The Court of Appeal has warned Kenyan borrowers that failing to repay a foreign loan cannot automatically be excused because the lender is not registered to operate in Kenya.

🇰🇪 Breaking It Down

The warning came after the court overturned a High Court decision that had struck out a foreign lender’s case after finding that the lender was not registered in Kenya under Section 974 of the Companies Act.

The dispute involved a claim of USD 230,868.51, which is approximately Ksh29.88 million, arising from financial support advanced to a Kenyan company.

The High Court had held that the lender’s failure to register in Kenya prevented it from pursuing the claim through Kenyan courts.

📌 What You Need to Know

However, the Court of Appeal disagreed, distinguishing a foreign company being required to register before carrying on business in Kenya and its legal capacity to institute proceedings before Kenyan courts.

The appellate court held that non-registration does not automatically strip a foreign company of its legal personality, extinguish a debt owed to it or invalidate every contract it enters into.

The court, however, clarified that its decision does not give foreign companies a blanket licence to conduct business in Kenya without complying with the law.

It noted that whether a foreign company is actually carrying on business in Kenya must be determined from the circumstances of each case, rather than simply by establishing that it is not registered in the country.

Among the factors that may be considered are the frequency of the company’s transactions, where its contracts are negotiated and performed, whether it has offices, employees or agents in Kenya, the source of its funds and the continuity of its commercial activities.

The Court of Appeal therefore reinstated the lender’s case, allowing the underlying debt and other regulatory questions to be determined based on the evidence presented before the court.

📰 Source: Kenyans.co.ke