The substantive Notice of Motion before this court was filed pursuant to leave granted on 17 th September 2024 by Justice Ngaah. The motion is brought under sections 8 and 9 of the Law Reform Act, Section 860 and 864 of the Companies Act, Sections 1A,1B and 3A of the Civil Procedure Act and Order 53 Rule 1(2) of the Civil Procedure Rules.
The application seeks the following orders: THAT the Honourable Court be and is hereby pleased to grant an Order of CERTIORARI quashing the decision of the Respondents to effect ‘changes’ in the 1 st Respondent’s CR12 altering the shareholding rights of the Applicant and the installation of the 1 st and 2 nd Interested Parties as Directors of the 1 st Respondent.
THAT the Honourable Court be and is hereby pleased to grant an Order of CERTIORARI quashing the UNPROCEDURAL, IMPROPER and ILLEGAL decision of the 1 st Respondent removing the Applicant as the Director Operations.
THAT the Honourable Court be and is hereby pleased to grant, as a consequence of Order 2 above, an Order of MANDAMUS, compelling the 2 nd Respondent to expunge from its register, the illegal, improper and unprocedural changes made to the list of directors/shareholders, CR 12.
THAT the Honourable Court be and is hereby pleased to grant, also as a consequence of Order 2 above, an Order of MANDAMUS, compelling the 2 nd Respondent to update and/or rectify its register with the details of the Applicant as a bona fide shareholder of 250 shares as was contained in list of directors/CR 12 as of 23 rd January, 2024 the illegal, improper and unprocedural changes were made.
THAT the Honourable Court be and is hereby pleased to grant an Order of Mandamus, compelling the l st Respondent’s directors to convene a meeting for the following purposes: conducting a comprehensive company audit, and/or approval of the audit done by CM. Maingi on 22 nd February 2024 and address the issue of dissolution of the company.
THAT the costs of this application is borne by the Respondents.
The application is grounded on the supporting affidavit of Paul Kibuba Njihia, the exparte applicant, sworn on 25 th September, 2024.
The Applicant’s case is that he has been an employee, a joint minority shareholder with one other director Margaret Wanjiku Magu holding 25% shares, an appointed Director of Operations, a Financial Controller, and generally the day-to-day general managing director of Opus Property Limited for the past twenty-five (25) years.
He states that pursuant to the CR 12 dated 23 rd January, 2024 the Company was and has always been constituted of the following bonafide directors and shareholders; Alfred Magu Mwangi who holds 50% shares, Margaret Wanjiku Magu who holds 25% shares, who is the wife to the majority shareholder and himself.
According to the applicant, until June 2023, he was always on the forefront when it came to the day to day running of the company and checking the company’s financial standing, especially when the majority shareholder was mostly in and out of the country due to health complications (2018-2023).
That during this period, he as the Finance Controller, withdrew Kshs. 4, 100, 000.00 from the company’s bank accounts, with the blessing of the fellow directors, for personal reasons. He urges that he this did within the purview of his powers as a director of the company, pursuant to the Articles of Association dated 3 rd August 1999.
It his case that since all the directors were signatories to the company’s bank accounts, himself included, he sought and received the consent of two co-directors without any condition, whatsoever, attached and they approved his loans.
He further states that after seeing that he had built some stronger customer relations, and the improvements made to the company, the majority shareholder in conjunction with his wife, started concocting unfounded and false allegations of embezzlement against him in a bid to kick him out of the company and as such to avoid unnecessary fights and for the good of the Company, he, as a show of good faith, decided to repay the company’s money back, as he had always intended to do.
He continues to state that he relinquished his interest in the ownership of his double cabin pickup truck Registration Number KCS 677C, valued at about Kshs.2, 800, 000.00 and a piece of land situated in Murang’a Title Number; KAKUZI/KINIMIRI/BLOCK 7/869 valued at Kshs. 700,000.00 to the company, leaving him with a balance of only Kshs. 800,000.00.
The Applicant further avers that in furtherance of the ploy to oust him from his directorial, employment status and shareholding rights, the majority shareholder and his wife on 2 nd June 2023, convened, without proper notice, a directors’ and shareholders’ meeting with only one agenda that he must be stripped of his shareholding rights and/or must go.
According to the Applicant the meeting, was attended by himself, Alfred Magu Mwangi Margaret Wanjiku Magu, Alexander Mwangi Magu who is the son to Alfred Magu & Margaret Wanjiku Magu (the two directors) and Victor Muturi Gachanja who is also related to the two directors aforementioned.
That during the aforesaid meeting, the Applicant states that the agenda was simple, that he was asked to step down as a director and transfer, forfeit without value attached and/or relinquish 100 of his shares to his replacement, Mr. Alexander Mwangi Magu, the 2 nd Interested Party.
The Applicant’s case is that he refused to heed the directors and made it clear that it can only happen if the procedure is followed. He informed the Directors that if the Company is being turned into a family business, then it should be valued and his rightful share given to him and he be let to go. This according to the Applicant did not rest well with the majority shareholder and as such he proceeded to block him from accessing his official email, locking him out of his office and from accessing all his personal belongings.
Mr. Magu is alleged to have started sending emails to the company’s customers to inform them that he no longer was a director at the company and any dealings with him should be halted at once.
According to the Applicant, on or about the 17 th January, 2024, the 1 st Respondent, through its shareholders/directors, lodged a request to the 2 nd Respondent to effect the changes of 2 nd June 2023 and through Mr. Joseph Kamau, the 2 nd Respondent notified the Applicant of the imminent changes and asked whether or not the changes were legitimate and should be effected.
It is the Applicant’s case that he rejected the proposed changes stating his reasons on 30 th January, 2024. According to the Applicant as a consequence of his refusal to concede the 1 st Respondent through Alfred Magu, summarily dismissed him vide a letter dated 11 th March, 2024, which letter is said to have been concluded by the statement, the decision is final and non-negotiable.
The Applicant states that he made peace with this decision and went ahead to pursue the 1 st Respondent for an audit of the Company Assets and Liabilities for him to relinquish his position and rights and the appropriate compensation.
