Kenya’s Court of Appeal has revived a debt recovery case filed by Stichting Rabobank Foundation against AVA Chem Limited and its director, Christopher Irungu Mwangi, overturning a High Court decision that had struck out the suit on procedural grounds.
The appellate court held that a foreign entity seeking to recover an existing debt in Kenya is not necessarily “carrying on business” in the country for purposes of Section 974 of the Companies Act.
The ruling means the dispute will now return to the High Court for determination on its merits, a decision that could shape how future cross-border commercial disputes are handled in Kenya.
Financing Agreement at the Centre of the Dispute
According to court proceedings, Stichting Rabobank Foundation advanced USD 180,116 to AVA Chem Limited in October 2016 under a Financial Support Agreement.
The foundation is the impact-financing arm of Rabobank Foundation, which supports agricultural cooperatives, rural enterprises and smallholder farming initiatives in developing markets.
Court records indicate that Christopher Irungu Mwangi later executed a personal guarantee and deed of suretyship in connection with the financing arrangement.
The foundation subsequently alleged that AVA Chem defaulted on its repayment obligations.
Debt Recovery Suit Filed in 2022
In September 2022, Stichting Rabobank Foundation filed a case in the High Court seeking to recover USD 230,868.51, comprising the outstanding principal, accrued interest and associated costs.
According to the court proceedings, AVA Chem and Mwangi challenged the suit primarily on jurisdictional grounds. They argued that the foundation had not registered locally under Section 974 of the Companies Act, and therefore lacked the legal capacity to institute proceedings in Kenya.
The argument focused on whether the foreign lender was required to register in Kenya before enforcing its contractual rights through the courts.
High Court Initially Struck Out the Case
In July 2024, the High Court agreed with the jurisdictional objection and struck out the suit before hearing the substantive dispute over the alleged debt.
The decision relied on an earlier judicial interpretation concerning foreign companies operating in Kenya.
As a result, the court did not determine the underlying contractual issues or make findings on the merits of the claim.
Court of Appeal Overturns the Decision
The Court of Appeal has now reversed that finding, concluding that filing a lawsuit to recover an existing debt does not, by itself, amount to carrying on business in Kenya.
The appellate court’s ruling allows the foundation to pursue its claim in the High Court without first registering locally under the Companies Act.
Legal experts say the judgment provides greater clarity for foreign lenders and investors seeking to enforce contractual rights through Kenyan courts while reducing uncertainty over the interpretation of Section 974.
Previous Court Decisions Reached Different Conclusions
The jurisdictional issue has previously produced differing outcomes in Kenyan courts.
According to the proceedings, an earlier case involving Root Capital Incorporated reached a different conclusion on similar questions surrounding foreign lenders.
Case Returns to the High Court
Following the appellate decision, the matter will return to the High Court, where the parties will argue the substantive issues surrounding the financing agreement for the first time since the proceedings began in 2022.
The High Court will determine the merits of the claim after hearing both parties.
The Court of Appeal ruling addressed only the procedural question of whether the suit could proceed. It did not determine liability or decide whether the amounts claimed are ultimately payable.
