INTRODUCTION AND BACKGROUND
1. This Ruling concerns two related suits which have been consolidated, namely HCCOMM E035 of 2026 and HCCOMM E858 of 2025 .
2. The two matters arise from the affairs and management of Paran Africa Limited ("the Company") and concern allegations of wrongdoing made by one director and shareholder of the Company against the other.
3. The suits were accordingly consolidated for purposes of facilitating the expeditious and efficient determination of the disputes arising from the affairs of the same Company and involving substantially related questions of fact and law.
4. The dispute has its genesis in the relationship between the parties, who were at the material time the directors and shareholders of the Company. The pleadings in HCCOMM E858 of 2025 show that the parties originally held 500 shares each out of the Company's total 1,000 ordinary shares.
5. The parties, who were previously married but have since separated, have each levelled allegations against the other concerning the manner in which the affairs of the Company have been conducted.
6. In HCCOMM E858 of 2025 , the 1 st Respondent commenced proceedings on behalf of the Company pursuant to leave granted by the Court on 4 th December 2025 in Miscellaneous Application No. E274 of 2025 .
7. The suit was instituted against the Applicant, Ramat Media Group Limited and the Registrar of Companies. The Plaint expressly states that the proceedings were brought pursuant to the leave previously granted by the Court.
8. The 1 st Respondent's case in E858 of 2025 is, in essence, that the Applicant acted in breach of her duties to the Company by allegedly irregularly transferring or selling 499 of her shares to Ramat Media Group Limited. He contends that the transfer was undertaken without the requisite authorization of the Company and that the documents allegedly authorizing the transaction were irregular. He further alleges that the transaction was carried out without proper corporate approval and that the Company suffered loss as a consequence.
9. The 1 st Respondent further alleges that the Applicant failed to disclose and account for the consideration received from the alleged sale of the shares and that, in addition, she withdrew Kshs. 950,000/= from the Company's account for her personal benefit.
10. His case is that the alleged acts constituted breaches of the Applicant's fiduciary obligations to the Company and occasioned loss and damage to it.
11. The reliefs sought in E858 of 2025 are directed at, among other matters, reversing or regularising the disputed transfer of the 499 shares and addressing the alleged loss occasioned to the Company.
12. The 1 st Respondent also alleges that the affairs of the Company have been adversely affected by the disputed shareholding and management issues.
13. Subsequently, the Applicant instituted HCCOMM E035 of 2026 against the 1 st Respondent and Ramat Media Group. Together with the suit, she filed the Notice of Motion dated 28 th January 2026, which is the principal Application presently before the Court. The Application is brought under Part XI of the Companies Act, 2015 and seeks leave to commence or continue a derivative claim on behalf of Paran Africa Limited.
14. Specifically, the Applicant seeks, inter alia, leave to commence a derivative suit on behalf of the Company or, in the alternative, an order that the suit be deemed as properly filed as a derivative suit. She further seeks orders for an audit into the Company's operations and affairs, the filing of an audit report in Court, the convening of an Annual General Meeting following the audit and, depending on the outcome of the audit, the removal of the 1 st Respondent as a director.
15. The Application is supported by the Applicant's Affidavit, in which she deposes that she is a director and shareholder of the Company and that, following her departure from the day-to-day management of the Company due to personal circumstances, the 1 st Respondent assumed control of its affairs. She alleges that the 1 st Respondent has since managed the Company to the exclusion of the other shareholder and in a manner detrimental to the interests of the Company.
16. The Applicant's complaints include the alleged exclusion from the affairs of the Company, failure to provide her with financial and management information, the alleged alteration of the Company's communication channels, statutory and regulatory non-compliance, tax liabilities and the filing of financial statements which she contends she did not approve or sign. She further maintains that no proper audit has been undertaken and that an independent audit is therefore necessary to establish the true financial position and affairs of the Company.
17. The Applicant's case is that the intervention of the Court is necessary to protect the Company and to enable the true state of its financial affairs to be established.
18. In her Further Affidavit, she maintains that the proposed audit is not intended to punish the 1 st Respondent but is sought as a means of ensuring transparency and accountability and of establishing whether the Company's resources have been properly managed.
19. The 1 st Respondent opposes the Application. He denies the allegations of mismanagement and contends that the Applicant has herself contributed to the difficulties facing the Company.
20. He points, in particular, to the matters which form the subject of E858 of 2025, namely the alleged withdrawal of Kshs. 950,000/= from the Company's account and the disputed transfer of the Applicant's 499 shares to Ramat Media Group.
21. The 1 st Respondent further contends that he had already obtained leave to institute derivative proceedings on behalf of the Company and had consequently commenced E858 of 2025 before the Applicant instituted E035 of 2026. His position is that both matters concern the affairs of the same Company and that permitting the commencement of a separate derivative action would unnecessarily duplicate proceedings and result in a multiplicity of suits concerning substantially related matters.
