RULING
INTRODUCTION AND BACKGROUND
1. The Plaintiffs/Applicants have moved this Court by way of a Notice of Motion brought pursuant to sections 139, 256, 257, 262 and 278 of the Companies Act, 2015, Order 51 Rule 1 of the Civil Procedure Rules, sections 1A, 1B and 3A of the Civil Procedure Act and all other enabling provisions of the law. The Application seeks, inter alia, the following orders: -
i. Spent.
ii. That a temporary injunction do issue restraining the 1 st , 2 nd and 3 rd Respondents from holding the Extraordinary General Meeting scheduled for 8 th March 2024 or any other meeting pending the inter partes hearing and determination of the Application.
iii. That a temporary injunction do issue restraining the 4 th Respondent from effecting the removal of the Applicants as Directors of the 2 nd Respondent and the appointment of the 3 rd Respondent as a Director pursuant to the resolution dated 8 th February 2024 or any subsequent resolution, pending the inter partes hearing and determination of the Application.
iv. That status quo orders be issued in respect of the directorship of the 2 nd Respondent pending the inter partes hearing and determination of the Application.
v. That similar injunctive and status quo orders be issued pending the hearing and determination of the suit.
vi. That the costs of the Application be provided for.
2. The Application is supported by the Affidavit of Tribhovan Lalji Chavda, the 1 st Plaintiff/Applicant herein. The Applicants depose that they, together with the 1 st Respondent, are Directors of the 2 nd Respondent Company, with the 1 st Applicant holding 51 ordinary shares and the 1 st Respondent holding 49 shares, while the 2 nd Applicant holds no shares. They state that on 6 th February 2024, the 1 st Respondent issued a notice for a Board meeting scheduled for 8 th February 2024, intended to consider the convening of an EGM for their removal as Directors and the appointment of the 3 rd Respondent in their place. The Applicants objected to the notice on the grounds that it had been issued without consultation, disclosed no reasons for the proposed changes and was too short and impracticable.
3. Despite their objection, the 1 st Respondent allegedly proceeded with the meeting and resolved to convene the EGM, appoint the 3 rd Respondent as a Director and file the resolutions with the Registrar of Companies. The Applicants were thereafter served with notices of intended removal on allegations of breach of fiduciary duties through secret financial transactions and diversion of Company funds for their personal benefit. An EGM was subsequently scheduled for 8 th March 2024 to consider their removal.
4. The Applicants contend that the foregoing actions are contrary to the Company's Articles of Association and the Companies Act, 2015, and that the allegations against them are unsupported and actuated by malice. They apprehend that unless restrained, the Respondents will proceed with the EGM, remove them as Directors, appoint the 3 rd Respondent and effect the changes with the Registrar of Companies. They further contend that such actions would prejudice the 2 nd Respondent, a going concern engaged in real estate development, and urge the Court to preserve the status quo pending determination of the suit.
5. The Application is opposed through the Replying Affidavit of Virji Meghji Patel, the 1 st Defendant/Respondent. He maintains that the Application is without merit and that the impugned corporate actions were lawfully undertaken. He avers that adequate notice of the Board meeting of 8 th February 2024 was issued to the Directors, but the Applicants failed to attend, following which the meeting resolved to convene an EGM to consider their removal and the appointment of the 3 rd Respondent as a Director.
6. He further states that the Applicants were subsequently served with special notices setting out the grounds for their proposed removal, including allegations of secret financial transactions and diversion of Company funds for personal benefit, and were given 21 days to make representations. He therefore maintains that the process complied with the Companies Act, 2015 and the Company’s Articles of Association, and denies any illegality or malice on his part.
7. The 1st Respondent consequently urges the Court to dismiss the Application and allow the EGM scheduled for 8 th March 2024 to proceed.
