Four companies went into voluntary liquidation in the first three months of this year, a sharp contrast to last year when no entity deliberately chose to dissolve, highlighting an increasingly difficult environment for business in Kenya.
Voluntary liquidation is when the directors or owners of a company decide to wind up the firm and sell off its assets, usually to pay off debts before the business is completely dissolved and ceases operations.
Companies often choose to go into voluntary liquidation when they are clearly insolvent, that is, they cannot settle their liabilities when they fall due, meaning that the business is basically struggling with sales or expenses, or both.
In addition to those going into voluntary liquidation, four others applied for bankruptcy with the Registrar of Companies. Voluntary bankruptcy is when a company recognises that it cannot pay its debts and seeks legal protection from its creditors.
In the same period last year, only one company filed for voluntary bankruptcy.
According to the latest data from the Business Registration Services, a total of 24 companies sent distress signals in the three months to March 2025, up from 19 in a similar period last year, signalling tougher times.
The majority of these companies (seven) are in court-ordered liquidation, where the process of winding up the company is ordered by a court rather than decided by the company’s owners and shareholders.
This, however, have declined from 11 last year.
Three others went under administrative receivership – where a company’s creditors appoint an administrator to run the firm until it recovers its debts. Receivership is often the second remedy when a company goes bankrupt after a rescue fails.
If receivership fails, the company is liquidated to compensate its creditors. This is also a change from last year, when no companies went into administrative receivership.
During the period, three companies went into administration, also a jump from zero last year. Administration is similar to receivership except the goal is to try and rescue the company.
A survey done by the Central Bank of Kenya during the same period revealed an increasingly constrained business environment for the private sector this year compared to last year.
The poll of chief executive officers showed that 33.3 percent of businesses reported lower demand for their products, 33.9 percent recorded lower production, and 36.4 percent said they had lower sales, indicating a tougher business environment.