22. It is against that background that the two matters were consolidated. The effect of the consolidation is that the competing allegations made by the two directors concerning alleged wrongdoing against Paran Africa Limited now fall for consideration within the same consolidated proceedings.
23. The question presently before the Court, however, is not whether the Applicant's allegations against the 1 st Respondent have been proved. Rather, the immediate question is whether, in light of the requirements governing derivative claims and the existing derivative proceedings in E858 of 2025, the Applicant has established a proper basis for the grant of leave or permission to proceed with her claim on behalf of the Company.
24. I have considered the Application dated 28th January 2026, the affidavits filed in support thereof and in opposition thereto, the pleadings in the consolidated matters, the submissions of the respective parties and the authorities cited. Although the consolidated suits contain allegations and reliefs which are not entirely identical, they are united by a central question: whether alleged acts of wrongdoing by either of the Company's directors have caused loss or prejudice to Paran Africa Limited and, if so, how the interests of the Company ought properly to be protected through the derivative proceedings contemplated under Part XI of the Companies Act, 2015.
APPLICANT’S SUBMISSIONS
25. The Applicant submits that she has satisfied the statutory threshold for permission to pursue a derivative claim on behalf of Paran Africa Limited. She contends that the allegations raised against the 1 st Respondent concern acts and omissions in the management of the Company and therefore fall within the scope of section 238(3) of the Companies Act, 2015.
26. The Applicant relies on the allegations concerning the management of the Company's finances, her alleged exclusion from the affairs of the Company, failure to provide her with financial and management information, statutory and regulatory non-compliance and the alleged filing of financial statements which she did not approve or sign.
27. The Applicant submits that derivative proceedings provide a mechanism through which a member may pursue a cause of action vested in the company where those responsible for the management of the company are unwilling or unable to cause the company to take action. She relies, inter alia, on Kuldeep Singh Sehra & another v Bullion Bank Ltd & 2 others [2014] eKLR and Amin Akberali Manji & 2 others v Altaf Abdulrasul Dadani & another [2015] KECA 356 (KLR) .
28. The Applicant further relies on Isaiah Waweru Ngumi & 2 others v Muturi Ndung'u [2016] KEHC 3032 (KLR) and submits that the Court, in determining whether permission should be granted, should consider whether the pleaded facts disclose a plausible cause of action, whether reasonable efforts have been made to procure action by the directors or shareholders, whether the Applicant fairly and adequately represents the interests of the Company and whether the claim is brought in good faith.
29. It is submitted that the allegations against the 1 st Respondent are sufficiently particularised and disclose, at the very least, an arguable case requiring investigation at trial.
30. The Applicant maintains that she is not asking the Court to determine the merits of the allegations at this stage but merely seeks permission for the Company's interests to be properly represented.
31. With respect to E858 of 2025, the Applicant submits that the fact that the 1 st Respondent obtained leave and instituted proceedings on behalf of the Company does not deprive her of the right to raise distinct allegations concerning the affairs of the same Company. She contends that both claims are intended to protect the interests of Paran Africa Limited.
32. On the prayer for an audit, the Applicant submits that the financial position of the Company cannot properly be ascertained from the material presently available to her. She therefore urges the Court to order an independent audit of the Company's affairs so that the true financial position of the Company can be established.
1 ST RESPONDENT’S SUBMISSIONS
33. The 1 st Respondent opposes the Application and submits that it is misconceived and amounts to an attempt to institute a second derivative claim concerning the same Company, notwithstanding that he had already obtained leave of the Court and instituted E858 of 2025.
34. The 1 st Respondent contends that E858 of 2025 was instituted pursuant to leave granted by the Court on 4 th December 2025 and concerns, among other matters, the alleged irregular transfer of 499 shares by the Applicant to Ramat Media Group Limited and the alleged withdrawal of Kshs. 950,000/= from the Company's account.
35. He denies the allegations of mismanagement and contends that the Applicant has not demonstrated that he has acted in breach of any duty owed to the Company. He maintains that the allegations concerning the Company's finances, statutory compliance and management are disputed matters which should be determined at trial and cannot, without more, justify the relief sought.
36. The 1 st Respondent further submits that the prayer for an audit is premature and amounts to an attempt to obtain substantive relief at an interlocutory stage. He contends that the Court should not order an audit merely on the basis of untested allegations, particularly where the parties are already engaged in litigation concerning the affairs of the Company.
37. Finally, the 1 st Respondent submits that allowing the Applicant to pursue a separate derivative claim would result in duplication of proceedings, unnecessary expenditure of corporate resources and the possibility of conflicting findings concerning the same Company. He urges the Court to dismiss the Application.
