Kenya Union of Commercial Food & Allied Workers Union v Fish & Chicken Bar Limited (Cause E326 of 2022) [2023] KEELRC 3029 (KLR)
The bottom line
#A Kenyan court refused to jail a company director over unpaid redundancy benefits, confirming that company insolvency alone doesn't make directors personally liable.
What this practically means
#Executive summary
#Key legal issues
#Whether the Respondent's Director can be cited for contempt and held personally liable for the Respondent's unpaid redundancy benefits
No - the Director cannot be held personally liable for the company's obligations absent a determination lifting the corporate veil, which was neither sought nor justified on the facts
The Respondent is a limited liability company, a separate legal person from its directors. The orders sought would effectively lift the corporate veil, but the Claimant never sought leave to lift the veil, and no fraud or improper conduct was suggested. Mere failure to settle the grievants' dues, or the company's insolvency, does not warrant lifting the veil; the law provides other remedies, such as execution proceedings under Order 22 Rule 35 of the Civil Procedure Rules.
Whether insolvency or lack of assets justifies holding the Director liable
No - insolvency alone is not a ground for lifting the corporate veil
Relying on Carey Ngini v Dennis O. Ogolla and Corporate Insurance Company Limited v Savemax Insurance Brokers Limited, the court held that the veil is not lifted merely because a company has no assets or cannot pay its debts. In such situations the law provides a remedy other than saddling the director with the company's debts.
Legal principles established
#- A company is a separate legal entity distinct from its directors and shareholders, who cannot be held personally liable for its obligations unless the corporate veil is lifted on proper grounds
- The corporate veil is lifted only in exceptional cases, such as where fraud or improper conduct is imputed
- Insolvency or inability to pay debts is not of itself a ground for lifting the corporate veil
- A party seeking orders that would effectively lift the corporate veil must first seek leave and specifically plead that relief
Court orders
#- 1.The Notice of Motion dated 9th June 2023 is dismissed
- 2.No orders as to costs
- Jurisdiction invoked
- Section 12 of the Employment and Labour Relations Court Act; Employment and Labour Relations Court Rules, Rule 32(2)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Kenya Union of Commercial Food & Allied Workers Union v Fish & Chicken Bar Limited (Cause E326 of 2022) [2023] KEELRC 3029 (KLR)", Case Analysis (2023). Cause No E326 of 2022. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/3029/eng@2023-11-24
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.