APPLICANT’S SUBMISSIONS
8. The Applicants submit that they have met the threshold for the grant of the interlocutory injunctions sought. Relying on Giella v Cassman Brown & Co. Ltd [1973] EA 358 , they submit that they have established a prima facie case, demonstrated the likelihood of irreparable injury, and that the balance of convenience favours the preservation of the status quo. They further rely on Jan Bolden Nielsen v Herman Philipus Steyn also known as Hermannus Phillipus Steyn & 2 Others [2012] eKLR , where the Court recognised that, beyond the Giella principles, the Court may consider the circumstances of the case generally and adopt the course carrying the lower risk of injustice.
9. On whether a prima facie case has been established, the Applicants rely on Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] eKLR , submitting that they have raised bona fide questions concerning the legality of the resolutions of 8 th February 2024, including whether the resolutions were validly passed without the signatures of all Directors as required by the Company’s Articles, whether the appointment of the 3 rd Respondent was valid in the absence of an ordinary resolution as required under section 139 of the Companies Act, and whether the allegations forming the basis of their proposed removal were sufficiently particularised to enable them to make meaningful representations.
10. On irreparable harm, the Applicants contend that the 1 st Respondent’s actions are actuated by malice and that their removal from the management of the Company would occasion loss incapable of adequate compensation by damages. They emphasise the 1 st Applicant’s majority shareholding and the Applicants’ involvement in the management of the Company, which is a going concern with assets, liabilities and ongoing obligations. They further contend that the Company itself risks being run down to the detriment of the Applicants and third parties.
11. On the balance of convenience, the Applicants rely on Adsite Limited v Imperial Bank Limited (In Receivership) [2021] eKLR , submitting that the Court should opt for the lower risk of injustice and consider which party would suffer greater harm. They argue that the Respondents have made only bare and unsubstantiated allegations of breach of fiduciary duties and have not demonstrated any prejudice they would suffer if the orders are granted. Conversely, failure to preserve the status quo would permit the 1 st Respondent to continue with what the Applicants describe as unlawful activities, to their detriment, that of the Company and third parties. They therefore urge the Court to allow the Application and preserve the existing directorship pending determination of the suit.
RESPONDENT’S SUBMISSIONS
12. The 1 st , 2 nd and 3 rd Respondents submit that the Applicants have failed to satisfy the threshold for the grant of an interlocutory injunction. Relying on Giella v Cassman Brown & Co. Ltd [1973] EA 358 and Nguruman Limited v Jan Bonde Nielsen & 2 Others [2014] eKLR , they submit that the Applicants must establish a prima facie case, demonstrate irreparable harm and show that the balance of convenience favours them.
13. On the prima facie case, the Respondents rely on Joseph Hinga Gati v Barclays Bank (K) Ltd [2001] eKLR and Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] eKLR , submitting that the Applicants have not demonstrated any infringement of their rights. They contend that the Board meeting was lawfully convened, sufficient notice was given, and the subsequent EGM and special notices for removal complied with the Companies Act, 2015 and the Company’s Articles. They further rely on Monicah Wangui Njenga & Another v David Kinyanjui Njenga & 3 Others , Ajay Shah v Deposit Protection Fund Board as Liquidator of Trust Bank Ltd (In Liquidation) [2016] eKLR , and Nyandarua Progressive Agencies Ltd v Cyrus Wahome Nduhiu & Another [2017] eKLR on the fiduciary duties owed by directors to a company.
14. The Respondents further rely on David Kabubii Kuria v Bryan Eric Ltd & 4 Others [2016] eKLR and Wambeye Kimweli Marakia v Board of Directors, Nzoia Water Services Co. Ltd & 2 Others; Nzoia Water Services Co. Ltd (Interested Party) [2021] eKLR , submitting that the requisite notices were issued and the Applicants were afforded an opportunity to make representations before their proposed removal.
15. On irreparable harm, the Respondents rely on Pius Kipchirchir Kogo v Frank Kimeli Tenai [2018] eKLR , submitting that the Applicants have not demonstrated any injury incapable of compensation by damages. They instead contend that allowing the Applicants to remain as Directors would expose the Company to continued mismanagement and irreparable harm. On the balance of convenience, they rely on Chebii Kipkoech v Barnabas Tuitoek Bargoria & Another [2019] eKLR , arguing that greater inconvenience would be suffered by the Respondents and the Company if the injunction were granted.