ISSUES FOR DETERMINATION
38. In my view, the following issues arise for determination:
a) Whether the Applicant has satisfied the statutory threshold for permission to continue a derivative claim under Part XI of the Companies Act, 2015;
b) What effect the existing derivative proceedings in HCCOMM E858 of 2025 have on the Applicant's Application;
c) Whether the Applicant has established a proper basis for the orders seeking an audit and consequential reliefs; and
d) Who should bear the costs of the Application.
ANALYSIS AND DETERMINATION
39. On the first issue, the governing law is Part XI of the Companies Act, 2015. The statutory regime must, however, be understood against the background of the rule in Foss v Harbottle (1843) 2 Hare 461 , under which the company is ordinarily the proper plaintiff in respect of a wrong done to it. The position was materially altered by the enactment of the Companies Act, 2015. As was stated in Ghelani Metals Limited & 3 Others v Elesh Ghelani Natwarlal & Another [2017] KEHC 4629 (KLR) :
“With the advent of the Act, the law fundamentally changed. The requirement to fall under the exceptions to the rule in Foss v Harbottle was replaced with judicial discretion to grant permission to continue a derivative action. Judicial approval of the action is what now counts and such approval is based on broad judicial discretion and sound judgment without limit but with statutory guidance.”
40. It is therefore the statutory framework under Part XI, rather than the former common law exceptions to Foss v Harbottle , that governs the determination of the present Application. Sections 238 to 241 set out the nature of a derivative claim, the requirement for permission to continue such a claim and the matters which the Court is required to consider in exercising its discretion.
41. The starting point is therefore to determine whether the claim before the Court falls within the statutory definition of a derivative claim and, if so, whether the Applicant has satisfied the threshold for permission under the Act.
42. Section 238 of the Act interprets a derivative claim as inter alia: -
i. In this Part, "derivative claim" means proceedings by a member of a company—
1. in respect of a cause of action vested in the company; and
2. seeking relief on behalf of the company.
ii. A derivative claim may be brought only—
1. under this Part; or
2. in accordance with an order of the Court in proceedings for protection of members against unfair prejudice brought under this Act.
iii. A derivative claim under this Part may be brought only in respect of a cause of action arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company.
iv. A derivative claim may be brought against the director or another person, or both.
43. Section 239 requires a member seeking to continue a derivative claim to obtain the permission of the Court. Where the application and evidence do not disclose a case for giving permission, the Court is required to dismiss it.
44. Where a case is disclosed, the Court may give directions as to evidence, adjourn the matter and, upon hearing the application, grant permission on such terms as it considers appropriate, refuse permission or adjourn the proceedings.
45. In Ghelani Metals Limited (supra) the Court explained that: -
“all that the applicant needs to establish, through evidence, is a prima facie case without the need to show that it will succeed.”
The Court further observed that the permission stage serves to “screen out frivolous claims.”
46. It follows that at the permission stage the Court is not called upon to finally determine the merits of the alleged wrongdoing. The Court is concerned with whether the application and evidence disclose a sufficient case to warrant permission for the derivative claim to proceed.
47. The statutory considerations are further set out in section 241. The Court shall refuse permission in specified circumstances, including where a person acting in accordance with section 144 would not seek to continue the claim or where the impugned act was authorised or ratified by the Company.
48. In Isaiah Waweru Ngumi & 2 Others v Muturi Ndung'u [2016] KEHC 3032 eKLR , the Court, while setting out the considerations applicable at the leave stage, stated:
"The Court is guided by the considerations stipulated in section 241(2) of the Companies Act. Among other things, the Court considers the following factors:
i. 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;
ii. 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;
iii. 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;
iv. Whether the Plaintiff is acting in good faith;
v. 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;
vi. 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
vii. Whether the cause of action contemplated is one that the Plaintiff could bring as a direct as opposed to a derivative action."
49. The Applicant is a Director and shareholder of Paran Africa Limited, and the material before the Court establishes that the parties were, at the material time, equal shareholders and directors of the Company. Her complaints concern the Company's management, financial records, statutory compliance, her alleged exclusion from its affairs and the alleged conduct of the 1st Respondent in his capacity as a director.
50. If proved, these allegations are capable of constituting breaches of duties owed to the Company and therefore fall within section 238(3) of the Companies Act, 2015. The reliefs sought are substantially directed at establishing and protecting the interests of the Company.
51. I am therefore satisfied that the Applicant has demonstrated an arguable basis for a derivative claim, without making any determination at this stage on the merits of the alleged wrongdoing.
52. Turning to the next issue, namely the effect of the existing derivative proceedings in E858 of 2025, the question is whether the prior grant of leave to institute derivative proceedings on behalf of the Company precludes the Applicant from seeking permission to pursue her own derivative claim.
53. The existence of E858 does not, in my view, automatically operate as a bar to a subsequent application by another member of the Company. The statutory framework governing derivative claims contemplates that a member may seek to protect the interests of the Company where a cause of action vested in it is alleged to have been wrongfully dealt with.
