Many are times the succession court in Kenya is tasked with determining the question on whether the assets of a company, in which a deceased person was a shareholder/director, form part of the deceased’s person’s estate and are available for distribution.
The Court of Appeal in Malindi, in the case of PACIFIC FRONTIER SEAS LIMITED V KYENGO & ANOTHER (2022) KECA 396 (KLR) dealt with this issue substantively.
In the matter, the deceased had died intestate, and the widow of the deceased petitioned the High Court for letters of administration intestate in the estate of the deceased. She listed five assets, including the three disputed properties, as part of the estate of the deceased, one of which was registered in the name of the company – Pacific Frontier Seas Limited.
The High Court issued the grant of letters of administration intestate in the estate of the deceased to the widow. Once the grant was confirmed, a third party applied to the court to have the grant revoked, on the grounds that two of the listed properties belonged to them. The widow entered into a consent to transfer and sell the properties and the proceeds of the sale to be held in a joint interest-earning account in the names of the parties’ advocates. This consent included one property registered in the name of Pacific Frontier Seas Limited, a company in which the deceased was a majority shareholder. Upon consent to transfer and sell the properties without reference to the company, the company applied for a revocation of the grant of letters of administration, in so far as it dealt with a property that was not part of the estate of the deceased.
The Court of Appeal, in determining the matter, looked at whether the succession court has the power to distribute company assets as part of the estate of a deceased person.
The Court stated that the Estate of a deceased shareholder is entitled ONLY to the shares owned by the deceased in the company, and the Succession Court has jurisdiction on only these shares held by the deceased and not the property of the Company. The Court therefore only decides on whether the shares are available for distribution and how they ought to be distributed.
The Court of Appeal laid the basis in the case of Re Estates of Gitere Kahura and Mary Nyokabi (2018) eKLR to state that the jurisdiction of the succession court lies only with the distribution of shares, and not any other matter or assets of a company. It further stated that the properties of a company should therefore NOT be listed as part of the estate of the deceased, as only the shares held by the deceased in the Company form part of the estate of the deceased. Therefore, where there is any dispute in terms of the owners of shares in the company, directors in the Company or number of shares held in the company; these matters should be left under the ambit of the Companies Act.
Therefore, a Succession Court can only decide on the distribution of shares held by the deceased in a company and not the Company’s assets.