Lift corporate veil to nab corrupt officers

There are three theories of legal personality: the realist, fiction and the objective. The fiction personality theory is controversial since non-human or artificial bodies’ (such as companies) are accepted legal entities because human beings provide the mind and soul (corpus and animus). Therefore, companies have a legal identity, right to own property and can sue or be sued.

However, such entities cannot be physically present in court to answer for offences committed. Furthermore, unless it is through liquidation or winding up, they cannot be punished by death.

Given the above limitations, Kenya has witnessed a worrying trend where wily individuals use companies as their alter ego. A company is deliberately used to provide a legal shield for corrupt practices. Such companies, which seem to enjoy protection from the political establishment, have often gone under just before or soon after the respective regimes collapse or after being used to defraud.

Conniving individuals hide behind "the limited liability" whenever they are called upon to account for their mischief.

Expose suspects

However, this protection may be ‘pierced’ and personal liability imposed by the courts to expose the faces behind the crimes.

According to Wikipedia "piercing the corporate veil" is a legal decision to treat the rights or duties of a company as the rights or liabilities of its shareholders or directors. Usually, a company is treated as a separate entity, solely responsible for the debts it incurs and the sole beneficiary of the credit it is owed. Common law countries uphold this principle of separate personhood, but in exceptional situations courts may "pierce" or "lift" the corporate veil.

This doctrine is used by the courts to ignore the corporate status of stockholders, officers and directors of a corporation in reference to their limited liability so that they may be held personally liable for their actions in case of committing fraud or other crimes. In Kaycee Land &Livestock versus Flahive in the US, the Wyoming Supreme Court held that the equitable doctrine of piercing the veil was an available remedy.

In the UK, the corporate veil was lifted in Gencor versus Dalby.

"Piercing the corporate veil" is, therefore, the only means of breaking down a wily individual’s protection. Given the soaring corruption cases in Kenya revolving around limited liability companies, courts should rise to the occasion by "lifting the corporate veil" to expose the real fraudsters. It would make a lot of social and economic sense if a company is barred from being the alter ego of the owners.

Tome Francis, Bumula