54. However, the Court must ensure that the derivative mechanism is used to protect the interests of the Company while avoiding unnecessary duplication or competing litigation. The court observed in Nextgen Office Suites Ltd & another v Netcom Investments Ltd & another; Shah Minakshi Navinchandra (Interested Party) [2021] KEHC 13357 (KLR) :
“The court is thus entrusted with a pivotal role in the statutory derivative action under sections 238 to 242 of the Companies Act. It has a crucial filtering function or screening function in deciding whether or not to permit the applicant to institute derivative proceedings on behalf of the company. This judicial screening mechanism is essential, since the company itself has chosen not to sue and the institution of a derivative action would involve the company in litigation against its will. The requirement of the leave of the court provides a safeguard against unwarranted interference by disgruntled shareholders, individual directors or other applicants in the internal management of the company, and prevents them from improperly arrogating the management function which is vested in the board of directors. This approach, moreover, averts opening the floodgates to a multiplicity of actions—if the leave of the court were not required, multiple actions could be brought by a multitude of individual shareholders and other applicants concerning the same wrong inflicted on the company.”
55. It is significant, however, that the 1 st Respondent obtained leave and instituted E858 of 2025 before the Applicant commenced the present proceedings. The prior institution of that suit is relevant to the Court's consideration of whether permitting a further derivative claim would result in unnecessary duplication of proceedings or otherwise prejudice the interests of the Company. It does not, however, by itself determine whether the Applicant has satisfied the statutory requirements for permission under sections 239 and 241 of the Companies Act.
56. In the circumstances of this case, the two claims concern the affairs of the same Company but raise distinct allegations of wrongdoing. Further, the suits have already been consolidated, thereby substantially addressing the concern of parallel proceedings. I therefore find that the existence of E858 does not, of itself, preclude the Applicant's derivative claim.
57. The appropriate course is for the Applicant's claim to be pursued within the consolidated proceedings, so that the competing allegations concerning the Company's affairs may be determined together.
58. On the third issue, the Applicant seeks an order for an audit into the Company's operations and affairs and for the audit report to be filed in Court, together with consequential orders that an Annual General Meeting be convened within 30 days of the audit and that the 1 st Respondent be removed as a director should the audit findings implicate him. The question is therefore whether, at this stage, the Court should direct the proposed audit and grant the consequential reliefs arising therefrom.
59. While the allegations concerning the Company's financial affairs and management warrant scrutiny, I am not persuaded that the material presently before the Court justifies ordering an independent audit at this interlocutory stage. The consequential orders for an Annual General Meeting and the possible removal of the 1 st Respondent as a director are premised upon the outcome of that audit and therefore cannot properly issue in the absence of the audit itself. Further, removal of a director on the basis of anticipated audit findings would amount to granting substantive relief on the basis of matters yet to be established.
60. The Applicant's concerns may instead be addressed through appropriate directions on the production and inspection of the Company's financial and corporate records in the consolidated proceedings. If the material subsequently demonstrates the need for an independent audit or other appropriate corporate relief, the Court may consider such orders at the appropriate stage. The prayers for the audit and the consequential orders are therefore declined at this stage.
61. Regarding costs, section 27 of the Civil Procedure Act vests the Court with discretion in the award of costs, although the general rule is that costs follow the event. In Morgan Air Cargo Limited v Evrest Enterprises Limited [2014] eKLR , the Court observed that
“The Court takes the view that awarding costs is a matter of the discretion of the Court. It is not a matter of course. The exercise of the discretion, however, depends on the circumstances of each case. Therefore, the law in designing the legal phrase that ‘’Cost follow the event’’ was driven by the fact that there could be no ‘’one-size-fit-all’’ situation on the matter.”
62. In the present case, the Application has succeeded in part, while the competing claims concerning the affairs of the Company have been consolidated for determination. In the circumstances, I find it appropriate that costs of the Application abide the outcome of the consolidated suits.
DISPOSITION AND ORDERS
63. Accordingly, the Notice of Motion dated 28 th January 2026 is allowed in part on the following terms:
i. The Applicant is granted leave to pursue the claim pleaded in HCCOMM E035 of 2026 as a derivative claim on behalf of Paran Africa Limited, within the consolidated proceedings.
ii. The prayers for an audit of the Company's affairs and the consequential orders arising therefrom are declined.
iii. The parties shall proceed with the consolidated suits in accordance with the applicable case management directions.
iv. The costs of the Application shall abide the outcome of the consolidated suits.
Orders accordingly.
DATED, SIGNED AND DELIVERED AT NAIROBI THIS 17 th DAY OF SEPTEMBER 2026.
