One of the main tenets of company law has long been the concept of distinct corporate personality. Courts have upheld the idea that a corporation is separate from its members, directors, and shareholders ever since Salomon v. Salomon. However, recent judicial trends, particularly in matrimonial property disputes, show that Kenyan courts are becoming more inclined to go past form to substance, especially when corporate entities are employed to conceal matrimonial assets.
The Kenyan courts have consistently affirmed that the corporate veil will not be lightly lifted, emphasizing that veil piercing is fact-driven and rooted in equitable considerations. Corporate personality may be disregarded where justice so demands.
These principles, once largely confined to commercial disputes, are now increasingly finding relevance in family law.
The Matrimonial Property Act recognizes that assets acquired during a marriage are divided upon dissolution according to both monetary and non-monetary contributions. Modern asset-holding arrangements, however, often complicate this assessment. It is no longer uncommon for spouses to register matrimonial homes, investment properties, or income-generating assets in the name of private companies. Similarly, courts are increasingly unwilling to allow corporate personality to be used as a protective shell to defeat matrimonial claims.
The Court of Appeal delivered a significant judgment in GKW v RNK (Civil Appeal 605 of 2019), where the appeal concerned whether a former spouse, RNK, might be permitted to add limited liability businesses as respondents in a property dispute against her ex-husband, GKW.
The core issue of the appeal was whether joining the companies would amount to an unauthorized lifting of the corporate veil under the Married Women’s Property Act, 1882. To this effect, the Court of Appeal decided that courts have broad authority to investigate the company and property ownership. It went on to further state that the Married Women’s Property Act allows for the inclusion of companies in matrimonial proceedings where ownership of the property is contested.
It held that when property ownership is “obfuscated through transfer of the property to a company” that is within the couple’s control, the court reaffirmed that it would be “totally unjust and unfair” to deny the court jurisdiction. The court may “go behind the corporate veil to determine the actual beneficial ownership” of the matrimonial property in several circumstances.
Kenyan courts are increasingly prepared to dismantle artificial structures designed to obscure the true nature of asset ownership within marriage. For spouses, the message is clear: incorporation does not erase contribution. For legal advisers and asset holders, the lesson is equally important: corporate planning that ignores matrimonial realities is increasingly vulnerable to judicial intervention.
In the end, the law is indicating that marriage, just like business, must be done in good faith; the veil will not hold if form is misused to undermine justice.
Are corporate structures in family enterprises being used to build value or unintentionally creating future vulnerability in the event of matrimonial breakdown?