16. On costs, the Respondents rely on Cecilia Karuru Ngayu v Barclays Bank of Kenya & Another [2016] eKLR , submitting that costs are at the Court’s discretion and that there is no basis for departing from the general rule. They consequently urge the Court to dismiss the Application and award costs to the 1 st –3 rd Respondents.
ISSUES FOR DETERMINATION
1. Whether the Applicants have satisfied the threshold for the grant of the interlocutory injunctions and status quo orders sought.
2. Who should bear the costs of the Application.
ANALYSIS AND DETERMINATION
17. Regarding the first issue, the principles applicable to the grant of an interlocutory injunction were set out in the celebrated case of Giella v Cassman Brown & Co. Ltd [1973] EA 358 , wherein the Court pronounced itself thus:
“The conditions for the grant of an interlocutory injunction are now, I think, well settled in East Africa. First, an applicant must show a prima facie case with a probability of success. Secondly, an interlocutory injunction will not normally be granted unless the applicant might otherwise suffer irreparable injury, which would not adequately be compensated by an award of damages. Thirdly, if the court is in doubt, it will decide an application on the balance of convenience.”
18. The precedent in Giella (supra) were further pronounced in Nguruman Limited v Jan Bonde Nielsen & 2 Others [2014] eKLR where the Court of Appeal went further to hold that the “ three conditions are to be applied as separate, distinct and logical hurdles which the applicant is expected to surmount sequentially.”
19. The first question is therefore whether the Applicants have established a prima facie case. In Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] eKLR , a prima facie case was described as one where, on the material presented, the Court properly directing itself would conclude that a right has apparently been infringed as to call for an explanation or rebuttal.
20. In the present case, the Applicants challenge the validity of the process leading to their intended removal as Directors. Their complaint is that the notice of the Board meeting of 8 th February 2024 was issued without their consultation, was too short, and did not disclose the reasons for their proposed removal or the appointment of the 3 rd Respondent. They further contend that the resolutions made at the meeting were not validly passed under the Company's Articles and that the appointment of the 3 rd Respondent was not approved in accordance with section 139 of the Companies Act, 2015.
21. The Respondents, on the other hand, maintain that the requisite notices were issued and that the Applicants were subsequently afforded an opportunity to make representations regarding their proposed removal. They further maintain that the impugned process was undertaken pursuant to the Company's Articles and the Companies Act.
22. At this stage, the Court is not called upon to make a final determination on the validity of the resolutions or the merits of the allegations of breach of fiduciary duty. As stated in Eveready East Africa Limited v Energizer Middle East and Africa Limited & Another [2017] KEHC 7227 (KLR),
“The grant of an interlocutory injunction is a discretionary matter. The court must keep in mind that the evidence available to the court is still incomplete (affidavit) evidence not tested on cross-examination. Consequently, it is not part of the courts’ function at such intermediary stage to try and resolve conflicts of evidence and make any definitive findings of fact or of law.”
23. It follows thus that the Court at the preliminary stage is instead required to determine whether the Applicants have established a prima facie case warranting preservation of the subject matter pending trial.
24. In my view, the competing positions disclose substantive questions concerning the validity of the Board resolutions, the appointment of the 3 rd Respondent and the procedure adopted in relation to the Applicants' removal. I am therefore satisfied that the Applicants have established a prima facie case.
25. On irreparable injury, the Applicants contend that their removal would affect their participation in the management of the Company and that the Company, being a going concern with assets, liabilities and ongoing obligations, may itself suffer prejudice if the impugned changes are effected before the dispute is determined.