MURUNGA, J
Delivered on virtual platform in the presence of:
Oonge for the Appellant
Migale for the 1st Respondent
Kevin Babu - Court Assistant
1. This Ruling concerns two related suits which have been consolidated, namely HCCOMM E035 of 2026 and HCCOMM E858 of 2025 .
2. The two matters arise from the affairs and management of Paran Africa Limited ("the Company") and concern allegations of wrongdoing made by one director and shareholder of the Company against the other.
3. The suits were accordingly consolidated for purposes of facilitating the expeditious and efficient determination of the disputes arising from the affairs of the same Company and involving substantially related questions of fact and law.
4. The dispute has its genesis in the relationship between the parties, who were at the material time the directors and shareholders of the Company. The pleadings in HCCOMM E858 of 2025 show that the parties originally held 500 shares each out of the Company's total 1,000 ordinary shares.
5. The parties, who were previously married but have since separated, have each levelled allegations against the other concerning the manner in which the affairs of the Company have been conducted.
6. In HCCOMM E858 of 2025 , the 1 st Respondent commenced proceedings on behalf of the Company pursuant to leave granted by the Court on 4 th December 2025 in Miscellaneous Application No. E274 of 2025 .
7. The suit was instituted against the Applicant, Ramat Media Group Limited and the Registrar of Companies. The Plaint expressly states that the proceedings were brought pursuant to the leave previously granted by the Court.
8. The 1 st Respondent's case in E858 of 2025 is, in essence, that the Applicant acted in breach of her duties to the Company by allegedly irregularly transferring or selling 499 of her shares to Ramat Media Group Limited. He contends that the transfer was undertaken without the requisite authorization of the Company and that the documents allegedly authorizing the transaction were irregular. He further alleges that the transaction was carried out without proper corporate approval and that the Company suffered loss as a consequence.
9. The 1 st Respondent further alleges that the Applicant failed to disclose and account for the consideration received from the alleged sale of the shares and that, in addition, she withdrew Kshs. 950,000/= from the Company's account for her personal benefit.
10. His case is that the alleged acts constituted breaches of the Applicant's fiduciary obligations to the Company and occasioned loss and damage to it.
11. The reliefs sought in E858 of 2025 are directed at, among other matters, reversing or regularising the disputed transfer of the 499 shares and addressing the alleged loss occasioned to the Company.
12. The 1 st Respondent also alleges that the affairs of the Company have been adversely affected by the disputed shareholding and management issues.
13. Subsequently, the Applicant instituted HCCOMM E035 of 2026 against the 1 st Respondent and Ramat Media Group. Together with the suit, she filed the Notice of Motion dated 28 th January 2026, which is the principal Application presently before the Court. The Application is brought under Part XI of the Companies Act, 2015 and seeks leave to commence or continue a derivative claim on behalf of Paran Africa Limited.
14. Specifically, the Applicant seeks, inter alia, leave to commence a derivative suit on behalf of the Company or, in the alternative, an order that the suit be deemed as properly filed as a derivative suit. She further seeks orders for an audit into the Company's operations and affairs, the filing of an audit report in Court, the convening of an Annual General Meeting following the audit and, depending on the outcome of the audit, the removal of the 1 st Respondent as a director.
15. The Application is supported by the Applicant's Affidavit, in which she deposes that she is a director and shareholder of the Company and that, following her departure from the day-to-day management of the Company due to personal circumstances, the 1 st Respondent assumed control of its affairs. She alleges that the 1 st Respondent has since managed the Company to the exclusion of the other shareholder and in a manner detrimental to the interests of the Company.
16. The Applicant's complaints include the alleged exclusion from the affairs of the Company, failure to provide her with financial and management information, the alleged alteration of the Company's communication channels, statutory and regulatory non-compliance, tax liabilities and the filing of financial statements which she contends she did not approve or sign. She further maintains that no proper audit has been undertaken and that an independent audit is therefore necessary to establish the true financial position and affairs of the Company.
17. The Applicant's case is that the intervention of the Court is necessary to protect the Company and to enable the true state of its financial affairs to be established.
18. In her Further Affidavit, she maintains that the proposed audit is not intended to punish the 1 st Respondent but is sought as a means of ensuring transparency and accountability and of establishing whether the Company's resources have been properly managed.
19. The 1 st Respondent opposes the Application. He denies the allegations of mismanagement and contends that the Applicant has herself contributed to the difficulties facing the Company.
20. He points, in particular, to the matters which form the subject of E858 of 2025, namely the alleged withdrawal of Kshs. 950,000/= from the Company's account and the disputed transfer of the Applicant's 499 shares to Ramat Media Group.
21. The 1 st Respondent further contends that he had already obtained leave to institute derivative proceedings on behalf of the Company and had consequently commenced E858 of 2025 before the Applicant instituted E035 of 2026. His position is that both matters concern the affairs of the same Company and that permitting the commencement of a separate derivative action would unnecessarily duplicate proceedings and result in a multiplicity of suits concerning substantially related matters.