During this period the 1 st Respondent, is said to have transferred Motor Vehicle Registration Number, KCS 677C, valued at about Kshs.2,800,000.00, that was a company property, to his own name.
The Applicant further urges that the 2 nd Respondent upon being approached by the 1 st Respondent, effected the changes in the Company. According to the CR12 generated on 14 th August, 2024, the l st and 2 nd Interested Parties were allocated 100 shares each.
It is the Applicant’s case that the majority shareholder and his wife have refused to approve, to date, the audit report by CM Maingi done on the 22 nd February 2024.
The Applicant urges that his removal from office without proper notice is an outright violation of Section 139 of the Company’s Act, No. 7 of 2015 and that the company’s refusal to cooperate with the valuation of its accounts demonstrates a clear disregard of Article 2(e) of the Articles of Association dated 3 rd August 1999.
According to the applicant, the failure by the Respondents to rectify the register has caused him severe prejudice, as Alfred Magu Mwangi and his accomplices have been using this new and unprocedural company records to make unauthorized decisions and transactions on behalf the company. That his professional reputation and credibility have also been tarnished. The continued existence of this new company’s register allows the majority shareholder to perpetuate further unlawful acts.
The Applicant also filed a further affidavit sworn on 18 th March 2025 in which he depones that on the issue of the Arbitration clause, it must be noted that a keen perusal of the Articles of Association of the 1 st Respondent reveals that disputes to be referred to arbitration are; “to sort out differences between the company and, one of the members, their executors, administrator’s or assigns”.
That the review of a decision-making process by the 1 st Respondent which is what he is seeking before this court does not fall under this clause as cited but falls within the mandate of the High Court which exercises supervisory jurisdiction to supervise the exercise of power by those who hold it to ensure that it has been lawfully exercised.
The Applicant also asserts that had the 1 st Respondent and Interested Parties been desirous of invoking the Arbitration clause prior to this matter, then they should have complied with Section 6 of Arbitration Act before they entered appearance and filed pleadings in reply to the application, thus as it stands, they submitted and acquiesced to this Court’s jurisdiction.
The Applicant states that Article 28 of the Articles of Association of the 1 st Respondent company provides for the mode of service of a notice either personally or by post to the registered address of a member appearing in the register of members.
Similarly, that Section 281(1) of the Companies Act has a proviso to the effect that in convening a general meeting, (other than Amount of notice to be given for general an adjourned meeting), a private company shall give a least twenty-one days’ notice. He states that no such notice was served upon him in regard to the meeting of 2 nd June,2023.
According to the Applicant, the 1 st Respondent having failed to comply with the strict requirements of section 281 of the Companies Act, from the beginning, as there was no notice convening the meeting, all proceedings and resultant resolutions thereto, including the installation of the 1 st and 2 nd Interested parties as Directors/Shareholders, are void ab initio.
He further states that although a purported undated resolution of the Company was prepared of another meeting allegedly held virtually on 19 th June,2023 to the effect that the majority shareholder’s wife, Margaret Wanjiku Magu and him would forfeit 100 shares and that each which would be transferred to the Interested parties, the newly appointed as directors/shareholders no resolution of the meeting of 2 nd June,2023 seeking to restructure the Company shareholding has been produced.
The Applicant states that the decision to call for forfeiture of his 100 shares to the Interested Parties without following the due procedure is in total contravention of the Companies Act,2015 as read together with Articles 70, 75 and 76 and 78 of the Model Articles of the Fourth Schedule of the Companies (General) Regulations, 2015 (the Regulations).
He further states that alteration of shareholding is a totally different undertaking from restructuring of shareholding through forfeiture of shares as captured in the 1 st Respondent’s impugned resolution of a meeting held virtually on 19 th June,2023 giving effect to the changes effected by the 2 nd Respondent on instructions of the 1 st Respondent.
It is his case that section 404 of the Companies Act,2015 as read together with Articles 87,88,89 and 90 of the Model Articles of The Fourth Schedule of the Companies (General) Regulations, 2015 (the Regulations) provide for the procedure of alteration of shareholding through increasing its share capital by allotting new shares or through reducing its share capital in accordance with the Act.
Additionally, that a company that wishes to alter its shareholding may subdivide or consolidate all or any of its share capital only in accordance with the strict requirements section 405 of the Companies Act,2015 and not in any other self-arrogated procedure as purportedly done by the 1 st Respondent. He also avers that he did not sign any documents including the statutory declaration purportedly sworn on 19 th June,2023 and the Transfer Form D.
It is the Applicant’s case that he sought audience with the 2 nd Respondent requesting for the correction of the register but there was failure to comply necessitating the instant motion.
The 1 st Respondent’s Response
In response, the 1 st Respondent filed a Replying Affidavit sworn by Alfred Magu Mwangi who introduces himself as the Director of the 1 st Respondent on 18 th October 2024.
The 1 st Respondent’s case is that this honourable court does not have the jurisdiction to entertain the present suit as filed as the Applicant was guilty of non-disclosure of material facts when applying for leave. According to the 1 st Respondent the Applicant deliberately failed to disclose that Clause 30 of the
1 st Respondent’s Articles of Association provides for arbitration as the dispute resolution mechanism between the company and any of its members.
The 1 st Respondent further states that the Applicant is a member of the 1 st Respondent and that despite making reference to the 1 st Respondent’s Articles of Association, the Applicant deliberately failed to annex the same in his ex parte application, which Articles would have clearly informed the Court on the envisaged mode of dispute resolution.
The 1 st Respondent also contends that the issue being raised by the Applicant herein is an employment dispute, which ought to be raised and determined in the Employment and Labour Relations Court pursuant to Article 162(2) of the Constitution. Further, that the other issues raised by the Applicant touch on company matters under the Companies Act and as such ought to be rightly determined by the Commercial Division of the High Court, more so when the issues raised by the Applicant call for a merit review of the impugned alleged decisions.
The 1 st Respondent’s further contends that where there is an alternative forum of dispute resolution which is more appropriate to resolve legal and factual issues such as the ones raised in the present application, then this Court should decline jurisdiction.
