Kimeto v Modern Sucurity Holdings Limited (Employment and Labour Relations Cause 85 of 2013) [2023] KEELRC 1564 (KLR)
The bottom line
#A Kenyan court ruled that directors of a company that refuses to pay a judgment debt must appear in court to explain, or risk paying it personally.
What this practically means
#Executive summary
#Key legal issues
#Whether the named directors/shareholders could be summoned for examination as to the judgment-debtor's assets
Yes. The official letter from the Registrar of Companies confirmed they were shareholders and directors at all material times; their claims of resignation and share transfers were unauthenticated. The court has power to summon them for examination and production of books of accounts.
The Registrar of Companies search confirmed the three named persons were shareholders and directors as at May 7, 2013. Their replying affidavits claiming appointment on May 21, 2013 and resignation on October 1, 2014 were false, as the transfer forms and resignation letters were not stamped as received by the Registrar and no company search authenticated them. The court found them responsible for the running of the company and thus seized of information on its assets, justifying summons for examination under oath.
Whether the corporate veil should be pierced so the directors pay the decree personally
Not at this stage. The directors are first to be summoned for examination; only in default of compliance may the claimant apply to pierce the corporate veil.
The court recognized the doctrine of separate corporate personality and the equally established jurisdiction to pierce the veil where those behind the company act wrongfully causing loss to third parties. However, the appropriate sequencing is examination first: the directors must be given the opportunity to disclose the company's assets and means of satisfying the decree. Only upon default, to the satisfaction of the court, can the claimant seek personal liability against the directors.
Legal principles established
#- Directors and shareholders of a judgment-debtor company may be summoned for examination under oath on the company's assets and means of satisfying a decree pursuant to the ELRC Act, the ELRC Procedure Rules and Order 22 Rule 35 of the Civil Procedure Rules
- Where directors fail to disclose the company's assets to the court's satisfaction, the claimant may move the court to pierce the corporate veil and hold the directors personally liable for the decree
Court orders
#- 1.An order summoning Ebel Ooko Mumbo, Leakey Onyango Okeyo, and Maxwell Otieno Auko, shareholders and directors of the Respondent, to attend court and be examined on oath as to whether the Respondent/Judgment debtor has any property or means of satisfying the decree and to produce books of accounts showing the financial status of the Respondent
- 2.In default of compliance, the Applicant shall be at liberty to move the court to pierce/lift the corporate veil to hold the said directors personally, individually, jointly and or severally liable to settle the decree
- 3.The Claimant is awarded costs of the application
- Jurisdiction invoked
- Section 13 of the Employment and Labour Relations Court Act, 2011; Rule 32(2) of the Employment and Labour Relations Court (Procedure) Rules, 2016; Order 22 Rule 35 of the Civil Procedure Rules
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Kimeto v Modern Sucurity Holdings Limited (Employment and Labour Relations Cause 85 of 2013) [2023] KEELRC 1564 (KLR)", Case Analysis (2023). Notice of motion dated May 12, 2022 (in a cause by Memorandum of Claim dated January 15, 2013). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/1564/eng@2023-05-25
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.