22. It is against that background that the two matters were consolidated. The effect of the consolidation is that the competing allegations made by the two directors concerning alleged wrongdoing against Paran Africa Limited now fall for consideration within the same consolidated proceedings.
23. The question presently before the Court, however, is not whether the Applicant's allegations against the 1 st Respondent have been proved. Rather, the immediate question is whether, in light of the requirements governing derivative claims and the existing derivative proceedings in E858 of 2025, the Applicant has established a proper basis for the grant of leave or permission to proceed with her claim on behalf of the Company.
24. I have considered the Application dated 28th January 2026, the affidavits filed in support thereof and in opposition thereto, the pleadings in the consolidated matters, the submissions of the respective parties and the authorities cited. Although the consolidated suits contain allegations and reliefs which are not entirely identical, they are united by a central question: whether alleged acts of wrongdoing by either of the Company's directors have caused loss or prejudice to Paran Africa Limited and, if so, how the interests of the Company ought properly to be protected through the derivative proceedings contemplated under Part XI of the Companies Act, 2015.
APPLICANT’S SUBMISSIONS
25. The Applicant submits that she has satisfied the statutory threshold for permission to pursue a derivative claim on behalf of Paran Africa Limited. She contends that the allegations raised against the 1 st Respondent concern acts and omissions in the management of the Company and therefore fall within the scope of section 238(3) of the Companies Act, 2015.
26. The Applicant relies on the allegations concerning the management of the Company's finances, her alleged exclusion from the affairs of the Company, failure to provide her with financial and management information, statutory and regulatory non-compliance and the alleged filing of financial statements which she did not approve or sign.
27. The Applicant submits that derivative proceedings provide a mechanism through which a member may pursue a cause of action vested in the company where those responsible for the management of the company are unwilling or unable to cause the company to take action. She relies, inter alia, on Kuldeep Singh Sehra & another v Bullion Bank Ltd & 2 others [2014] eKLR and Amin Akberali Manji & 2 others v Altaf Abdulrasul Dadani & another [2015] KECA 356 (KLR) .
28. The Applicant further relies on Isaiah Waweru Ngumi & 2 others v Muturi Ndung'u [2016] KEHC 3032 (KLR) and submits that the Court, in determining whether permission should be granted, should consider whether the pleaded facts disclose a plausible cause of action, whether reasonable efforts have been made to procure action by the directors or shareholders, whether the Applicant fairly and adequately represents the interests of the Company and whether the claim is brought in good faith.
29. It is submitted that the allegations against the 1 st Respondent are sufficiently particularised and disclose, at the very least, an arguable case requiring investigation at trial.
30. The Applicant maintains that she is not asking the Court to determine the merits of the allegations at this stage but merely seeks permission for the Company's interests to be properly represented.
31. With respect to E858 of 2025, the Applicant submits that the fact that the 1 st Respondent obtained leave and instituted proceedings on behalf of the Company does not deprive her of the right to raise distinct allegations concerning the affairs of the same Company. She contends that both claims are intended to protect the interests of Paran Africa Limited.
32. On the prayer for an audit, the Applicant submits that the financial position of the Company cannot properly be ascertained from the material presently available to her. She therefore urges the Court to order an independent audit of the Company's affairs so that the true financial position of the Company can be established.
1 ST RESPONDENT’S SUBMISSIONS
33. The 1 st Respondent opposes the Application and submits that it is misconceived and amounts to an attempt to institute a second derivative claim concerning the same Company, notwithstanding that he had already obtained leave of the Court and instituted E858 of 2025.
34. The 1 st Respondent contends that E858 of 2025 was instituted pursuant to leave granted by the Court on 4 th December 2025 and concerns, among other matters, the alleged irregular transfer of 499 shares by the Applicant to Ramat Media Group Limited and the alleged withdrawal of Kshs. 950,000/= from the Company's account.
35. He denies the allegations of mismanagement and contends that the Applicant has not demonstrated that he has acted in breach of any duty owed to the Company. He maintains that the allegations concerning the Company's finances, statutory compliance and management are disputed matters which should be determined at trial and cannot, without more, justify the relief sought.
36. The 1 st Respondent further submits that the prayer for an audit is premature and amounts to an attempt to obtain substantive relief at an interlocutory stage. He contends that the Court should not order an audit merely on the basis of untested allegations, particularly where the parties are already engaged in litigation concerning the affairs of the Company.
37. Finally, the 1 st Respondent submits that allowing the Applicant to pursue a separate derivative claim would result in duplication of proceedings, unnecessary expenditure of corporate resources and the possibility of conflicting findings concerning the same Company. He urges the Court to dismiss the Application.