26. The court in Ndeffo Co. Ltd v Ndegwa & 4 others (Civil Suit E024 of 2023) [2024] KEHC 4436 (KLR) held that: -
“If the directors are removed without due process, the same can lead to breach of Companies Regulations and may result in disputes among shareholders and internal conflicts and unnecessary litigations that could have significant implications on the Applicant’s performance, and if the respondents are not stopped by way of a temporary injunction then the applicant is likely to suffer irreparable harm.
27. In the present case, the prejudice alleged by the Applicants is similarly not limited to the loss of their positions as Directors. The Application concerns the composition of the Company's Board and the consequent management and control of an ongoing business entity. If the impugned changes are effected before the legality of the process is determined, they may alter the management and affairs of the Company and occasion consequences that an award of damages may not adequately address. I therefore find that the Applicants have demonstrated a sufficient risk of irreparable harm.
28. Turning to the balance of convenience, the Applicants rely on Adsite Limited v Imperial Bank Limited (In Receivership) [2021] eKLR , where the Court considered the lower risk of injustice and the party likely to suffer greater harm from the outcome of the application.
29. The court while dealing with the issue of balance of convenience in Paul Gitonga Wanjau v Gathuthi Tea Factory Company Ltd & 2 others (2016) eKLR, stated as follows: -
“Where any doubt exists as to the Applicants’ right, or if the right is not disputed, but its violation is denied, the court, in determining whether an interlocutory injunction should be granted, takes into consideration the balance of convenience to the parties and the nature of the injury which the Respondent on the other hand, would suffer if the injunction was granted and he should ultimately turn out to be right and that which the Applicant, on the other hand, might sustain if the injunction was refused and he should ultimately turn out to be right... Thus, the court makes a determination as to which party will suffer the greater harm with the outcome of the motion. If Applicant has a strong case on the merits or there is significant irreparable harm, it may influence the balance in favour of granting an injunction. The court will seek to maintain the status quo in determining where the balance of convenience lies.”
30. In the circumstances of this case, I find that the balance of convenience favours preservation of the existing position pending determination of the suit. The orders sought will not determine the substantive dispute but will merely preserve the existing composition of the Board. Conversely, allowing the impugned changes to take effect may alter the management and control of the Company before the dispute is determined. I therefore find that the lower risk of injustice lies in maintaining the status quo.
31. I accordingly find that the Applicants have satisfied the threshold for the grant of the interlocutory injunctive and status quo orders sought.
32. On the issue of costs, the general principle is that costs follow the event, although the Court retains a discretion to determine by whom and to what extent costs should be borne. In Cecilia Karuru Ngayu v Barclays Bank of Kenya & Another (2016) eKLR , the Court observed that “the basic rule on attribution of costs is that costs follow the event,” while noting that the Court may depart from that principle for good reason.
33. In the present circumstances, the Applicants have succeeded in establishing the basis for preservation of the existing directorship pending determination of the suit. However, the substantive dispute between the parties remains unresolved, and the Court has not made a final finding on the legality of the impugned corporate actions.
34. In the circumstances, I find it appropriate that the costs of the Application abide the outcome of the suit.
DISPOSITION
35. Accordingly, and for the reasons set out above, I make the following orders:
i. The Application is allowed.
ii. An injunction is hereby issued restraining the 1 st , 2 nd and 3 rd Respondents from convening or holding any meeting for purposes of removing the Applicants as Directors of the 2 nd Respondent pending the hearing and determination of the suit.
iii. An injunction is hereby issued restraining the 4 th Respondent from effecting or registering any changes to the directorship of the 2 nd Respondent pursuant to the impugned resolutions pending the hearing and determination of the suit.
iv. The existing directorship of the 2 nd Respondent shall be maintained pending the hearing and determination of the suit.
v. The costs of the Application shall abide the outcome of the suit.
Orders accordingly.
DATED, SIGNED AND DELIVERED AT NAIROBI THIS 17 th DAY OF SEPTEMBER 2026.