It is also stated that in so far as the application seeks an order of certiorari, the same is time barred and offends the provisions of Order 53 Rule 2 of the Civil procedure Rules and Section 9(3) of the Law Reform Act. According to the 1 st Respondent the Applicant seeks to quash the 1 st Respondent’s resolution made on 2 nd June 2023, an inordinate delay of 15 months. It is further urged that the Applicant is statutorily time barred and this Court cannot entertain the same.
According to the 1 st Respondent, the Applicant herein seeks to have this Honourable Court to undertake a merit review of the alleged impugned decisions, by looking into the invalidity or otherwise of the reasons for his termination from employment, looking into the invalidity or otherwise of the reasons for the restructuring of the shareholding and even to adopt an audit report and dissolve the company yet the suit as filed does not allow for the same.
The 1 st Respondent states that the Applicant was not appointed as Director of Operations of the 1 st Respondent until a resolution was passed during the meeting held on 2 nd June 2023, which also addressed shareholding restructuring. Further, that a follow-up meeting on 19 th June 2023 confirmed the restructuring. The Applicant is said to have attended both meetings after being properly notified and as such, it is inconsistent for the Applicant to challenge the outcomes of these meetings while accepting his appointment as Director of Operations.
The Applicant, it is contended, that at paragraph 5 of his supporting affidavit, has admitted to taking advantage of his position in the company, to not only stealing from the company, but conferring a benefit upon himself and his family.
The Applicant is alleged to be withdrawn Kshs. 6,372,677 from the 1 st Respondent’s bank accounts without director approval for personal use. That upon discovery, he admitted the misconduct in a letter dated 11 th May 2023, offered property as partial restitution, and agreed to forgo dividends. The 1st Respondent reported the matter to Kilimani Police Station and all involved parties recorded statements with the DCI.
Regarding shareholding changes, it is asserted that they were conducted in accordance with the Company’s Articles of Association and the Companies Act. That th Applicant attended the 2 nd June 2023 meeting, participated in the resolutions and voluntarily signed documents including a Statutory Declaration dated 19 th June 2023 and a Transfer Form D to effect the shareholding changes.
That these documents were then lodged with the 2 nd Respondent, who verified them and even contacted the Applicant for confirmation. That although the Applicant mentioned “pending issues,” he neither specified them nor raised any formal objection with the 1 st or 2 nd Respondents. Consequently, it is contended that the Applicant cannot now challenge decisions he actively participated in and endorsed.
The 1 st respondent’s Supplementary Affidavit
The 1 st Respondent filed a supplementary affidavit sworn by Alfred Magu Mwangi on 16 th April 2025 in response to the further affidavit sworn and filed by the exparte applicant.
In the said supplementary affidavit, the 1 st Respondent contends that Section 9(2) of the Fair Administrative Action Act was enacted to give life to Article 47 of the Constitution which provides that the court shall not review an administrative action or decision unless the mechanisms including internal mechanisms for appeal or review and all remedies available under any other written law are first exhausted.
It was reiterated that the Applicant was aware of the meeting of 2 nd June 2023 and its agenda. Further, that he used to attend all company meetings together with the two directors of the company. According to the 1 st Respondent, in a meeting held on 15 th May 2023, it became apparent that owing to the Applicant’s fraudulent actions, there was need to restructure the company.
It is urged that a proposal was made and it was agreed that the company restructuring, would begin after 1 st June 2023 and that subsequently, on 29 th May 2023, in a meeting of three members of the company, it was agreed that the meeting on restructuring as agreed in the meeting of 15 th May 2023, would be held on the following Thursday. The 1 st Respondent states that that those minutes were duly signed by the Applicant.
Further, that the meeting was held on 2 nd June 2023 and that the Applicant was duly aware and had sufficient notice of the meeting, was present and even participated in the deliberations culminating in the decision to restructure the company. According to the 1 st Respondent, the Applicant did not raise any issue whatsoever in the said meeting.
The 1 st Interested Party’s Response
The 1 st Interested Party filed a replying affidavit sworn on 18 th October 2024 by Victor Muturi Gachanja who introduces himself as a Director/ Shareholder of the 1 st Respondent.
In his affidavit, Mr. Muturi avers that he became a director/shareholder of the 1 st Respondent company pursuant to a resolution passed in a members’ meeting held on 2 nd June 2023. Further, that the Applicant herein and all the other members of the 1 st Respondent were present in the meeting. It is his case that a unanimous decision was arrived at to bring him on board as a shareholder and director of the company. That it was agreed that the Applicant herein would transfer 100 shares to the interested party. It was also agreed that he would double up as the finance director of the 1 st Respondent.
The interested party further states that a subsequent meeting was held on 19 th June 2023 where the said restructuring was confirmed. The 1 st Interested Party states that he signed all the requisite documents to effect the resolution and have the changes formally reflected in the companies registry. He deposes that he signed the statutory Transfer Form D which document had also been duly executed by the Applicant herein at the time he was signing the same. Further, that he also signified his consent and acceptance in form CR6 and through a letter dated 2 nd June 2023, he accepted his appointment as a director as required.
The deponent states that all procedures relating to the change in shareholding and his appointment as finance director of the 1 st Respondent were lawfully followed with the Applicant’s full consent and the he has since taken up his duties in that role. It is his case that the current application is inconsistent, procedurally defective and an abuse of court process and that it should be dismissed with costs.
He further states that the High Court lacks jurisdiction due to the 1 st Respondent’s Articles of Association, which require arbitration for disputes involving members. Additionally, that some of the Applicant’s claims relate to employment matters, which fall under the Employment and Labour Relations Court, while others are commercial issues better suited for the Commercial Division of the High Court.
The 2 nd Interested Party’s Replying affidavit
The 2 nd Interested Party filed a Replying Affidavit sworn on 18 th October 2024 by Alexander Mwangi Magu who introduces himself also as a Director/ Shareholder of the 1 st Respondent.
The 2 nd Interested Party states that he became a director and shareholder of the 1 st Respondent following a resolution passed during a members’ meeting held on 2 nd June 2023. He states that the Applicant and all other members of the company were present at the meeting, and a unanimous decision was made to bring him on board.
