{"id":604,"date":"2025-03-21T13:54:40","date_gmt":"2025-03-21T13:54:40","guid":{"rendered":"https:\/\/gkmuturi.ke\/law\/?p=604"},"modified":"2025-03-21T14:05:17","modified_gmt":"2025-03-21T14:05:17","slug":"legal-alert-court-affirms-requirement-for-leave-in-derivative-claims","status":"publish","type":"post","link":"https:\/\/gkmuturi.ke\/law\/2025\/03\/21\/legal-alert-court-affirms-requirement-for-leave-in-derivative-claims\/","title":{"rendered":"Legal Alert: Court Affirms Requirements For Leave In Derivative Claims."},"content":{"rendered":"\n
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Article By Gideon Muturi<\/em> assisted by Anita Nyaga<\/em><\/p>\n\n\n\n

Are you aware that as a shareholder, you cannot bring a claim on behalf of a company without first obtaining the court’s permission? This crucial principle was reaffirmed in the recent High Court decision in Simon Njoroge Ndungu vs. Stanley Livondo & David Kiguongo Kanja & 2 Others<\/em>, where the court struck out an application improperly filed without leave as required for a derivative claim.<\/p>\n\n\n\n

We are pleased to have represented the company that filed the application through the firm of G.K. Muturi, with counsels Gideon K. Muturi assisted by Anita Nyaga.<\/p>\n\n\n\n

Background<\/strong><\/p>\n\n\n\n

The Applicant sought to be reinstated as a director and shareholder of the company, alleging that his removal was part of a scheme to defraud the company’s suppliers, consultants, and workers. The Respondents argued that the Applicant had not sought leave to continue the suit as a derivative claim despite the fact that the grievances raised concerned wrongs to the company rather than personal claims. The court agreed, finding that the claim was effectively a derivative suit and could not proceed without prior leave.<\/p>\n\n\n\n

Key Legal Takeaways<\/strong><\/p>\n\n\n\n

    \n
  1. Derivative Claims Require Leave <\/strong>– The Companies Act, 2015, under Sections 238 and 239, mandates that a shareholder must obtain court approval before pursuing a derivative claim on behalf of a company.<\/li>\n\n\n\n
  2. Foss v. Harbottle Principle<\/strong> – A company is the proper plaintiff in an action concerning its losses, and shareholders cannot bypass this rule unless they meet the statutory requirements for derivative actions.<\/li>\n\n\n\n
  3. Case Precedents <\/strong>– The Court of Appeal in Amin Akberali Manji & Another v. Altaf Abdulrasul Dadani & Musikland Limited (Under Receivership)<\/em> emphasized that leave must be sought at any stage before proceeding with a derivative suit.<\/li>\n\n\n\n
  4. Striking Out for Want of Leave<\/strong>– Failure to obtain leave renders the suit defective, and courts will not hesitate to strike out such applications, as seen in Ghelani Metals Limited & Others v. Elesh Ghelani Natwarlal & Registrar of Companies<\/em>.<\/li>\n<\/ol>\n\n\n\n

    Conclusion<\/strong><\/p>\n\n\n\n

    The ruling in Simon Njoroge Ndungu\u2019s<\/em><\/strong> case underscores the importance of adhering to procedural requirements when bringing derivative claims. Shareholders seeking to protect the interests of a company must first establish a prima facie case and obtain the court’s permission. Failure to do so will lead to dismissal, as procedural compliance is a fundamental requirement under corporate litigation principles.<\/p>\n\n\n\n

    For further inquiries or assistance in structuring corporate claims, reach out to our team of experts for guidance on compliance with the Companies Act and best practices in shareholder \/ director\u2019s litigation.<\/p>\n\n\n\n

    Notice: <\/em><\/strong>The content of this alert is intended to be of general use only and should not be relied upon without seeking specific legal advice on any matter.<\/em><\/p>\n\n\n\n

    edited by Amy Maina<\/em><\/p>\n\n\n\n

    Legal Alert<\/a>Download<\/a><\/div>\n\n\n\n

    <\/p>\n\n\n\n

    <\/p>\n","protected":false},"excerpt":{"rendered":"

    Article By Gideon Muturi assisted by Anita Nyaga Are you aware that as a shareholder, you cannot bring a claim on behalf of a company without first obtaining the court’s permission? This crucial principle was reaffirmed in the recent High Court decision in Simon Njoroge Ndungu vs. Stanley Livondo & David Kiguongo Kanja & 2 […]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-604","post","type-post","status-publish","format-standard","hentry","category-general"],"_links":{"self":[{"href":"https:\/\/gkmuturi.ke\/law\/wp-json\/wp\/v2\/posts\/604","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gkmuturi.ke\/law\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gkmuturi.ke\/law\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gkmuturi.ke\/law\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/gkmuturi.ke\/law\/wp-json\/wp\/v2\/comments?post=604"}],"version-history":[{"count":4,"href":"https:\/\/gkmuturi.ke\/law\/wp-json\/wp\/v2\/posts\/604\/revisions"}],"predecessor-version":[{"id":612,"href":"https:\/\/gkmuturi.ke\/law\/wp-json\/wp\/v2\/posts\/604\/revisions\/612"}],"wp:attachment":[{"href":"https:\/\/gkmuturi.ke\/law\/wp-json\/wp\/v2\/media?parent=604"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gkmuturi.ke\/law\/wp-json\/wp\/v2\/categories?post=604"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gkmuturi.ke\/law\/wp-json\/wp\/v2\/tags?post=604"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}