Failed marriage is no reason to liquidate a healthy company, judge rules
The High Court has dismissed a woman's bid to have the firm she jointly owns with her estranged husband wound up.
What you need to know:
- The High Court has ruled that a failed marriage does not automatically justify liquidation of a financially healthy company.
- Justice Rhoda Rutto said shareholder disputes should first be addressed through less drastic remedies provided by company law.
A Nairobi couple's failed marriage will not cost them their company, the High Court has ruled, after a judge dismissed a woman's bid to have the firm she jointly owns with her estranged husband wound up.
Justice Rhoda Rutto threw out a petition by Joan Catherine Wangui Change, who had asked the court to close down Rak Limited and share out its assets between her and her husband, Robert Marekia Gethenji.
The two are the company's only shareholders and directors, each holding a single share. But their marriage has broken down, and with it, their ability to run the business together. Joan told the court that Robert had locked her out of the company's affairs from July 2024, cutting off her access to information, assets, finances and decision-making.
She said she could no longer help find tenants for the company's property, and that the resulting standstill had left her exposed to possible penalties should the company fail to meet its obligations. She wanted the court to close Rak Limited, appoint an Official Receiver to take over, and have its assets sold and divided between them.
There was just one problem: Rak Limited was not broke. Both sides agreed the company was financially sound and debt-free. Its main asset is House No. 41D at Waridi Gardens, Kihingo village, and Joan also pointed to motor vehicle KCJ 795D as belonging to the company.
Robert opposed the petition, arguing that the dispute was about the couple's personal differences and not the company's finances. He said Rak Limited had been set up to hold a house that came to him through a family property development arrangement, and that Joan was made a shareholder only because the law at the time required a private company to have at least two.
He maintained she had contributed nothing towards the company or the property, and that the house was his, with the company simply holding it on his behalf. Rak Limited, he added, was still running normally and had no reason to be shut down.
Joan disagreed. She insisted she was a genuine shareholder who had taken up her share when the company was formed, that the house belonged to Rak Limited, and that she was never merely holding her share in trust for her husband.
She said the company had been built around their relationship, with both of them expected to manage it and benefit from it. In her petition, filed on 3 September 2025, she argued that once the relationship collapsed, so did the trust holding the business together.
Ownership of the house became one of the central points of contention. Robert said the property stemmed from a family investment involving Wagema Limited and Kihingo Village (Waridi Gardens) Limited, that family members had put money into the development, and that House No. 41D was eventually allocated to him, with Rak Limited created only to hold it on his behalf.
Joan rejected this, saying the property had been acquired by Rak Limited and belonged to the company, and that there was no documentation showing the house was being held for her husband or that her shareholding was merely nominal.
Financial health
For Justice Rutto, the central question was whether there was sufficient reason to shut down a company that remained financially healthy. She acknowledged that a company owned by two people can, in some cases, be wound up once trust between them has completely broken down, but said a falling-out between business partners does not automatically mean the business itself must end.
“I am not persuaded that the Petitioner has demonstrated that the continued existence of the Company has become impossible or impracticable,” she said in her ruling delivered on August 6, 2026.
She found that the evidence pointed mainly to the collapse of the couple's personal relationship, rather than any inability on the part of Rak Limited to function.
“While that breakdown may have strained their interactions as directors and shareholders, it does not necessarily follow that the Company itself has become incapable of functioning,” she said, noting that the company was legally separate from the two people who owned it.
“The evidence before the court demonstrates a dispute between the two shareholders; it does not demonstrate the collapse of the corporate entity.”
The judge found no evidence that the company had stopped operating, that its property was at risk, or that it could not meet its obligations. The real issue, she said, was that the couple could no longer work together because their relationship had deteriorated.
“Such a grievance, while genuine, does not, without more, constitute a sufficient basis for the grant of an order for liquidation in the present circumstances,” she said.
Justice Rutto pointed out that other remedies existed for complaints about access to information, participation in management, and directors' conduct.
“I take the view that disputes relating to access to information, participation in management, and directors' conduct are matters for which company law provides remedies that are significantly less drastic than liquidation, and should at least be pursued first,” she said.
She also cautioned against treating liquidation as a convenient exit whenever business partners fall out. “The just and equitable jurisdiction is intended as a remedy of last resort. It is not designed to provide shareholders with an exit mechanism whenever personal relationships deteriorate,” she said.
The judge declined to rule on who ultimately owns House No. 41D, saying the competing claims raised difficult questions about family arrangements and entitlement that should be resolved separately, “in the appropriate forum, before resorting to liquidation, if at all”.
In the end, Justice Rutto found that Joan had not given sufficient grounds for Rak Limited to be wound up, and dismissed her request to have an official receiver take over the company. Other avenues, she said, remained open for resolving the shareholders' dispute, and shutting the company down would be going too far. Given the couple's history and the nature of the dispute, each side was ordered to bear its own costs.