It is his position that it was agreed that Margaret Wanjiku Magu, one of the existing shareholders, would transfer 100 shares to him. Also, that he would serve as the Properties Director of the company. That this restructuring was later confirmed in a subsequent meeting held on 19 th June 2023.
According to the 2 nd interested party, following these resolutions, the 2 nd Interested Party signed all the necessary documents to effect the changes, including the statutory Transfer Form D, which had already been executed by Margaret Wanjiku Magu. That he further gave his formal consent to act as a director through Form CR6 and accepted his appointment in writing via a letter dated 2 nd June 2023. He affirms that the entire process of altering the company’s shareholding and appointing him as a director was conducted lawfully and in accordance with the required procedures.
He notes that Margaret Wanjiku Magu, having willingly participated in the process, has not raised any objections and that since his appointment, he has assumed his role as the Properties Director of the 1 st Respondent and has been actively performing his duties in that capacity. He also states that some of the issues raised by the Applicant ought to be canvassed before the Employment and Labour Relations Court and the Commercial Division of the High Court.
Submissions
The application was canvassed by way of written submissions.
The Applicant filed his written submissions dated 18 th March 2025. In the said submissions, he relies on Article 165 on the jurisdiction of the High Court. He also relies on the case of Republic v Magistrates Court, Mombasa; Absin Synegy Limited (Interested Party) (Judicial Review E033 of 2021) [2022] KEHC 10 (KLR) (24 January 2022) (Judgment) where the court held that a judicial review is a review by a High Court judge of a decision, intended decision, or failure to make a decision, in order to assess whether it is unlawful or invalid.
On the scope of judicial review, the Applicant relies on the case of Pastoli v Kabale District Local Government Council & Others (2008) 2 EA 300 . The Applicant submits that the application herein seeks to challenge the unlawful decision-making process of the Respondents jointly and/or severally to change the directorship and shareholding of the 1 st Respondent Company unprocedurally. He relies on the case of Republic vs Director of Immigration Services & 2 others Exparte Olamilekan Gbenga Fasuyi & 2 others [2018] eKLR where the court observed that judicial review is about the decision-making process and that where a decision has been made within the confines of the law then the court will not interfere.
The Applicant also relies on the case of Eunice Soko Mlagui v Suresh Parmar & 4 others [2017] eKLR where the court held that the court may nonetheless decline to grant a stay of proceedings and refer the matter to arbitration if the request is not made when entering appearance or is made after the defence has been filed.
On the scope of judicial review, the Applicant relies on the Ugandan case of Pastoli v Kabale District Local Government Council and Others [2008] 2 EA 300 . It is submitted that the Fair Administrative Actions Act was enacted to give practical effect to the right to fair administrative action protected by Article 47 of the Constitution. The Applicant also refers to section 7 of the Fair Administrative Action Act on a Court’s or Tribunal’s jurisdiction to review and administrative action or decision.
On the importance of a notice for the meeting being issued, the Applicant relies on the case of Wambeye Kimweli Marakia V Board of Directors, Nzoia Water Services Co. Ltd & 2 Others; Nzoia Water Services Co. Ltd (Interested Party) [2021] eKLR where the court emphasised that for a meeting to be fruitful, a notice and agenda of the meeting must be issued. According to the Applicant as per section 281(8) of the Act a meeting that does not comply with the requirements of section 281 is void.
It is also the Applicant’s submission that the 1 st Respondent company was incorporated on 10 th August 1999 under the now repealed Companies Act (Cap 486) and that the current governing law is the Companies Act, 2015, which came into effect on 11 th September 2015 and repealed Cap 486.
However, that the Sixth Schedule of the 2015 Act includes transitional provisions that preserve the application of Table A from the First Schedule of the repealed Act. As such, both the company's Memorandum and Articles of Association, Table A (where relevant), and the 2015 Act govern the company’s affairs.
It is submitted that pursuant to section 323 of the Companies Act, the nature of shares or other interest of a member in a company are personal property. Further, that article 75 of the Model Articles of Association is instructive on forfeiture of Company shares while article 78 is said to provide for the procedure following the forfeiture of shares.
The Applicant also relies on the case of Republic v Registrar of Companies & 2 others (Miscellaneous Application E547 of 2022) [2023] KEHC 19417 (KLR) (Commercial and Tax) (30 June 2023) (Ruling) where the court observed that ultimately, the authority to forfeit shares rests primarily with the Company. However, that in exercising this power, the Company must adhere to due process and provide the shareholder with a fair opportunity to be heard.
The Applicant contends that the 2 nd Respondent’s process of making changes to the Company register on account of a resolution of alleged forfeiture of shares despite his protests is an illegality, was marred with procedural impropriety and irrationality.
According to the Applicant, despite the fact that the 2 nd Respondent has power to reject registration of documents where the same do not comply with the law, they approved changes to the 1 st Respondent’s register on account of a resolution of alleged forfeiture of share despite the Applicant’s protests that the decision-making process was marred with procedural impropriety and irrationality.
He relied on Republic v Registrar of Companies Ex Parte Independent Electoral Board of Kenya National Chamber of Commerce & Industry (KNCCI) [2016] eKLR where the Court is said to have noted the power of the 2 nd Respondent to reject registration of non-compliant documents provided the same was done in accordance with Article 47 of the Constitution.
The Applicant submits that the 2 nd Respondent had a duty to invoke the provisions of sections 847 and 860 of the Companies Act in order to remedy the illegality occasioned to the Applicant but he failed to do so in total contravention of inter alia Article 47 of the Constitution of Kenya,2010.The Applicant relies on the case of Judicial Service Commission vs. Mbalu Mutava & Another [2015] eKLR, Civil Appeal 52 of 2014 where the court observed that administrative actions are now subject to Article 47(1) of the Constitution.
It is the Applicant’s further submission that he has established the threshold for grant of the orders of certiorari sought in the motion dated 25 th September,2024.
On the grant of the order of certiorari he relies on the case of Kenya National Examination Council vs. Republic Exparte Geoffrey Gathenji & 9 Others, Nairobi Civil Appeal No.266 of 1996.
