The landscape of matrimonial property law has recently undergone a significant transformation, marked by a decisive Court of Appeal judgment in the case of GKW vs RNK (Civil Appeal 605 of 2019) (2025) KECA 1475 (KLR), that mandates the scrutiny of shares and company assets in divorce cases. This judgment represents a crucial development in jurisprudence, effectively closing a loophole that previously allowed spouses to conceal assets behind corporate structures.
What does piercing the corporate veil entail?
Piercing the corporate veil is a legal doctrine that allows courts to disregard the separate legal personality of a company and hold its shareholders, directors, liable for the entity’s dealings. It’s an exception to the principle of limited liability, which normally protects individuals from personal responsibility concerning corporate obligations.
The affirmation of equitable division.
The judgment specifically dealt with an appeal concerning the division of assets involving a long running dispute between a divorced couple, namely Mr. GKW and Ms. RNK. The appellant, identified as Mr. GKW, admitted to being a shareholder in seven companies and owning shares in six of them. Ms. RNK claimed that the companies in question were closely tied to their matrimonial relationship. She cited that ownership of the matrimonial home, which was registered in the name of one of the companies, where they had resided for twenty (20) years. Thus, she sought 50% of the shares registered in the name of her former husband and half of the properties held by the companies.
Mr. GKW’s lawyers vide their submissions attempted to use the now repealed Married Women’s Property Act, 1882, which provided a procedure for resolving disputes between husband and wife, particularly suppressing the disclosure of assets. The court, presided over by Justices M Ngugi, Daniel Musinga, and Francis Tuiyott, upheld a crucial finding that shares and company assets acquired during marriage form part of the divisible matrimonial estate. This decision reinforces the core principle that a spouse is legally entitled to equitable division of assets, regardless of whether those assets are held directly or indirectly through corporate entities.
Moreover, it provides essential clarity, ensuring that technical defences such as ownership being vested in corporate names can no longer serve as an automatic barrier to discovery. The court emphasized that the determination of matrimonial assets must move beyond mere titles to ascertain the beneficial ownership and the contribution of the parties to the wealth.
Implications for legal practice.
This judgment carries immediate and long-term implications for how legal practitioners must approach divorce cases:
- Enhanced due diligence and discovery: Legal personnel must now demand comprehensive disclosures regarding shareholding structures, transfer of assets, and the relationship between the company and the divorcing parties.
- Judicial precedence: The decision is explicitly expected to guide lower courts in handling disputes where attempts have been made to hide matrimonial assets under corporate entities. This standardized approach will reduce inconsistency in judgments concerning corporate asset divisions.
- Advising corporate clients: Legal counsel must advise clients on the need for absolute honesty regarding corporate interests and shareholdings during divorce proceedings. Any attempt to suppress disclosure could lead to severe repercussions, as the judgment confirms that corporate records are now subject to the same level of inquiry as traditional marital property.
Conclusion.
This judgment is a definitive step towards the principle of equality and achieving marital fairness. By confirming that any dispute regarding asset division must include a thorough look behind the corporate veil, the court has signalled that structures of ownership, shareholding, and transfers of assets will not stand in the way of a spouse’s claim to an equitable share of the marital estate.
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