Summary

The Kenyan Court of Appeal has overturned a High Court ruling that had barred a foreign lender from enforcing a debt in Kenya solely because it was not registered under the Companies Act. The decision in Stichting Rabobank Foundation v Ava Chem Limited (Civil Appeal No. E090 of 2025, judgment delivered on 31 July 2026) removes a significant source of uncertainty for international lenders, investors and counterparties doing business with Kenyan entities. The Court confirmed that a foreign company’s right to access Kenyan courts does not depend on local registration and that a cross-border loan does not, by itself, amount to “carrying on business in Kenya.”

Background

In 2022, Stichting Rabobank Foundation, a Dutch entity, sued Ava Chem Limited and its director in the High Court at Nairobi to recover approximately USD 230,868 under a financial support agreement. The borrower did not dispute the debt. Instead, it raised a preliminary objection arguing that Rabobank, as an unregistered foreign company, had no legal standing to bring proceedings in Kenya.

The High Court agreed. Relying on section 974 of the Companies Act 2015, which requires foreign companies “carrying on business in Kenya” to register locally, the Court struck out Rabobank’s claim. The effect was stark: a foreign lender with a valid, undisputed debt  could be denied access to the Kenyan courts solely for failing to complete a local registration process.

Rabobank appealed.

The Court’s Decision 

The Court of Appeal (Korir, Ndolo and Hassan JJ.A.) unanimously allowed the appeal and reinstated the suit for trial. The Court held that the High Court had made two fundamental errors.

First, it had conflated separate legal concepts. The requirement to register under section 974 is a regulatory obligation that applies to foreign companies carrying on business in Kenya. It does not affect a foreign company’s legal personality or its capacity to bring proceedings. A company incorporated under the laws of another country does not cease to exist at Kenya’s border simply because it has not completed a local registration requirement.

Second, the High Court had determined a contested factual question, whether Rabobank was “carrying on business in Kenya” , as though it were a pure point of law, without hearing any evidence. That approach was procedurally impermissible.

Key Findings

Registration and access to the courts are separate questions

The Court drew a clear distinction between three concepts that the High Court had treated as interchangeable:

• Legal personality: whether an entity is recognised by law as capable of holding rights and obligations. A foreign company’s legal personality derives from the law of its place of incorporation and is not extinguished by failure to register in Kenya.
• Capacity to sue: whether a legal person may invoke the courts. Section 974 does not expressly or by necessary implication bar an unregistered foreign company from instituting proceedings.
• Regulatory compliance : whether a foreign company has met the registration requirements for carrying on business in Kenya. Non-compliance may attract the penalties prescribed by the Act, but the Act does not impose the additional sanction of denying access to the courts.

The Court emphasised that where Parliament has prescribed a specific consequence for breach of a statutory provision,  here, a penal sanction , courts should not superimpose a further, more drastic consequence (such as denial of access to justice) unless the statute expressly or by necessary implication requires it.

A cross-border loan is not automatically “carrying on business”

The Court rejected the argument that lending money to a Kenyan borrower necessarily amounts to “carrying on business in Kenya” under section 974. Whether a foreign company is carrying on business in Kenya is a question of fact, not a conclusion that flows automatically from the existence of a cross-border transaction. The Court identified a range of factors relevant to the assessment, including:

• the nature and frequency of the company’s activities;
• where contracts are negotiated and concluded;
• where performance takes place;
• whether the company maintains an office, branch, employees or agents in Kenya;
• the duration and continuity of the activities; and
• the degree of commercial presence in the jurisdiction.

No single factor is decisive. A solitary transaction may, depending on its nature and the statutory context, be sufficient in one case and insufficient in another. The mere fact that one contracting party is in Kenya does not mean the foreign counterparty is carrying on business there.

The Court also clarified that advancing a loan is not the same as “offering debentures in Kenya” (one of the activities expressly mentioned in section 974(2)). A loan and a debenture are not synonymous, and the statutory characterization of an instrument depends on its legal attributes, not its label.

Constitutional reinforcement

The Court noted that its interpretation was reinforced by Kenya’s constitutional framework. Article 48 of the Constitution requires the State to ensure access to justice for all persons, and Article 50(1) guarantees the right to have disputes resolved by a court or tribunal. While these provisions do not exempt foreign entities from regulatory requirements, they caution against reading into legislation an exclusion from the courts that Parliament has not expressed.

Practical Implications

The judgment has significant practical consequences for foreign lenders, investors and businesses with Kenyan exposure.

Enforcement risk reduced.

Before this decision, there was a real risk that a Kenyan borrower could defeat a foreign lender’s claim simply by pointing to the lender’s failure to register locally. That defence has now been removed. Foreign lenders can enforce their contractual rights in Kenyan courts regardless of their registration status.

Registration remains important.

The decision does not remove the obligation to register where a foreign company is genuinely carrying on business in Kenya. Registration remains a regulatory requirement, and non-compliance may attract penalties. The question of whether a particular activity amounts to “carrying on business” is fact-specific and will turn on the nature, extent and continuity of the foreign company’s activities.

Structuring and documentation.

Businesses entering cross-border transactions with Kenyan counterparties should consider whether their activities could be characterised as “carrying on business in Kenya.” While a single lending transaction is unlikely to trigger the registration requirement, a pattern of sustained commercial activity may do so. Transaction documentation should be reviewed to ensure it accurately reflects where negotiations take place, where agreements are executed and where funds are disbursed.