Dissolution Limited Liability Partnerships (LLPs) in Kenya

deregistration of limited liability partnership in kenya
Last updated October 10, 2024

Did you know you cannot currently deregister a Limited Liability Partnership (LLP) in Kenya

Limited Liability Partnerships (LLPs) have become a popular business structure in Kenya, offering a flexible and advantageous setup for many entrepreneurs. However, navigating the process of LLP dissolution can be challenging due to the current regulatory landscape. 

In this article, we will delve into the intricacies of LLP dissolution in Kenya, shedding light on the existing limitations and regulatory gaps that hinder the deregistration process.

The Current Scenario

At present, it is not possible to deregister an LLP in Kenya. The Limited Liability Partnership Act of 2011 lacks the necessary provisions for LLP dissolution, and no accompanying regulations or guidelines have been established for this purpose. The act solely addresses insolvency and winding up procedures for LLPs covered under Section 34 (1) and (2). Consequently, the only existing regulations are the Limited Liability Partnerships Regulations of 2014, which offer partial guidance but do not cover the entire dissolution process.

Insolvency Act and LLP Winding Up

According to the Insolvency Act, LLPs are classified as companies for the purpose of insolvency proceedings. Thus, LLP winding up falls under the jurisdiction of this act. However, even when LLPs are wound up through the Insolvency Act, their names may still appear on the e-citizen platform of the respective partners or managers. This situation arises due to the discrepancy between the Limited Liability Partnership Act of 2011 (enforced in 2012) and the Insolvency Act of 2015 (enforced in 2016). Amendments that aimed to align these two acts were drafted but have yet to be passed by Parliament.

Challenges Faced

Currently, LLP partners or managers are unable to initiate the application process for deregistration or dissolution of an LLP that has no assets or liabilities. This is primarily due to the unavailability of appropriate forms designed for LLP dissolution. As a result, LLPs that have concluded the insolvency procedure are not being struck off the Registrar's records, as initially expected. The absence of enabling provisions and comprehensive regulations further exacerbates the challenges surrounding LLP dissolution in Kenya.

Potential Future Developments

Efforts are underway to address the existing gaps and streamline the LLP dissolution process in Kenya. Proposed amendments to align the Limited Liability Partnership Act of 2011 with the Insolvency Act of 2015 have been put forward. These amendments, if passed by Parliament, would provide a clearer framework for LLP dissolution and pave the way for a more efficient and streamlined deregistration process.

Conclusion

While LLPs continue to thrive as a favored business structure in Kenya, the absence of enabling provisions and comprehensive regulations poses challenges when it comes to dissolving an LLP. Currently, there is no formal mechanism for deregistration, and LLPs cannot be struck off the Registrar's records even after completing the insolvency procedure. It is essential for business owners and professionals to stay updated on any future developments and amendments that may address these issues. By closely monitoring the evolving regulatory landscape, entrepreneurs can ensure compliance and make informed decisions regarding the dissolution of their LLPs.


Written by Joseph Wachira
The author is a senior business consultant and can be reached via wachira@cleartax.co.ke

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