The Applicant also submits that a reading of sections 863(1) and 864 of the Companies Act,2015 shows that the Court has power to issue an order directing the Registrar to rectify any entry in the register. On the grant of an order of mandamus the Applicant relies on the case of Republic v Jomo Kenyatta University of Agriculture and Technology E
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The application seeks the following orders: THAT the Honourable Court be and is hereby pleased to grant an Order of CERTIORARI quashing the decision of the Respondents to effect ‘changes’ in the 1 st Respondent’s CR12 altering the shareholding rights of the Applicant and the installation of the 1 st and 2 nd Interested Parties as Directors of the 1 st Respondent.
THAT the Honourable Court be and is hereby pleased to grant an Order of CERTIORARI quashing the UNPROCEDURAL, IMPROPER and ILLEGAL decision of the 1 st Respondent removing the Applicant as the Director Operations.
THAT the Honourable Court be and is hereby pleased to grant, as a consequence of Order 2 above, an Order of MANDAMUS, compelling the 2 nd Respondent to expunge from its register, the illegal, improper and unprocedural changes made to the list of directors/shareholders, CR 12.
THAT the Honourable Court be and is hereby pleased to grant, also as a consequence of Order 2 above, an Order of MANDAMUS, compelling the 2 nd Respondent to update and/or rectify its register with the details of the Applicant as a bona fide shareholder of 250 shares as was contained in list of directors/CR 12 as of 23 rd January, 2024 the illegal, improper and unprocedural changes were made.
THAT the Honourable Court be and is hereby pleased to grant an Order of Mandamus, compelling the l st Respondent’s directors to convene a meeting for the following purposes: conducting a comprehensive company audit, and/or approval of the audit done by CM. Maingi on 22 nd February 2024 and address the issue of dissolution of the company.
THAT the costs of this application is borne by the Respondents.
The application is grounded on the supporting affidavit of Paul Kibuba Njihia, the exparte applicant, sworn on 25 th September, 2024.
The Applicant’s case is that he has been an employee, a joint minority shareholder with one other director Margaret Wanjiku Magu holding 25% shares, an appointed Director of Operations, a Financial Controller, and generally the day-to-day general managing director of Opus Property Limited for the past twenty-five (25) years.
He states that pursuant to the CR 12 dated 23 rd January, 2024 the Company was and has always been constituted of the following bonafide directors and shareholders; Alfred Magu Mwangi who holds 50% shares, Margaret Wanjiku Magu who holds 25% shares, who is the wife to the majority shareholder and himself.
According to the applicant, until June 2023, he was always on the forefront when it came to the day to day running of the company and checking the company’s financial standing, especially when the majority shareholder was mostly in and out of the country due to health complications (2018-2023).
That during this period, he as the Finance Controller, withdrew Kshs. 4, 100, 000.00 from the company’s bank accounts, with the blessing of the fellow directors, for personal reasons. He urges that he this did within the purview of his powers as a director of the company, pursuant to the Articles of Association dated 3 rd August 1999.
It his case that since all the directors were signatories to the company’s bank accounts, himself included, he sought and received the consent of two co-directors without any condition, whatsoever, attached and they approved his loans.
He further states that after seeing that he had built some stronger customer relations, and the improvements made to the company, the majority shareholder in conjunction with his wife, started concocting unfounded and false allegations of embezzlement against him in a bid to kick him out of the company and as such to avoid unnecessary fights and for the good of the Company, he, as a show of good faith, decided to repay the company’s money back, as he had always intended to do.
He continues to state that he relinquished his interest in the ownership of his double cabin pickup truck Registration Number KCS 677C, valued at about Kshs.2, 800, 000.00 and a piece of land situated in Murang’a Title Number; KAKUZI/KINIMIRI/BLOCK 7/869 valued at Kshs. 700,000.00 to the company, leaving him with a balance of only Kshs. 800,000.00.
The Applicant further avers that in furtherance of the ploy to oust him from his directorial, employment status and shareholding rights, the majority shareholder and his wife on 2 nd June 2023, convened, without proper notice, a directors’ and shareholders’ meeting with only one agenda that he must be stripped of his shareholding rights and/or must go.
According to the Applicant the meeting, was attended by himself, Alfred Magu Mwangi Margaret Wanjiku Magu, Alexander Mwangi Magu who is the son to Alfred Magu & Margaret Wanjiku Magu (the two directors) and Victor Muturi Gachanja who is also related to the two directors aforementioned.
That during the aforesaid meeting, the Applicant states that the agenda was simple, that he was asked to step down as a director and transfer, forfeit without value attached and/or relinquish 100 of his shares to his replacement, Mr. Alexander Mwangi Magu, the 2 nd Interested Party.
The Applicant’s case is that he refused to heed the directors and made it clear that it can only happen if the procedure is followed. He informed the Directors that if the Company is being turned into a family business, then it should be valued and his rightful share given to him and he be let to go. This according to the Applicant did not rest well with the majority shareholder and as such he proceeded to block him from accessing his official email, locking him out of his office and from accessing all his personal belongings.
Mr. Magu is alleged to have started sending emails to the company’s customers to inform them that he no longer was a director at the company and any dealings with him should be halted at once.
According to the Applicant, on or about the 17 th January, 2024, the 1 st Respondent, through its shareholders/directors, lodged a request to the 2 nd Respondent to effect the changes of 2 nd June 2023 and through Mr. Joseph Kamau, the 2 nd Respondent notified the Applicant of the imminent changes and asked whether or not the changes were legitimate and should be effected.
It is the Applicant’s case that he rejected the proposed changes stating his reasons on 30 th January, 2024. According to the Applicant as a consequence of his refusal to concede the 1 st Respondent through Alfred Magu, summarily dismissed him vide a letter dated 11 th March, 2024, which letter is said to have been concluded by the statement, the decision is final and non-negotiable.
The Applicant states that he made peace with this decision and went ahead to pursue the 1 st Respondent for an audit of the Company Assets and Liabilities for him to relinquish his position and rights and the appropriate compensation.
During this period the 1 st Respondent, is said to have transferred Motor Vehicle Registration Number, KCS 677C, valued at about Kshs.2,800,000.00, that was a company property, to his own name.
