Philomena Ndanga Karaja & 2 others v Edward Kamau Maina [2015] KEELC 562 (KLR)
The bottom line
#Kenya's High Court struck out a company lawsuit because the shareholder who filed it lacked a Board of Directors resolution authorising the case.
What this practically means
#Executive summary
#Key legal issues
#Whether a suit filed in the name of a company without a Board resolution is properly before the court
The suit was filed without a Board resolution and was therefore improperly instituted; the company was not before the court and the suit was struck out
The court found it obvious that the suit was filed without a resolution of the Board. Citing Assia Pharmaceuticals and Bugere Coffee, it held that a suit on behalf of a company requires authorization by resolution of the Board of Directors. The 1st Plaintiff's status as a shareholder did not cure the defect, so the company was not properly before the court and the entire suit was struck out with personal costs.
Whether a majority shareholder may institute proceedings on behalf of a company without Board authorization
No - majority shareholding does not confer authority to flout the requirement of a Board resolution; it is the majority of members, not a member with majority shareholding, who may in principle overrule Directors
The 1st Plaintiff argued that as majority shareholder she could take any action for the company's benefit, including filing suit. The court held that being a majority shareholder could not justify flouting settled law, and relying on Muthama v Waithaka distinguished majority shareholding from a majority of members, while reaffirming that Directors ordinarily have authority to act for the company in litigation.
Whether the firm of Njuguna & Partners Advocates was properly appointed to represent the 3rd Plaintiff
Yes - the firm was properly appointed by a resolution of the Board passed by two of the three Directors
The 1st Plaintiff disputed the appointment of Njuguna & Partners Advocates for the 3rd Plaintiff, alleging the firm acted for the Defendant or her sons. The court examined annexure TK1 showing three Directors, two of whom passed a resolution appointing the firm, and found the appointment proper, validating the application brought on behalf of the company.
Legal principles established
#- A suit instituted for and on behalf of a company requires a company resolution authorizing it
- A suit on behalf of a company can only be filed by a person specifically empowered by the Board of Directors
- In the absence of a Board resolution, the majority of the members of a company may decide whether an action in the company's name should be commenced or proceed
Court orders
#- 1.The Notice of Motion dated 21st November 2014 is allowed entirely in terms of prayers No. 1 and 3
- 2.The entire suit is struck out
- 3.The interlocutory application filed on 6th November 2014 is struck out
- 4.Costs of the suit to be borne by the 1st Plaintiff personally
- Jurisdiction invoked
- Civil Procedure Rules, Order 2 Rule 15(b), Order 1 Rule 10(2), Order 51 Rule 1 and all other enabling provisions of law
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Philomena Ndanga Karaja & 2 others v Edward Kamau Maina [2015] KEELC 562 (KLR)", Case Analysis (2015). Not stated in judgment (Notice of Motion dated 21st November 2014). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2015/562/eng@2015-03-09
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.