MURUNGA, J
Delivered on the virtual platform in the presence of:
Awuor for the Applicant
Kevin Babu - Court Assistant
INTRODUCTION AND BACKGROUND
1. The Plaintiffs/Applicants have moved this Court by way of a Notice of Motion brought pursuant to sections 139, 256, 257, 262 and 278 of the Companies Act, 2015, Order 51 Rule 1 of the Civil Procedure Rules, sections 1A, 1B and 3A of the Civil Procedure Act and all other enabling provisions of the law. The Application seeks, inter alia, the following orders: -
i. Spent.
ii. That a temporary injunction do issue restraining the 1 st , 2 nd and 3 rd Respondents from holding the Extraordinary General Meeting scheduled for 8 th March 2024 or any other meeting pending the inter partes hearing and determination of the Application.
iii. That a temporary injunction do issue restraining the 4 th Respondent from effecting the removal of the Applicants as Directors of the 2 nd Respondent and the appointment of the 3 rd Respondent as a Director pursuant to the resolution dated 8 th February 2024 or any subsequent resolution, pending the inter partes hearing and determination of the Application.
iv. That status quo orders be issued in respect of the directorship of the 2 nd Respondent pending the inter partes hearing and determination of the Application.
v. That similar injunctive and status quo orders be issued pending the hearing and determination of the suit.
vi. That the costs of the Application be provided for.
2. The Application is supported by the Affidavit of Tribhovan Lalji Chavda, the 1 st Plaintiff/Applicant herein. The Applicants depose that they, together with the 1 st Respondent, are Directors of the 2 nd Respondent Company, with the 1 st Applicant holding 51 ordinary shares and the 1 st Respondent holding 49 shares, while the 2 nd Applicant holds no shares. They state that on 6 th February 2024, the 1 st Respondent issued a notice for a Board meeting scheduled for 8 th February 2024, intended to consider the convening of an EGM for their removal as Directors and the appointment of the 3 rd Respondent in their place. The Applicants objected to the notice on the grounds that it had been issued without consultation, disclosed no reasons for the proposed changes and was too short and impracticable.
3. Despite their objection, the 1 st Respondent allegedly proceeded with the meeting and resolved to convene the EGM, appoint the 3 rd Respondent as a Director and file the resolutions with the Registrar of Companies. The Applicants were thereafter served with notices of intended removal on allegations of breach of fiduciary duties through secret financial transactions and diversion of Company funds for their personal benefit. An EGM was subsequently scheduled for 8 th March 2024 to consider their removal.
4. The Applicants contend that the foregoing actions are contrary to the Company's Articles of Association and the Companies Act, 2015, and that the allegations against them are unsupported and actuated by malice. They apprehend that unless restrained, the Respondents will proceed with the EGM, remove them as Directors, appoint the 3 rd Respondent and effect the changes with the Registrar of Companies. They further contend that such actions would prejudice the 2 nd Respondent, a going concern engaged in real estate development, and urge the Court to preserve the status quo pending determination of the suit.
5. The Application is opposed through the Replying Affidavit of Virji Meghji Patel, the 1 st Defendant/Respondent. He maintains that the Application is without merit and that the impugned corporate actions were lawfully undertaken. He avers that adequate notice of the Board meeting of 8 th February 2024 was issued to the Directors, but the Applicants failed to attend, following which the meeting resolved to convene an EGM to consider their removal and the appointment of the 3 rd Respondent as a Director.
6. He further states that the Applicants were subsequently served with special notices setting out the grounds for their proposed removal, including allegations of secret financial transactions and diversion of Company funds for personal benefit, and were given 21 days to make representations. He therefore maintains that the process complied with the Companies Act, 2015 and the Company’s Articles of Association, and denies any illegality or malice on his part.
7. The 1st Respondent consequently urges the Court to dismiss the Application and allow the EGM scheduled for 8 th March 2024 to proceed.
