Times Tower in Nairobi, the headquarters of the Kenya Revenue Authority (KRA).
When Benjamin Franklin, one of the US founding fathers, said that only death and taxes are certain in life, the assumption was that the former coming first can save one from debts owed to Caesar.
But in a rare show of the permanency of taxes, a High Court judge has ordered for the resurrection of a company that has been dead nearly three years, to allow the Kenya Revenue Authority (KRA) chase a Sh125.8 million debt.
Justice Helene Namisi has ordered the registrar of companies to restore Dream Dressing and Household Items Trading Company Ltd to the list of existing firms in Kenya, following a request by the KRA.
The company’s directors in 2021 applied for its striking off from the register of companies. The registrar of companies granted that application, through a gazette notice, on January 14, 2022.
On November 6, 2023 the KRA filed an application in court seeking to reinstate Dream Dressing to the register of companies.
Section 900 of the Companies Act requires firms seeking to be struck off the register of companies to furnish stakeholders, such as employees and creditors, with a copy of that application.
Violation of law
Dream Dressing did not furnish the KRA with a copy of its application to be struck off the register, which Justice Namisi said was a violation of the law and used as grounds to order the firm’s restoration.
The judge noted that section 916 of the Companies Act allows creditors and other stakeholders to apply to the Registrar of Companies for restoration of a firm that has already been struck off the register.
Dream Dressing will also have to foot the bills that KRA incurred in resurrecting the firm through the court process.
“The Registrar of Companies is hereby directed and ordered to forthwith restore the 1st respondent Dream Dressing and Household Items Trading Company Limited, to the register of companies; Costs of the application are awarded to the applicant (KRA),” Justice Namisi ruled.
The KRA sued Dream Dressing, its directors Abdirahman Adan Mohamed and Noor Abdi Ali, and the Registrar of Companies. The defendants did not file responses in the suit.
Justice Namisi’s decision means that the KRA will be allowed by law to demand the unpaid taxes from both Dream Dressing and its directors.
The court papers do not indicate what kind of business Dream Dressing was doing at the time it accrued taxes of Sh125.8 million.
KRA’s Victor Mino argued that the firm’s owners only killed the company to evade taxes totaling Sh125.8 million. That amount, the taxman added, continued to accrue interest even in the period that the company has been legally dead.
Section 81(2) of the Tax Procedures Act provides for interest and penalties to be charged on unpaid taxes by a firm that has been struck off the register of companies.
The taxman argued that failure by Dream Dressing to apply to the Commissioner for Domestic Taxes for deregistration of its tax obligations, and for cancellation of its Personal Identification Number (PIN), was an indication that the firm intended to evade what it owes Caesar.
That requirement lies in section 36 of the VAT Act, read together with sections 10 and 14 of the Tax Procedures Act.
bwasuna@ke.nationmedia.com