The Applicant further urges that the 2 nd Respondent upon being approached by the 1 st Respondent, effected the changes in the Company. According to the CR12 generated on 14 th August, 2024, the l st and 2 nd Interested Parties were allocated 100 shares each.
It is the Applicant’s case that the majority shareholder and his wife have refused to approve, to date, the audit report by CM Maingi done on the 22 nd February 2024.
The Applicant urges that his removal from office without proper notice is an outright violation of Section 139 of the Company’s Act, No. 7 of 2015 and that the company’s refusal to cooperate with the valuation of its accounts demonstrates a clear disregard of Article 2(e) of the Articles of Association dated 3 rd August 1999.
According to the applicant, the failure by the Respondents to rectify the register has caused him severe prejudice, as Alfred Magu Mwangi and his accomplices have been using this new and unprocedural company records to make unauthorized decisions and transactions on behalf the company. That his professional reputation and credibility have also been tarnished. The continued existence of this new company’s register allows the majority shareholder to perpetuate further unlawful acts.
The Applicant also filed a further affidavit sworn on 18 th March 2025 in which he depones that on the issue of the Arbitration clause, it must be noted that a keen perusal of the Articles of Association of the 1 st Respondent reveals that disputes to be referred to arbitration are; “to sort out differences between the company and, one of the members, their executors, administrator’s or assigns”.
That the review of a decision-making process by the 1 st Respondent which is what he is seeking before this court does not fall under this clause as cited but falls within the mandate of the High Court which exercises supervisory jurisdiction to supervise the exercise of power by those who hold it to ensure that it has been lawfully exercised.
The Applicant also asserts that had the 1 st Respondent and Interested Parties been desirous of invoking the Arbitration clause prior to this matter, then they should have complied with Section 6 of Arbitration Act before they entered appearance and filed pleadings in reply to the application, thus as it stands, they submitted and acquiesced to this Court’s jurisdiction.
The Applicant states that Article 28 of the Articles of Association of the 1 st Respondent company provides for the mode of service of a notice either personally or by post to the registered address of a member appearing in the register of members.
Similarly, that Section 281(1) of the Companies Act has a proviso to the effect that in convening a general meeting, (other than Amount of notice to be given for general an adjourned meeting), a private company shall give a least twenty-one days’ notice. He states that no such notice was served upon him in regard to the meeting of 2 nd June,2023.
According to the Applicant, the 1 st Respondent having failed to comply with the strict requirements of section 281 of the Companies Act, from the beginning, as there was no notice convening the meeting, all proceedings and resultant resolutions thereto, including the installation of the 1 st and 2 nd Interested parties as Directors/Shareholders, are void ab initio.
He further states that although a purported undated resolution of the Company was prepared of another meeting allegedly held virtually on 19 th June,2023 to the effect that the majority shareholder’s wife, Margaret Wanjiku Magu and him would forfeit 100 shares and that each which would be transferred to the Interested parties, the newly appointed as directors/shareholders no resolution of the meeting of 2 nd June,2023 seeking to restructure the Company shareholding has been produced.
The Applicant states that the decision to call for forfeiture of his 100 shares to the Interested Parties without following the due procedure is in total contravention of the Companies Act,2015 as read together with Articles 70, 75 and 76 and 78 of the Model Articles of the Fourth Schedule of the Companies (General) Regulations, 2015 (the Regulations).
He further states that alteration of shareholding is a totally different undertaking from restructuring of shareholding through forfeiture of shares as captured in the 1 st Respondent’s impugned resolution of a meeting held virtually on 19 th June,2023 giving effect to the changes effected by the 2 nd Respondent on instructions of the 1 st Respondent.
It is his case that section 404 of the Companies Act,2015 as read together with Articles 87,88,89 and 90 of the Model Articles of The Fourth Schedule of the Companies (General) Regulations, 2015 (the Regulations) provide for the procedure of alteration of shareholding through increasing its share capital by allotting new shares or through reducing its share capital in accordance with the Act.
Additionally, that a company that wishes to alter its shareholding may subdivide or consolidate all or any of its share capital only in accordance with the strict requirements section 405 of the Companies Act,2015 and not in any other self-arrogated procedure as purportedly done by the 1 st Respondent. He also avers that he did not sign any documents including the statutory declaration purportedly sworn on 19 th June,2023 and the Transfer Form D.
It is the Applicant’s case that he sought audience with the 2 nd Respondent requesting for the correction of the register but there was failure to comply necessitating the instant motion.
The 1 st Respondent’s Response
In response, the 1 st Respondent filed a Replying Affidavit sworn by Alfred Magu Mwangi who introduces himself as the Director of the 1 st Respondent on 18 th October 2024.
The 1 st Respondent’s case is that this honourable court does not have the jurisdiction to entertain the present suit as filed as the Applicant was guilty of non-disclosure of material facts when applying for leave. According to the 1 st Respondent the Applicant deliberately failed to disclose that Clause 30 of the
1 st Respondent’s Articles of Association provides for arbitration as the dispute resolution mechanism between the company and any of its members.
The 1 st Respondent further states that the Applicant is a member of the 1 st Respondent and that despite making reference to the 1 st Respondent’s Articles of Association, the Applicant deliberately failed to annex the same in his ex parte application, which Articles would have clearly informed the Court on the envisaged mode of dispute resolution.
The 1 st Respondent also contends that the issue being raised by the Applicant herein is an employment dispute, which ought to be raised and determined in the Employment and Labour Relations Court pursuant to Article 162(2) of the Constitution. Further, that the other issues raised by the Applicant touch on company matters under the Companies Act and as such ought to be rightly determined by the Commercial Division of the High Court, more so when the issues raised by the Applicant call for a merit review of the impugned alleged decisions.
The 1 st Respondent’s further contends that where there is an alternative forum of dispute resolution which is more appropriate to resolve legal and factual issues such as the ones raised in the present application, then this Court should decline jurisdiction.
It is also stated that in so far as the application seeks an order of certiorari, the same is time barred and offends the provisions of Order 53 Rule 2 of the Civil procedure Rules and Section 9(3) of the Law Reform Act. According to the 1 st Respondent the Applicant seeks to quash the 1 st Respondent’s resolution made on 2 nd June 2023, an inordinate delay of 15 months. It is further urged that the Applicant is statutorily time barred and this Court cannot entertain the same.
