Court Rules-Couples to Divide Shares of Firm Equally in Absence of Agreement

By Virginia Mwangi

In what seemed to be a landmark ruling, Justice Francis Tuiyott said that investments and liabilities are supposed to be split equally upon dissolution of a marriage in case there are no allocated shares or written agreement irrespective of what either party contributed in the making of the business.

The ruling, which is bound to change the course of sharing family businesses once a couple decides to go for divorce, was made following a divorce case between Richard and Mary who could not agree on how to share a school they had built now valued at 109 million shillings.

Richard was a second-hand clothes seller while Mary was a teacher.

“The rationale for the rule of equality being that, in the absence of any express or implied agreement between the partners, the partners consider their shares to be equal notwithstanding their contribution to the partnership be it capital, skill, labour, business connections or otherwise,” Justice Tuiyott stated adding that it is to be presumed that having not expressed or implied their shares, then the partners take their contributions of whatever nature to be equal and if it were to be otherwise, then they would say so expressly or by implication.

Mary, who had come into the union with two girls, said that it had been 13 years of love.

The couple had registered a partnership, on 15th June 2004, and included her two daughters in the deal. Mary stated that she had used a part of her inheritance and loans to build the school claiming that the school grew from a nursery school business which she had developed alone. Mary said she saved 1.2 million shillings from the nursery and added 2.4 million shillings from a loan she secured from Co-operative Bank to purchase the land where the school is built.

The land, now valued at 78 million shillings, because of the facilities built, also houses furniture worth 4.2 million shillings, motor vehicles 9.2 million shillings with the business income standing at 17 million shillings.

Richard, in his side of the story, said that the school was constructed from 14 million shillings he had sought as loans from Co-operative and Equity banks. The family told the court that they had fully serviced all the loans except for 8.4 million shillings which they had gotten as a loan from their friend.

Richard further told the court that he closed his second-hand business to concentrate on construction and managing the school adding that his step-daughters did not deserve any share as they were dependents.

Judge Tuiyott ruled that they should pay equally 4.1 million shillings to pay up the outstanding debt but neither of them would spend it adding that it would be paid out to the deceased’s estate the time they would request it.

The ruling is expected to set precedence alerting couples to have agreements how they wish to divide property in case they wish to split.