Can a Company Sue Without a Board Resolution? Understanding Corporate Authority to Litigate in Kenya

The question of whether a company must produce a formal board resolution to authorise the filing of a suit has long been a subject of judicial debate in Kenya. For the litigation practitioner, this issue presents a recurring procedural trap. It is an area where what appears to be a straightforward statutory requirement under Order 4 Rule 1(4) of the Civil Procedure Rules, 2010 has generated conflicting judicial interpretations and, more critically, divergent outcomes at the appellate level.

The Statutory Framework and Its Interpretation

Order 4 Rule 1(4) provides that where the plaintiff is a corporation, the verifying affidavit shall be sworn by an officer of the company duly authorised under the seal of the company to do so. The provision is expressed in mandatory terms. It requires two elements:

(i) the deponent must be an officer of the company, and (ii) that officer must be authorised under the company’s seal.

The mischief the rule seeks to address is to guard against unauthorised persons instituting proceedings on behalf of corporations and obtaining orders that the company itself never sanctioned. The company seal, affixed under the hand of directors, ensures that the board is aware of and has authorised both the proceedings and the person enlisted to conduct them.

However, the rule says nothing about filing the authorisation itself. This silence has been the source of considerable litigation.

The Evolution of Jurisprudence: From Bugerere to Arthi Highway

The starting point for any discussion on corporate authority to sue is the Uganda High Court decision in Bugerere Coffee Growers Ltd v Sebaduka & Another [1970] EA 147. That court held that when companies authorise the commencement of legal proceedings, a resolution must be passed at a board of directors meeting and recorded in the minutes. The decision further stated that an advocate who brings proceedings without authority becomes personally liable for costs. This principle was followed in Kenya for many years.

The watershed moment came with the Court of Appeal of Kenya decision in Arthi Highway Developers Limited v West End Butchery Limited & 6 others [2015] KECA 816 (KLR). The Court of Appeal expressly departed from the Bugerere principle. It noted that the Uganda Supreme Court had overruled that decision in United Assurance Co. Ltd v Attorney General SCCA No.1 of 1998, which settled the law as follows:

“it does not require a board of directors, or even the general meeting of members, to sit and resolve to instruct Counsel to file proceedings on behalf and in the names of the Company. Any director, who is authorised to act on behalf of the company, unless the contrary is shown, has the powers of the board to act on behalf of that Company.”

The Court of Appeal in Arthi Highway adopted this position. It is now settled law that there is no requirement for a company to file a board resolution alongside its plaint. The authority of a director to institute proceedings is presumed unless the contrary is shown.

The High Court Divergence: Applying the Arthi Highway Principle

Despite the clear position from the Court of Appeal, some High Court decisions have continued to strike out suits for want of a board resolution. This has created uncertainty for litigants and practitioners.

The High Court in Bethany Vineyards Limited & Another v Equity Bank Limited & 2 Others [2020] KEHC 6009 (KLR) correctly applied the Arthi Highway principle. The court held that it suffices for the deponent to state that they have authority to act. That authority cannot be questioned by an opposing party; it can only be questioned by the company itself. The court rejected the argument that the suit failed for lack of a board resolution, observing:

“It does become apparent that there is no requirement for a company to present a resolution of a company indicating that a company has authorised the filing of a suit or has authorised the swearing of an affidavit on its behalf nor, for that matter, confirming it has authorised an advocate to represent it.”

The Standard of Proof and Evidentiary Burden

Where the authority of a deponent is challenged, the burden falls on the challenger. The Court of Appeal in Makupa Transit Shade Limited & another v Kenya Ports Authority & another [2015] KECA 891 (KLR) stated:

“In our view, the Authority, as with other corporate bodies, has its affidavits deponed on its behalf by persons with knowledge of the issues at hand who have been so authorised by it. It was therefore sufficient for the deponents to state that ‘they were duly authorised.’ It was then up to the appellants to demonstrate by evidence that they were not so authorised.”

This principle was reaffirmed in Spire Bank Limited v Land Registrar & 2 others [2019] KECA 530 (KLR), where the Court of Appeal held that a bare statement that the plaintiff was not authorised would not be sufficient. The objecting party must produce evidence to demonstrate that the deponent lacked the requisite authority.

The Preliminary Objection Trap

A recurring issue in practice is the use of preliminary objections to challenge the authority of a deponent. The Court of Appeal in Spire Bank emphasised that whether an officer is authorised to institute proceedings is a matter of evidence, not a pure point of law. It cannot be the subject of a preliminary objection unless the fact is admitted. The court stated:

“Where evidence was produced to demonstrate that a person was unauthorised, the burden shifted to such officer to demonstrate that they were authorised under the company seal. With this in mind, we dare say that the provision was not intended to be utilised as a procedural technicality to strike out suits, particularly where no evidence was produced to demonstrate that the officer was unauthorised.”

This is a very important point for practitioners. An objection based on lack of authority is not a preliminary point of law. It requires the ascertainment of facts, including whether the deponent was actually authorised by the company. Such objections must be raised in the pleadings and canvassed through evidence.

The Contractual Angle: Section 35 of the Companies Act

Section 35 of the Companies Act, 2015 provides that a contract may be made by a company in writing or on behalf of a company by a person acting under its authority, express or implied. This provision underscores the principle that a company, being a distinct legal entity, can only operate through duly authorised representatives.