ISSUES FOR DETERMINATION
38. In my view, the following issues arise for determination:
a) Whether the Applicant has satisfied the statutory threshold for permission to continue a derivative claim under Part XI of the Companies Act, 2015;
b) What effect the existing derivative proceedings in HCCOMM E858 of 2025 have on the Applicant's Application;
c) Whether the Applicant has established a proper basis for the orders seeking an audit and consequential reliefs; and
d) Who should bear the costs of the Application.
ANALYSIS AND DETERMINATION
39. On the first issue, the governing law is Part XI of the Companies Act, 2015. The statutory regime must, however, be understood against the background of the rule in Foss v Harbottle (1843) 2 Hare 461 , under which the company is ordinarily the proper plaintiff in respect of a wrong done to it. The position was materially altered by the enactment of the Companies Act, 2015. As was stated in Ghelani Metals Limited & 3 Others v Elesh Ghelani Natwarlal & Another [2017] KEHC 4629 (KLR) :
“With the advent of the Act, the law fundamentally changed. The requirement to fall under the exceptions to the rule in Foss v Harbottle was replaced with judicial discretion to grant permission to continue a derivative action. Judicial approval of the action is what now counts and such approval is based on broad judicial discretion and sound judgment without limit but with statutory guidance.”
40. It is therefore the statutory framework under Part XI, rather than the former common law exceptions to Foss v Harbottle , that governs the determination of the present Application. Sections 238 to 241 set out the nature of a derivative claim, the requirement for permission to continue such a claim and the matters which the Court is required to consider in exercising its discretion.
41. The starting point is therefore to determine whether the claim before the Court falls within the statutory definition of a derivative claim and, if so, whether the Applicant has satisfied the threshold for permission under the Act.
42. Section 238 of the Act interprets a derivative claim as inter alia: -
i. In this Part, "derivative claim" means proceedings by a member of a company—
1. in respect of a cause of action vested in the company; and
2. seeking relief on behalf of the company.
ii. A derivative claim may be brought only—
1. under this Part; or
2. in accordance with an order of the Court in proceedings for protection of members against unfair prejudice brought under this Act.
iii. A derivative claim under this Part may be brought only in respect of a cause of action arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company.
iv. A derivative claim may be brought against the director or another person, or both.
43. Section 239 requires a member seeking to continue a derivative claim to obtain the permission of the Court. Where the application and evidence do not disclose a case for giving permission, the Court is required to dismiss it.
44. Where a case is disclosed, the Court may give directions as to evidence, adjourn the matter and, upon hearing the application, grant permission on such terms as it considers appropriate, refuse permission or adjourn the proceedings.
45. In Ghelani Metals Limited (supra) the Court explained that: -
“all that the applicant needs to establish, through evidence, is a prima facie case without the need to show that it will succeed.”
The Court further observed that the permission stage serves to “screen out frivolous claims.”
46. It follows that at the permission stage the Court is not called upon to finally determine the merits of the alleged wrongdoing. The Court is concerned with whether the application and evidence disclose a sufficient case to warrant permission for the derivative claim to proceed.
47. The statutory considerations are further set out in section 241. The Court shall refuse permission in specified circumstances, including where a person acting in accordance with section 144 would not seek to continue the claim or where the impugned act was authorised or ratified by the Company.
48. In Isaiah Waweru Ngumi & 2 Others v Muturi Ndung'u [2016] KEHC 3032 eKLR , the Court, while setting out the considerations applicable at the leave stage, stated:
"The Court is guided by the considerations stipulated in section 241(2) of the Companies Act. Among other things, the Court considers the following factors:
i. 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;
ii. 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;
iii. 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;
iv. Whether the Plaintiff is acting in good faith;
v. 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;
vi. 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
vii. Whether the cause of action contemplated is one that the Plaintiff could bring as a direct as opposed to a derivative action."
49. The Applicant is a Director and shareholder of Paran Africa Limited, and the material before the Court establishes that the parties were, at the material time, equal shareholders and directors of the Company. Her complaints concern the Company's management, financial records, statutory compliance, her alleged exclusion from its affairs and the alleged conduct of the 1st Respondent in his capacity as a director.
50. If proved, these allegations are capable of constituting breaches of duties owed to the Company and therefore fall within section 238(3) of the Companies Act, 2015. The reliefs sought are substantially directed at establishing and protecting the interests of the Company.
51. I am therefore satisfied that the Applicant has demonstrated an arguable basis for a derivative claim, without making any determination at this stage on the merits of the alleged wrongdoing.
52. Turning to the next issue, namely the effect of the existing derivative proceedings in E858 of 2025, the question is whether the prior grant of leave to institute derivative proceedings on behalf of the Company precludes the Applicant from seeking permission to pursue her own derivative claim.
53. The existence of E858 does not, in my view, automatically operate as a bar to a subsequent application by another member of the Company. The statutory framework governing derivative claims contemplates that a member may seek to protect the interests of the Company where a cause of action vested in it is alleged to have been wrongfully dealt with.
