Kenyan Businesses Face Deregistration Amidst Government Push for Labor Exportation

A recent Kenya Gazette dated September 6, 2024, contained many routine announcements, but one stood out: the notice by the Registrar of Companies, Joyce Koech. In line with Section 897 of the Companies Act, 2015, the Registrar announced that the names of several companies would be struck off the Register of Companies three months from the publication date unless valid reasons were provided to prevent this action. This follows a similar notice issued in February 2024, which resulted in the deregistration of numerous companies.

When a company is deregistered, it ceases to exist as a legal entity, effectively marking its end. The process of deregistration differs from dissolution in that the liabilities of the company’s directors, members, and officers do not cease upon deregistration, while dissolution completely terminates all liabilities. The formal administrative procedure for winding up a company is governed by its articles of association and the law, but the consequences are severe in both cases—the company ceases to exist, and employees often find themselves jobless overnight.

A major reason for deregistering companies is poor financial health. Some companies may have been dormant for extended periods, losing momentum and opting to end their ventures. Others may struggle with unsustainable debt levels and long-term unprofitability, prompting them to seek dissolution. The Kenya Revenue Authority (KRA) regulations, designed to improve compliance and tax collection, have also added pressure. Struggling startups, in particular, find themselves overwhelmed by high tax demands, digital invoicing requirements like the e-TIMS system, and increased scrutiny from KRA, often leading to their early demise.

This deregistration wave comes at a time when the government is pushing for labor exportation as a solution to unemployment, encouraging Kenyans to take up menial jobs overseas. This approach, while offering short-term relief, overlooks the potential to develop local talent and industries. It raises the question of why more emphasis isn’t placed on creating a conducive environment for businesses to thrive locally, providing meaningful employment and contributing to the national economy.

The deregistration process is not only a blow to the companies involved but also to the broader workforce and economy. Each deregistered company represents lost jobs and lost opportunities for growth and development. As the government continues to encourage labor exportation, it must also address the critical need for a supportive business environment that retains local talent. The current trajectory threatens to turn deregistration notices into harbingers of bad news, fostering fear and uncertainty among employees of local firms.

Kenya’s business registration regulations, updated in 2015, aimed to clarify operational guidelines and enforce tax compliance. However, these regulations have also made it difficult for companies, particularly startups, to survive. The government should consider whether its regulatory and tax policies are stifling business growth rather than supporting it. The goal should be to foster a thriving business ecosystem that not only attracts investment but also encourages companies to stay and grow.

For Kenya to move forward, the government needs to prioritize the development of local industries and support businesses through fair taxation and reduced bureaucratic burdens. This includes re-evaluating the impact of current regulations on struggling businesses and creating an enabling environment that encourages entrepreneurship, innovation, and sustainable growth.

Rather than pushing Kenyans to seek opportunities abroad, the government should focus on harnessing the potential of its workforce domestically. Investing in local industries, providing incentives for businesses to expand, and ensuring fair employment practices can transform Kenya’s economic landscape. The conversation should shift from exporting labor to nurturing homegrown talent, turning Kenya’s best and brightest into national assets.