However, the section does not require that authority to be documented in a board resolution or filed in court. It simply requires that the person acting has authority, express or implied. The absence of a written resolution does not, in itself, negate the existence of authority.

The Distinction Between Authority to Swear vs Authority to Sue

A distinction must be drawn between the authority to swear a verifying affidavit and the authority to institute proceedings. Order 4 Rule 1(4) specifically addresses the verifying affidavit. It requires that the affidavit be sworn by an officer duly authorised under the seal. This is a procedural requirement that goes to the competency of the affidavit, not to the jurisdiction of the court.

The authority to institute proceedings is a separate issue. It is governed by the articles of association of a company and the general law of agency. A director who has the power to manage the affairs of the company has the implied authority to instruct counsel and commence proceedings. This is the principle articulated in Arthi Highway.

Practical Implications for the Litigator

For the Plaintiff’s Practitioner

The starting point must be compliance with Order 4 Rule 1(4). The verifying affidavit should be sworn by a director or company secretary who states on oath that they are duly authorised. The authorisation should ideally be recorded in a board resolution, but that resolution need not be filed with the plaint.

The safer approach, however, is to obtain and retain a board resolution in the file. While the court may not require its production at the pleading stage, the resolution becomes crucial if the authority of the deponent is challenged. It may also be required at the trial stage, either through discovery or as an exhibit.

Where the articles of association of the company require a board resolution for the institution of proceedings, compliance with the articles is a must. A failure to comply may render the proceedings invalid, regardless of the Arthi Highway principle. The principle does not override the internal governance rules of a company; it simply presumes that a director who acts is acting with authority unless the contrary is shown.

For the Defendant’s Practitioner

A challenge to the plaintiff’s authority should not be raised by way of preliminary objection. It must be pleaded in the defence and supported by evidence at the trial. The defendant bears the burden of demonstrating that the deponent was not authorised. If you are impatient, you may file an application to strike out the suit. But it cannot be a Notice of Preliminary Objection.

The challenge should be specific. A bare assertion that no resolution was filed will not suffice. The defendant must adduce evidence, such as the company’s articles of association, board minutes, or testimony from directors, to show that the institution of the suit was not authorised.

If the defendant can demonstrate that the suit was instituted without proper authority, the consequence may be fatal. The proceedings may be struck out, and the advocate who filed the suit may be personally liable for costs. However, the court may exercise its discretion to stay the proceedings and direct that the issue be placed before the company’s members for ratification, rather than striking out the suit.

The Evidentiary Gap and Counter-Strategies

Even where the Arthi Highway principle applies, there remains an evidentiary gap. The deponent states on oath that they are authorised, but there is no independent verification. The defendant is left with the burden of disproving that assertion.

The plaintiff’s practitioner can strengthen their position by ensuring that the verifying affidavit is clear and unequivocal. The deponent should state their position in the company, the basis of their authority, and the fact that they are acting on behalf of the company. The affidavit should also state that the institution of proceedings was approved by the board or the members, as the case may be.

The defendant’s practitioner can counter this by obtaining discovery of the records of the company. The articles of association, minutes of board meetings, and any resolutions passed by the members may disclose whether the institution of proceedings was properly authorised. If the records reveal no authorisation, the defendant has a basis for challenging the plaintiff’s capacity.

The Supremacy of the Court of Appeal

It must be emphasised that the Arthi Highway decision represents the definitive position of the Court of Appeal. It is binding on all subordinate courts. High Court decisions that continue to apply the Bugerere principle are, with respect, incorrect and should not be followed. The Court of Appeal has settled the law, holding that there is no requirement for a board resolution to be filed alongside the plaint. A director’s authority is presumed unless the contrary is shown.

Conclusion

The question of corporate authority to sue remains a live issue in litigation in Kenya. While the Court of Appeal has provided clarity in Arthi Highway, there persists a divergence in the courts below. Some courts have continued to strike out suits for want of a board resolution, while others have applied the Arthi Highway principle and allowed suits to proceed.

For the practitioner, the safest approach is to ensure compliance with Order 4 Rule 1(4) by obtaining a board resolution and retaining it in the file. While the resolution need not be filed with the plaint, its existence provides a defence against any challenge to the deponent’s authority. The practitioner should also ensure that the verifying affidavit states clearly and unequivocally that the deponent is authorised.

Where a defendant challenges the plaintiff’s authority, the challenge should be pleaded and supported by evidence. A preliminary objection is not the proper vehicle for such a challenge. The defendant must demonstrate that the institution of the suit was not authorised, either by the board or by the members.

Ultimately, the Arthi Highway principle represents a pragmatic approach to litigation. It recognises the reality of corporate governance and avoids the elevation of procedural technicalities over substantive justice. It is a principle that serves the interests of justice and should be applied consistently.

Authored by Benson Odiwuor Otieno; Advocate, High Court of Kenya

This article is a publication of the Litigation Practice Notes series, featured in The BOLD Newsletter. For questions, clarifications, or suggestions on this or related subjects, contact the author directly: insights@bensonodiwuor.com / info@benodiwuor.com.