According to the 1 st Respondent, the Applicant herein seeks to have this Honourable Court to undertake a merit review of the alleged impugned decisions, by looking into the invalidity or otherwise of the reasons for his termination from employment, looking into the invalidity or otherwise of the reasons for the restructuring of the shareholding and even to adopt an audit report and dissolve the company yet the suit as filed does not allow for the same.
The 1 st Respondent states that the Applicant was not appointed as Director of Operations of the 1 st Respondent until a resolution was passed during the meeting held on 2 nd June 2023, which also addressed shareholding restructuring. Further, that a follow-up meeting on 19 th June 2023 confirmed the restructuring. The Applicant is said to have attended both meetings after being properly notified and as such, it is inconsistent for the Applicant to challenge the outcomes of these meetings while accepting his appointment as Director of Operations.
The Applicant, it is contended, that at paragraph 5 of his supporting affidavit, has admitted to taking advantage of his position in the company, to not only stealing from the company, but conferring a benefit upon himself and his family.
The Applicant is alleged to be withdrawn Kshs. 6,372,677 from the 1 st Respondent’s bank accounts without director approval for personal use. That upon discovery, he admitted the misconduct in a letter dated 11 th May 2023, offered property as partial restitution, and agreed to forgo dividends. The 1st Respondent reported the matter to Kilimani Police Station and all involved parties recorded statements with the DCI.
Regarding shareholding changes, it is asserted that they were conducted in accordance with the Company’s Articles of Association and the Companies Act. That th Applicant attended the 2 nd June 2023 meeting, participated in the resolutions and voluntarily signed documents including a Statutory Declaration dated 19 th June 2023 and a Transfer Form D to effect the shareholding changes.
That these documents were then lodged with the 2 nd Respondent, who verified them and even contacted the Applicant for confirmation. That although the Applicant mentioned “pending issues,” he neither specified them nor raised any formal objection with the 1 st or 2 nd Respondents. Consequently, it is contended that the Applicant cannot now challenge decisions he actively participated in and endorsed.
The 1 st respondent’s Supplementary Affidavit
The 1 st Respondent filed a supplementary affidavit sworn by Alfred Magu Mwangi on 16 th April 2025 in response to the further affidavit sworn and filed by the exparte applicant.
In the said supplementary affidavit, the 1 st Respondent contends that Section 9(2) of the Fair Administrative Action Act was enacted to give life to Article 47 of the Constitution which provides that the court shall not review an administrative action or decision unless the mechanisms including internal mechanisms for appeal or review and all remedies available under any other written law are first exhausted.
It was reiterated that the Applicant was aware of the meeting of 2 nd June 2023 and its agenda. Further, that he used to attend all company meetings together with the two directors of the company. According to the 1 st Respondent, in a meeting held on 15 th May 2023, it became apparent that owing to the Applicant’s fraudulent actions, there was need to restructure the company.
It is urged that a proposal was made and it was agreed that the company restructuring, would begin after 1 st June 2023 and that subsequently, on 29 th May 2023, in a meeting of three members of the company, it was agreed that the meeting on restructuring as agreed in the meeting of 15 th May 2023, would be held on the following Thursday. The 1 st Respondent states that that those minutes were duly signed by the Applicant.
Further, that the meeting was held on 2 nd June 2023 and that the Applicant was duly aware and had sufficient notice of the meeting, was present and even participated in the deliberations culminating in the decision to restructure the company. According to the 1 st Respondent, the Applicant did not raise any issue whatsoever in the said meeting.
The 1 st Interested Party’s Response
The 1 st Interested Party filed a replying affidavit sworn on 18 th October 2024 by Victor Muturi Gachanja who introduces himself as a Director/ Shareholder of the 1 st Respondent.
In his affidavit, Mr. Muturi avers that he became a director/shareholder of the 1 st Respondent company pursuant to a resolution passed in a members’ meeting held on 2 nd June 2023. Further, that the Applicant herein and all the other members of the 1 st Respondent were present in the meeting. It is his case that a unanimous decision was arrived at to bring him on board as a shareholder and director of the company. That it was agreed that the Applicant herein would transfer 100 shares to the interested party. It was also agreed that he would double up as the finance director of the 1 st Respondent.
The interested party further states that a subsequent meeting was held on 19 th June 2023 where the said restructuring was confirmed. The 1 st Interested Party states that he signed all the requisite documents to effect the resolution and have the changes formally reflected in the companies registry. He deposes that he signed the statutory Transfer Form D which document had also been duly executed by the Applicant herein at the time he was signing the same. Further, that he also signified his consent and acceptance in form CR6 and through a letter dated 2 nd June 2023, he accepted his appointment as a director as required.
The deponent states that all procedures relating to the change in shareholding and his appointment as finance director of the 1 st Respondent were lawfully followed with the Applicant’s full consent and the he has since taken up his duties in that role. It is his case that the current application is inconsistent, procedurally defective and an abuse of court process and that it should be dismissed with costs.
He further states that the High Court lacks jurisdiction due to the 1 st Respondent’s Articles of Association, which require arbitration for disputes involving members. Additionally, that some of the Applicant’s claims relate to employment matters, which fall under the Employment and Labour Relations Court, while others are commercial issues better suited for the Commercial Division of the High Court.
The 2 nd Interested Party’s Replying affidavit
The 2 nd Interested Party filed a Replying Affidavit sworn on 18 th October 2024 by Alexander Mwangi Magu who introduces himself also as a Director/ Shareholder of the 1 st Respondent.
The 2 nd Interested Party states that he became a director and shareholder of the 1 st Respondent following a resolution passed during a members’ meeting held on 2 nd June 2023. He states that the Applicant and all other members of the company were present at the meeting, and a unanimous decision was made to bring him on board.
It is his position that it was agreed that Margaret Wanjiku Magu, one of the existing shareholders, would transfer 100 shares to him. Also, that he would serve as the Properties Director of the company. That this restructuring was later confirmed in a subsequent meeting held on 19 th June 2023.
