Bleak future as more companies seek to close shop in Kenya

Over 100 companies in Kenya have applied for dissolution following a tough economic period in what analysts predict will render hundreds of workers jobless.

Both formal and non-formal employed workers and Kenyans as a whole are facing uncertainty as businesses literally struggle to survive in a tough operating environment.

A recent gazette notice from the Registrar of Companies Joyce Koech listed a total of 134 companies that have submitted applications for dissolution.

This comes against the backdrop  of government working overtime to facilitate a better business environment to support Small and Medium Enterprises (SMEs) and other businesses to prosper and create jobs for millions of unemployed graduates.

To date, 64 companies have been  approved for dissolution with tens more  at risk.

Koech stated that these businesses will officially be removed from the Register of Companies unless there is an objection to the process.

“Pursuant to section 897 (3) of the Companies Act, the Registrar of Companies gives notice that the names of the companies set out in the Schedule hereto shall, unless a cause is shown to the contrary, be struck off the Register of Companies and the companies shall be dissolved,” read part of the notice from the Registrar of Companies

Additionally, the Registrar released another list of 74 more companies that are set to be struck off the register by May 25, if no objections are raised.

“Pursuant to section 897 (3) of the Companies Act, the Registrar of Companies gives notice that the names of the companies specified hereunder shall be struck off from the Register of Companies at the expiry of three months from the date of publication of this notice and invites any person to show cause why the companies should not be struck off from the Register of Companies,” the notice further stated.

Economists are suggesting the impacting in the long term will be huge. The closure of these 134 companies thus will affect a wide range of industries in Kenya, potentially leading to mass job losses. Not only will direct employees suffer, but businesses that rely on these companies for supplies and services will also feel the impact to a massive scale.

Moreover, the Registrar of Companies confirmed that two companies have already been completely dissolved and are no longer recognised as active businesses in the country. As many companies are being dissolved, Koech also announced that three businesses have been reinstated into the Register of Companies.

“Pursuant to section 914 (4) of the Companies Act, 2015, it is notified for information of the general public that the Registrar of Companies has restored the following company to the Register of Companies with effect from the date of this publication,” the notice stated.

Lately, many companies in Kenya have been forced to lay off employees due to rising operational costs. High taxation, increased business expenses, and economic challenges have made it difficult for businesses to remain profitable. Others have migrated to neighbouring countries where taxation and other regulations are more friendly.

Some of the taxes and levies businesses are finding difficult to comply with include the fuel and housing levies as well as enhanced Social Health Insurance Fund and National Social Security Fund contributions.

According to lawyer and entrepreneur, Steve Biko Wafula, the tax burden imposed on businesses, especially startups, is disproportionately high, placing an undue strain on their limited resources.

“The tax system fails to differentiate between large corporations and SMEs, imposing the same burdensome tax rates and compliance requirements on all. This one-size-fits-all approach disproportionately impacts SMEs, as they lack the financial resources and infrastructure to handle such obligations,” Biko, commonly known as SokoAnalyst on social media, wrote on X in 2023, generating a lot of interest.

“Consequently, many small businesses are pushed to the brink of closure, depriving the economy of their potential contributions,” he added.

Other factors include limited access to credit due to excessive borrowing from the domestic market by the government, which has clouded out the private sector.