54. However, the Court must ensure that the derivative mechanism is used to protect the interests of the Company while avoiding unnecessary duplication or competing litigation. The court observed in Nextgen Office Suites Ltd & another v Netcom Investments Ltd & another; Shah Minakshi Navinchandra (Interested Party) [2021] KEHC 13357 (KLR) :
“The court is thus entrusted with a pivotal role in the statutory derivative action under sections 238 to 242 of the Companies Act. It has a crucial filtering function or screening function in deciding whether or not to permit the applicant to institute derivative proceedings on behalf of the company. This judicial screening mechanism is essential, since the company itself has chosen not to sue and the institution of a derivative action would involve the company in litigation against its will. The requirement of the leave of the court provides a safeguard against unwarranted interference by disgruntled shareholders, individual directors or other applicants in the internal management of the company, and prevents them from improperly arrogating the management function which is vested in the board of directors. This approach, moreover, averts opening the floodgates to a multiplicity of actions—if the leave of the court were not required, multiple actions could be brought by a multitude of individual shareholders and other applicants concerning the same wrong inflicted on the company.”
55. It is significant, however, that the 1 st Respondent obtained leave and instituted E858 of 2025 before the Applicant commenced the present proceedings. The prior institution of that suit is relevant to the Court's consideration of whether permitting a further derivative claim would result in unnecessary duplication of proceedings or otherwise prejudice the interests of the Company. It does not, however, by itself determine whether the Applicant has satisfied the statutory requirements for permission under sections 239 and 241 of the Companies Act.
56. In the circumstances of this case, the two claims concern the affairs of the same Company but raise distinct allegations of wrongdoing. Further, the suits have already been consolidated, thereby substantially addressing the concern of parallel proceedings. I therefore find that the existence of E858 does not, of itself, preclude the Applicant's derivative claim.
57. The appropriate course is for the Applicant's claim to be pursued within the consolidated proceedings, so that the competing allegations concerning the Company's affairs may be determined together.
58. On the third issue, the Applicant seeks an order for an audit into the Company's operations and affairs and for the audit report to be filed in Court, together with consequential orders that an Annual General Meeting be convened within 30 days of the audit and that the 1 st Respondent be removed as a director should the audit findings implicate him. The question is therefore whether, at this stage, the Court should direct the proposed audit and grant the consequential reliefs arising therefrom.
59. While the allegations concerning the Company's financial affairs and management warrant scrutiny, I am not persuaded that the material presently before the Court justifies ordering an independent audit at this interlocutory stage. The consequential orders for an Annual General Meeting and the possible removal of the 1 st Respondent as a director are premised upon the outcome of that audit and therefore cannot properly issue in the absence of the audit itself. Further, removal of a director on the basis of anticipated audit findings would amount to granting substantive relief on the basis of matters yet to be established.
60. The Applicant's concerns may instead be addressed through appropriate directions on the production and inspection of the Company's financial and corporate records in the consolidated proceedings. If the material subsequently demonstrates the need for an independent audit or other appropriate corporate relief, the Court may consider such orders at the appropriate stage. The prayers for the audit and the consequential orders are therefore declined at this stage.
61. Regarding costs, section 27 of the Civil Procedure Act vests the Court with discretion in the award of costs, although the general rule is that costs follow the event. In Morgan Air Cargo Limited v Evrest Enterprises Limited [2014] eKLR , the Court observed that
“The Court takes the view that awarding costs is a matter of the discretion of the Court. It is not a matter of course. The exercise of the discretion, however, depends on the circumstances of each case. Therefore, the law in designing the legal phrase that ‘’Cost follow the event’’ was driven by the fact that there could be no ‘’one-size-fit-all’’ situation on the matter.”
62. In the present case, the Application has succeeded in part, while the competing claims concerning the affairs of the Company have been consolidated for determination. In the circumstances, I find it appropriate that costs of the Application abide the outcome of the consolidated suits.
DISPOSITION AND ORDERS
63. Accordingly, the Notice of Motion dated 28 th January 2026 is allowed in part on the following terms:
i. The Applicant is granted leave to pursue the claim pleaded in HCCOMM E035 of 2026 as a derivative claim on behalf of Paran Africa Limited, within the consolidated proceedings.
ii. The prayers for an audit of the Company's affairs and the consequential orders arising therefrom are declined.
iii. The parties shall proceed with the consolidated suits in accordance with the applicable case management directions.
iv. The costs of the Application shall abide the outcome of the consolidated suits.
Orders accordingly.
DATED, SIGNED AND DELIVERED AT NAIROBI THIS 17 th DAY OF SEPTEMBER 2026.
MURUNGA, J
Delivered on virtual platform in the presence of:
Oonge for the Appellant
Migale for the 1st Respondent
Kevin Babu - Court Assistant