According to the 2 nd interested party, following these resolutions, the 2 nd Interested Party signed all the necessary documents to effect the changes, including the statutory Transfer Form D, which had already been executed by Margaret Wanjiku Magu. That he further gave his formal consent to act as a director through Form CR6 and accepted his appointment in writing via a letter dated 2 nd June 2023. He affirms that the entire process of altering the company’s shareholding and appointing him as a director was conducted lawfully and in accordance with the required procedures.
He notes that Margaret Wanjiku Magu, having willingly participated in the process, has not raised any objections and that since his appointment, he has assumed his role as the Properties Director of the 1 st Respondent and has been actively performing his duties in that capacity. He also states that some of the issues raised by the Applicant ought to be canvassed before the Employment and Labour Relations Court and the Commercial Division of the High Court.
Submissions
The application was canvassed by way of written submissions.
The Applicant filed his written submissions dated 18 th March 2025. In the said submissions, he relies on Article 165 on the jurisdiction of the High Court. He also relies on the case of Republic v Magistrates Court, Mombasa; Absin Synegy Limited (Interested Party) (Judicial Review E033 of 2021) [2022] KEHC 10 (KLR) (24 January 2022) (Judgment) where the court held that a judicial review is a review by a High Court judge of a decision, intended decision, or failure to make a decision, in order to assess whether it is unlawful or invalid.
On the scope of judicial review, the Applicant relies on the case of Pastoli v Kabale District Local Government Council & Others (2008) 2 EA 300 . The Applicant submits that the application herein seeks to challenge the unlawful decision-making process of the Respondents jointly and/or severally to change the directorship and shareholding of the 1 st Respondent Company unprocedurally. He relies on the case of Republic vs Director of Immigration Services & 2 others Exparte Olamilekan Gbenga Fasuyi & 2 others [2018] eKLR where the court observed that judicial review is about the decision-making process and that where a decision has been made within the confines of the law then the court will not interfere.
The Applicant also relies on the case of Eunice Soko Mlagui v Suresh Parmar & 4 others [2017] eKLR where the court held that the court may nonetheless decline to grant a stay of proceedings and refer the matter to arbitration if the request is not made when entering appearance or is made after the defence has been filed.
On the scope of judicial review, the Applicant relies on the Ugandan case of Pastoli v Kabale District Local Government Council and Others [2008] 2 EA 300 . It is submitted that the Fair Administrative Actions Act was enacted to give practical effect to the right to fair administrative action protected by Article 47 of the Constitution. The Applicant also refers to section 7 of the Fair Administrative Action Act on a Court’s or Tribunal’s jurisdiction to review and administrative action or decision.
On the importance of a notice for the meeting being issued, the Applicant relies on the case of Wambeye Kimweli Marakia V Board of Directors, Nzoia Water Services Co. Ltd & 2 Others; Nzoia Water Services Co. Ltd (Interested Party) [2021] eKLR where the court emphasised that for a meeting to be fruitful, a notice and agenda of the meeting must be issued. According to the Applicant as per section 281(8) of the Act a meeting that does not comply with the requirements of section 281 is void.
It is also the Applicant’s submission that the 1 st Respondent company was incorporated on 10 th August 1999 under the now repealed Companies Act (Cap 486) and that the current governing law is the Companies Act, 2015, which came into effect on 11 th September 2015 and repealed Cap 486.
However, that the Sixth Schedule of the 2015 Act includes transitional provisions that preserve the application of Table A from the First Schedule of the repealed Act. As such, both the company's Memorandum and Articles of Association, Table A (where relevant), and the 2015 Act govern the company’s affairs.
It is submitted that pursuant to section 323 of the Companies Act, the nature of shares or other interest of a member in a company are personal property. Further, that article 75 of the Model Articles of Association is instructive on forfeiture of Company shares while article 78 is said to provide for the procedure following the forfeiture of shares.
The Applicant also relies on the case of Republic v Registrar of Companies & 2 others (Miscellaneous Application E547 of 2022) [2023] KEHC 19417 (KLR) (Commercial and Tax) (30 June 2023) (Ruling) where the court observed that ultimately, the authority to forfeit shares rests primarily with the Company. However, that in exercising this power, the Company must adhere to due process and provide the shareholder with a fair opportunity to be heard.
The Applicant contends that the 2 nd Respondent’s process of making changes to the Company register on account of a resolution of alleged forfeiture of shares despite his protests is an illegality, was marred with procedural impropriety and irrationality.
According to the Applicant, despite the fact that the 2 nd Respondent has power to reject registration of documents where the same do not comply with the law, they approved changes to the 1 st Respondent’s register on account of a resolution of alleged forfeiture of share despite the Applicant’s protests that the decision-making process was marred with procedural impropriety and irrationality.
He relied on Republic v Registrar of Companies Ex Parte Independent Electoral Board of Kenya National Chamber of Commerce & Industry (KNCCI) [2016] eKLR where the Court is said to have noted the power of the 2 nd Respondent to reject registration of non-compliant documents provided the same was done in accordance with Article 47 of the Constitution.
The Applicant submits that the 2 nd Respondent had a duty to invoke the provisions of sections 847 and 860 of the Companies Act in order to remedy the illegality occasioned to the Applicant but he failed to do so in total contravention of inter alia Article 47 of the Constitution of Kenya,2010.The Applicant relies on the case of Judicial Service Commission vs. Mbalu Mutava & Another [2015] eKLR, Civil Appeal 52 of 2014 where the court observed that administrative actions are now subject to Article 47(1) of the Constitution.
It is the Applicant’s further submission that he has established the threshold for grant of the orders of certiorari sought in the motion dated 25 th September,2024.
On the grant of the order of certiorari he relies on the case of Kenya National Examination Council vs. Republic Exparte Geoffrey Gathenji & 9 Others, Nairobi Civil Appeal No.266 of 1996.
The Applicant also submits that a reading of sections 863(1) and 864 of the Companies Act,2015 shows that the Court has power to issue an order directing the Registrar to rectify any entry in the register. On the grant of an order of mandamus the Applicant relies on the case of Republic v Jomo Kenyatta University of Agriculture and Technology E
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