APPLICANT’S SUBMISSIONS
8. The Applicants submit that they have met the threshold for the grant of the interlocutory injunctions sought. Relying on Giella v Cassman Brown & Co. Ltd [1973] EA 358 , they submit that they have established a prima facie case, demonstrated the likelihood of irreparable injury, and that the balance of convenience favours the preservation of the status quo. They further rely on Jan Bolden Nielsen v Herman Philipus Steyn also known as Hermannus Phillipus Steyn & 2 Others [2012] eKLR , where the Court recognised that, beyond the Giella principles, the Court may consider the circumstances of the case generally and adopt the course carrying the lower risk of injustice.
9. On whether a prima facie case has been established, the Applicants rely on Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] eKLR , submitting that they have raised bona fide questions concerning the legality of the resolutions of 8 th February 2024, including whether the resolutions were validly passed without the signatures of all Directors as required by the Company’s Articles, whether the appointment of the 3 rd Respondent was valid in the absence of an ordinary resolution as required under section 139 of the Companies Act, and whether the allegations forming the basis of their proposed removal were sufficiently particularised to enable them to make meaningful representations.
10. On irreparable harm, the Applicants contend that the 1 st Respondent’s actions are actuated by malice and that their removal from the management of the Company would occasion loss incapable of adequate compensation by damages. They emphasise the 1 st Applicant’s majority shareholding and the Applicants’ involvement in the management of the Company, which is a going concern with assets, liabilities and ongoing obligations. They further contend that the Company itself risks being run down to the detriment of the Applicants and third parties.
11. On the balance of convenience, the Applicants rely on Adsite Limited v Imperial Bank Limited (In Receivership) [2021] eKLR , submitting that the Court should opt for the lower risk of injustice and consider which party would suffer greater harm. They argue that the Respondents have made only bare and unsubstantiated allegations of breach of fiduciary duties and have not demonstrated any prejudice they would suffer if the orders are granted. Conversely, failure to preserve the status quo would permit the 1 st Respondent to continue with what the Applicants describe as unlawful activities, to their detriment, that of the Company and third parties. They therefore urge the Court to allow the Application and preserve the existing directorship pending determination of the suit.
RESPONDENT’S SUBMISSIONS
12. The 1 st , 2 nd and 3 rd Respondents submit that the Applicants have failed to satisfy the threshold for the grant of an interlocutory injunction. Relying on Giella v Cassman Brown & Co. Ltd [1973] EA 358 and Nguruman Limited v Jan Bonde Nielsen & 2 Others [2014] eKLR , they submit that the Applicants must establish a prima facie case, demonstrate irreparable harm and show that the balance of convenience favours them.
13. On the prima facie case, the Respondents rely on Joseph Hinga Gati v Barclays Bank (K) Ltd [2001] eKLR and Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] eKLR , submitting that the Applicants have not demonstrated any infringement of their rights. They contend that the Board meeting was lawfully convened, sufficient notice was given, and the subsequent EGM and special notices for removal complied with the Companies Act, 2015 and the Company’s Articles. They further rely on Monicah Wangui Njenga & Another v David Kinyanjui Njenga & 3 Others , Ajay Shah v Deposit Protection Fund Board as Liquidator of Trust Bank Ltd (In Liquidation) [2016] eKLR , and Nyandarua Progressive Agencies Ltd v Cyrus Wahome Nduhiu & Another [2017] eKLR on the fiduciary duties owed by directors to a company.
14. The Respondents further rely on David Kabubii Kuria v Bryan Eric Ltd & 4 Others [2016] eKLR and Wambeye Kimweli Marakia v Board of Directors, Nzoia Water Services Co. Ltd & 2 Others; Nzoia Water Services Co. Ltd (Interested Party) [2021] eKLR , submitting that the requisite notices were issued and the Applicants were afforded an opportunity to make representations before their proposed removal.
15. On irreparable harm, the Respondents rely on Pius Kipchirchir Kogo v Frank Kimeli Tenai [2018] eKLR , submitting that the Applicants have not demonstrated any injury incapable of compensation by damages. They instead contend that allowing the Applicants to remain as Directors would expose the Company to continued mismanagement and irreparable harm. On the balance of convenience, they rely on Chebii Kipkoech v Barnabas Tuitoek Bargoria & Another [2019] eKLR , arguing that greater inconvenience would be suffered by the Respondents and the Company if the injunction were granted.
