In many families, couples usually purchase property to secure their future and that of their offspring. Some invest in real estate, farming, shares and other lucrative opportunities while others invest in motor vehicles. The law protects such ventures.
Such investments can be carried out under legal regimes such as partnerships, companies, limited liability partnerships, Saccos and other loose legal arrangements.
The preamble to the constitution captures this fact succinctly. The people of Kenya are committed to nurturing and protecting the wellbeing of the individual, the family, communities and the nation.
The property acquired together by couples might fall under the category of matrimonial property. The constitution defines property (Article 260) as any right to land, goods or personal property, intellectual property and money.
The Matrimonial Property Act (2013) defines matrimonial property as the matrimonial home(s), household goods in the matrimonial home, any other immovable and movable property jointly owned and acquired during the subsistence of the marriage.
Ownership of matrimonial property vests in the spouses according to the contribution towards its acquisition. During divorce or dissolution of marriage, such property will be divided between the spouses.
The Act defines contribution to mean “monetary and non-monetary contribution and includes domestic work and management of the matrimonial home ,child care, companionship, management of family business or property and farm work.
One of the most difficult legal challenges arise when such property is held in form of shares in a company. How do you distribute such property between the couples?
Do you divide the shares they own in the company equally amongst them given that the company is a legal person who owns the property in such companies? Which court does one go to for redress?
Is the family court the right place to seek orders for distribution of properties that were registered in the names of limited liability companies? The answer to the above questions is in the negative.
The jurisdiction of the family court does not extend to distribution of properties registered in the name of the company in which the spouses are the shareholders.
If there are disputes between husband and wife as to their respective rights to the shares in a company registered in the name of one spouse, then the family court only has power to ascertain the respective beneficial rights of husband and wife to the disputed shares.
The family Court cannot order the transfer of the legal titles to property to either spouse. It cannot pass proprietary interest from one spouse to another.
The proper court for such a distribution order is the High Court. The couple must file appropriate proceedings under Section 211 or 222(2) of the Companies Act.
The rationale for such an Act is based on the well settled principle of company law in Salomon v Salomon (1897) AC 22 that a company is a separate legal person from its shareholders and directors. The company is different from the couple who are merely shareholders.
The courts have come up with a principle applicable in division of matrimonial property where the properties are registered in the name of one spouse.
“Where the disputed property is not registered in the joint names of the spouses but is registered in the name of one spouse, the beneficial share of each spouse would ultimately depend on their proven respective proportions of financial contribution either direct or indirect towards acquisition of the property. However, in cases where each spouse has made a substantial but unascertainable contribution, it may be equitable to apply the maxim 'equality is equity'".
In conclusion, couples need to be aware of their contribution in acquisition of matrimonial properties.
Further, the family court does not have the power to distribute property owned by the couples in a company. The right court to visit for such orders is the High Court in an application filed under the Company Act.