filed preliminary objections that sought to have the case dismissed. The ground of the preliminary objections was that the plaintiff being a “foreign company” had not complied with section 974 of the Companies Act, which requires foreign companies carrying on business in Kenya to be registered. They claimed this non-compliance meant the plaintiff was “non-existent” and had neither legal capacity nor the legal standing to sue in Kenyan courts (locus standi).

In making this argument, the defendants relied on previous High Court decisions, notably Stichting Rabo Bank Foundation v Ava Chem Limited and Another [2024] KEHC 9931 (KLR), which we analysed in a previous alert (link here), and Root Capital Incorporated v Tekangu Farmers Co-operative Society Ltd and Another [2016] KEHC 3735 (KLR).

In these decisions, the High Court adopted a strict position that unregistered foreign companies carrying on business in Kenya could not sue in Kenyan courts as they lacked legal capacity to do so. This approach was taken despite the existence of several Kenyan Court of Appeal decisions in which foreign companies were permitted to bring claims in Kenya, indicating that the law on this point has not been applied consistently across the courts.

The plaintiff countered that the question of its capacity to sue had already been addressed in a previous ruling in the same matter, where the court recognised it as a company incorporated in Dubai. It also argued that its claim was not based on conducting business in Kenya in a manner that required registration under section 974 of the Companies Act. It also maintained that its right to sue was supported by constitutional guarantees of access to justice.

The High Court’s ruling

The High Court dismissed the preliminary objections and allowed the case to proceed by drawing a distinction between legal capacity and the right to sue. The court acknowledged that legal capacity is an important element of the right to sue and that the right to sue will be established where the issue of legal capacity has been determined with certainty.

Given the fact that the defendants did not challenge the plaintiff’s registration in Dubai, the court took the view that upon incorporation in its home country, the plaintiff gained legal personality, meaning it existed in the eyes of the law, and the argument that the plaintiff was non-existent could not hold. The plaintiff’s legal status was not dependent on its registration as a foreign company in Kenya.

The court further explained that the right to sue is premised on the existence of a sufficient or a legitimate interest in a matter before the court and in view of the existence of the agreement for exporting of gold, the High Court was clothed with jurisdiction since Kenyan courts have jurisdiction over an agreement which is made to be performed in Kenya. The High Court considered the provisions of the Kenyan Constitution, including the definition of “person”, which includes companies, whether incorporated locally or abroad, as well as the right to access justice and to have a fair hearing, allowing any person to bring a claim for the enforcement of rights.

The High Court’s interpretation of section 974 of the Companies Act was that this section only prohibits a foreign company from “carrying on business” in Kenya without registration in Kenya, but it did not expressly state that an unregistered company could not sue. The Companies Act also leaves open what “carrying on business” means, listing examples such as offering or guaranteeing debentures but not limiting the definition to these. Whether a company is carrying on business in Kenya is a factual matter that requires evidence and cannot be decided conclusively at the preliminary stage.

Implications

The decision in Bruton Gold reflects a shift toward a more expansive and constitutionally anchored interpretation of a foreign company’s right to sue in Kenya. It underscores that non-registration of a foreign company under the Companies Act does not automatically shut the courthouse doors to foreign companies, particularly where the dispute stems from a discrete transaction connected to Kenya rather than from ongoing business operations that would ordinarily trigger the registration requirement.

Even so, the legal landscape remains unsettled. The stricter reasoning in the Rabo Bank and Root Capital decisions is still part of Kenyan jurisprudence, and the Court of Appeal has yet to reconcile these divergent approaches. This uncertainty is especially relevant to foreign lenders, commodity traders, and other cross-border businesses whose activities could be narrowly interpreted in accordance with Rabo Bank and Root Capital as amounting to “carrying on business” in Kenya.

In light of this, and noting the variance in the court rulings of courts of equal status, there is no guarantee that suits instituted by foreign companies dealing with Kenyan counterparties to enforce contracts in Kenyan courts will be permitted to proceed to full trial on the merits of the case. We recommend that foreign lenders seek early legal advice to assess the enforceability of contracts to be performed in Kenya and whether local registration would be a prudent safeguard. Taking these steps can help mitigate the risk of procedural objections that might delay or derail their claims.