16. On costs, the Respondents rely on Cecilia Karuru Ngayu v Barclays Bank of Kenya & Another [2016] eKLR , submitting that costs are at the Court’s discretion and that there is no basis for departing from the general rule. They consequently urge the Court to dismiss the Application and award costs to the 1 st –3 rd Respondents.
ISSUES FOR DETERMINATION
1. Whether the Applicants have satisfied the threshold for the grant of the interlocutory injunctions and status quo orders sought.
2. Who should bear the costs of the Application.
ANALYSIS AND DETERMINATION
17. Regarding the first issue, the principles applicable to the grant of an interlocutory injunction were set out in the celebrated case of Giella v Cassman Brown & Co. Ltd [1973] EA 358 , wherein the Court pronounced itself thus:
“The conditions for the grant of an interlocutory injunction are now, I think, well settled in East Africa. First, an applicant must show a prima facie case with a probability of success. Secondly, an interlocutory injunction will not normally be granted unless the applicant might otherwise suffer irreparable injury, which would not adequately be compensated by an award of damages. Thirdly, if the court is in doubt, it will decide an application on the balance of convenience.”
18. The precedent in Giella (supra) were further pronounced in Nguruman Limited v Jan Bonde Nielsen & 2 Others [2014] eKLR where the Court of Appeal went further to hold that the “ three conditions are to be applied as separate, distinct and logical hurdles which the applicant is expected to surmount sequentially.”
19. The first question is therefore whether the Applicants have established a prima facie case. In Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] eKLR , a prima facie case was described as one where, on the material presented, the Court properly directing itself would conclude that a right has apparently been infringed as to call for an explanation or rebuttal.
20. In the present case, the Applicants challenge the validity of the process leading to their intended removal as Directors. Their complaint is that the notice of the Board meeting of 8 th February 2024 was issued without their consultation, was too short, and did not disclose the reasons for their proposed removal or the appointment of the 3 rd Respondent. They further contend that the resolutions made at the meeting were not validly passed under the Company's Articles and that the appointment of the 3 rd Respondent was not approved in accordance with section 139 of the Companies Act, 2015.
21. The Respondents, on the other hand, maintain that the requisite notices were issued and that the Applicants were subsequently afforded an opportunity to make representations regarding their proposed removal. They further maintain that the impugned process was undertaken pursuant to the Company's Articles and the Companies Act.
22. At this stage, the Court is not called upon to make a final determination on the validity of the resolutions or the merits of the allegations of breach of fiduciary duty. As stated in Eveready East Africa Limited v Energizer Middle East and Africa Limited & Another [2017] KEHC 7227 (KLR),
“The grant of an interlocutory injunction is a discretionary matter. The court must keep in mind that the evidence available to the court is still incomplete (affidavit) evidence not tested on cross-examination. Consequently, it is not part of the courts’ function at such intermediary stage to try and resolve conflicts of evidence and make any definitive findings of fact or of law.”
23. It follows thus that the Court at the preliminary stage is instead required to determine whether the Applicants have established a prima facie case warranting preservation of the subject matter pending trial.
24. In my view, the competing positions disclose substantive questions concerning the validity of the Board resolutions, the appointment of the 3 rd Respondent and the procedure adopted in relation to the Applicants' removal. I am therefore satisfied that the Applicants have established a prima facie case.
25. On irreparable injury, the Applicants contend that their removal would affect their participation in the management of the Company and that the Company, being a going concern with assets, liabilities and ongoing obligations, may itself suffer prejudice if the impugned changes are effected before the dispute is determined.
