Kenya’s Apex Court Clarifies Enforcement Rights of Foreign Lenders

The Court of Appeal (Court) in Kenya has delivered an important decision for international lenders and investors operating in or financing businesses in Kenya.

In Civil Appeal No. E090 of 2025 – Stichting Rabobank Foundation v Ava Chem Limited and Christopher Irungu Mwangi, the Court confirmed that a foreign company does not lose the ability to bring proceedings in Kenya merely because it has not registered as a foreign company under the Companies Act,2015.

This decision provides welcome certainty for foreign financiers.

A borrower cannot defeat a legitimate claim simply by arguing that the lender was not registered in Kenya. Non-registration is a regulatory issue and does not automatically prevent a foreign lender from enforcing its contractual rights before Kenyan courts.

The dispute arose from a financial support arrangement entered in 2016, under which Stichting Rabobank Foundation (Stichting), a Netherlands-incorporated entity, advanced funds to AVA Chem Limited (AVA Chem). Following default, Stichting commenced proceedings in the High Court at Nairobi to recover the outstanding amounts.

AVA Chem and Christopher Irungu Mwangi (Guarantor) argued that Stichting lacked the capacity to sue because it had not registered in Kenya under section 974 of the Companies Act, 2015, which regulates foreign companies carrying on business in Kenya.

The High Court accepted that argument and struck out the claim on the basis of the preliminary point.

The Court held that registration requirements, legal personality and the right to access Kenyan courts are distinct legal issues.

While section 974 requires a foreign company carrying on business in Kenya to register, it does not provide that an unregistered foreign company ceases to exist, cannot sue or is automatically barred from enforcing its rights in Kenyan courts. Any consequences of non-registration must be found in the statute and cannot be implied.

Importantly, the Court affirmed that entering a transaction with a Kenyan company, without more, does not constitute ‘carrying on business’ in Kenya for a foreign lender. Whether registration is required depends on the nature and extent of the lender’s activities in Kenya.

The Court also held that section 974(2) contains examples, rather than a complete list, of activities that may amount to carrying on business in Kenya.

It confirmed that simply advancing a loan does not amount to carrying on business and that transactions should be assessed based on their true substance, not how they are labelled.

The Court therefore held that the High Court had erred in determining, at the preliminary stage, that Stichting lacked standing to sue. The claim has been reinstated and will now be determined on its merits.

Why this decision matters

This decision provides greater certainty for international lenders and investors financing Kenyan businesses regarding their legal standing before Kenyan courts.

It confirms that non-registration alone under the terms of the Companies Act, 2015, will not prevent a foreign lender from enforcing its contractual rights before Kenyan courts.

International financiers should nevertheless continue to assess whether their activities amount to carrying on business in Kenya and therefore require registration under the Companies Act.

The decision does not remove those regulatory obligations, but it confirms that non-registration, by itself, is not a defence to an enforcement claim.