Discuss how the affairs of the company may be invested.

The affairs of the company may be investigated the registrar or an inspector(s) appointed the registrar or the court.

1. Investigation the Registrar:
The affairs of a company may be investigated the registrar in the following circumstances:

(a) Non-compliance with the provisions of the Act:
Under Section 164(1) of the Act, if the registrar has reasonable cause to believe that the provisions of the Act are not being complied with, he may investigate the company‟s affairs.

(b) Incomplete documents:
Under Section 164(1) of the Act, if on perusal of a document, submitted to him, in accordance with the provisions of the Act, the registrar is of the opinion that it does not disclose a full and fair statement of the matters it relates to.

In both cases the investigation is initiated a written order calling upon the company to produce the books or to furnish information or explanation as the order may specify. The same must be produced or furnished within the duration prescribed the order. It is the duty of the officers of the company to produce the books or furnish information or explanation. If after examining the books, and considering the information, and explanation and unsatisfactory state of affairs is disclosed, the registrar must make a written report to the court.

(c) Investigation of ownership of shares and debentures:
Under Section 174(1), if there is good, the registrar is empowered to investigate the ownership of shares or debentures of a company requiring persons who may have been interested in the securities or who have acted as agents or advocates for interested parties, to provide information in relation to them as they reasonably can. Failure to provide such information renders, the person in default liable to imprisonment for a term not exceeding 6 months or a fine not exceeding Sh.10,000 or both.

(II) Investigation an inspector appointed the registrar:
Under section 173(1) of the Act, if there is good reason, the registrar is empowered to appoint one or more competent inspectors to investigate and report on the membership of a company for purposes of determining the two persons who:

(a) Are or have been financially interested in the success or failure of the company
(b) Control the company
(c) Materially influence the policy of the company.

The registrar is empowered to define the scope of the investigation. The registrar may appoint an inspector or inspectors under this section upon application members.

(III) Investigation Inspector(s) appointed the court:
The High Court may appoint an inspector or inspectors in the following circumstances:

(i) Application members:
Under Section 165(1) of the Act, the High Court may appoint an inspector(s) to investigate a company‟s affairs upon application members. The application may be made by:

• Not less than 200 members
• Holders of not less than 1/10 of the issued shares
• Not less than 1/5 of the number of members of the company
The application must be supported sufficient evidence to justify an investigation.

(ii) Special resolution:

Under Section 166(a) of the Act, the High Court must appoint one or more competent inspectors to investigate a company‟s affairs if the company has special resolution resolved that its affairs be so investigated.

(iii) Registrars report:
Under Section 166(b) of the Act, the court may appoint one or more competent inspectors to investigate a company‟s affairs if on the basis of the registrar‟s report made pursuant to Section 164, it appears to the court that:

It is desirable to do so.
Members have not been given all the information respecting the company‟s affairs which they reasonably expect.
Persons concerned with the formation or management of the company have been guilty of fraud, misfeasance or misconduct towards the company or its members.
The company‟s business has been conducted:

With intent to defraud its creditors or creditors of any other person. For a fraudulent purpose
For an unlawful purpose
In a manner oppressive to any part of the members
The company was formed to pursue a fraudulent or unlawful purpose.

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