26. The court in Ndeffo Co. Ltd v Ndegwa & 4 others (Civil Suit E024 of 2023) [2024] KEHC 4436 (KLR) held that: -
“If the directors are removed without due process, the same can lead to breach of Companies Regulations and may result in disputes among shareholders and internal conflicts and unnecessary litigations that could have significant implications on the Applicant’s performance, and if the respondents are not stopped by way of a temporary injunction then the applicant is likely to suffer irreparable harm.
27. In the present case, the prejudice alleged by the Applicants is similarly not limited to the loss of their positions as Directors. The Application concerns the composition of the Company's Board and the consequent management and control of an ongoing business entity. If the impugned changes are effected before the legality of the process is determined, they may alter the management and affairs of the Company and occasion consequences that an award of damages may not adequately address. I therefore find that the Applicants have demonstrated a sufficient risk of irreparable harm.
28. Turning to the balance of convenience, the Applicants rely on Adsite Limited v Imperial Bank Limited (In Receivership) [2021] eKLR , where the Court considered the lower risk of injustice and the party likely to suffer greater harm from the outcome of the application.
29. The court while dealing with the issue of balance of convenience in Paul Gitonga Wanjau v Gathuthi Tea Factory Company Ltd & 2 others (2016) eKLR, stated as follows: -
“Where any doubt exists as to the Applicants’ right, or if the right is not disputed, but its violation is denied, the court, in determining whether an interlocutory injunction should be granted, takes into consideration the balance of convenience to the parties and the nature of the injury which the Respondent on the other hand, would suffer if the injunction was granted and he should ultimately turn out to be right and that which the Applicant, on the other hand, might sustain if the injunction was refused and he should ultimately turn out to be right... Thus, the court makes a determination as to which party will suffer the greater harm with the outcome of the motion. If Applicant has a strong case on the merits or there is significant irreparable harm, it may influence the balance in favour of granting an injunction. The court will seek to maintain the status quo in determining where the balance of convenience lies.”
30. In the circumstances of this case, I find that the balance of convenience favours preservation of the existing position pending determination of the suit. The orders sought will not determine the substantive dispute but will merely preserve the existing composition of the Board. Conversely, allowing the impugned changes to take effect may alter the management and control of the Company before the dispute is determined. I therefore find that the lower risk of injustice lies in maintaining the status quo.
31. I accordingly find that the Applicants have satisfied the threshold for the grant of the interlocutory injunctive and status quo orders sought.
32. On the issue of costs, the general principle is that costs follow the event, although the Court retains a discretion to determine by whom and to what extent costs should be borne. In Cecilia Karuru Ngayu v Barclays Bank of Kenya & Another (2016) eKLR , the Court observed that “the basic rule on attribution of costs is that costs follow the event,” while noting that the Court may depart from that principle for good reason.
33. In the present circumstances, the Applicants have succeeded in establishing the basis for preservation of the existing directorship pending determination of the suit. However, the substantive dispute between the parties remains unresolved, and the Court has not made a final finding on the legality of the impugned corporate actions.
34. In the circumstances, I find it appropriate that the costs of the Application abide the outcome of the suit.
DISPOSITION
35. Accordingly, and for the reasons set out above, I make the following orders:
i. The Application is allowed.
ii. An injunction is hereby issued restraining the 1 st , 2 nd and 3 rd Respondents from convening or holding any meeting for purposes of removing the Applicants as Directors of the 2 nd Respondent pending the hearing and determination of the suit.
iii. An injunction is hereby issued restraining the 4 th Respondent from effecting or registering any changes to the directorship of the 2 nd Respondent pursuant to the impugned resolutions pending the hearing and determination of the suit.
iv. The existing directorship of the 2 nd Respondent shall be maintained pending the hearing and determination of the suit.
v. The costs of the Application shall abide the outcome of the suit.
Orders accordingly.
DATED, SIGNED AND DELIVERED AT NAIROBI THIS 17 th DAY OF SEPTEMBER 2026.
MURUNGA, J
Delivered on the virtual platform in the presence of:
Awuor for the Applicant
Kevin Babu - Court Assistant