Marriage and business: Is your firm's foundation built on a prenuptial agreement?

That "fair" shareholding you just imagined - does it match what's written on those official company documents at the company's registry?
Let's go further. Assume things go bad (and everything crossed, they won't!), and you have to split assets.

Would those official papers reflect the real story of who built what? More importantly - and this is the part that keeps lawyers awake at night - could you actually prove your contribution in court? And when I say contribution, does it only mean the money you put in?

Think about this: if your company owns that beautiful “home” in Runda or that thriving hardware shop in town, who really owns it? The law says it belongs to the company, not you or your spouse. So, if you split, can a judge reach into the company and pull out assets to grant them to one of you?

These aren't just philosophical questionse. They are the realities that are hitting Kenyan courtrooms every day, and the answers have been evolving over the years until this September when the Court of Appeal strongly stated the position.

Think of Joe and Rose. They built their logistics company together over 15 years. Rose raised three children and managed the business books at night after tucking the children in. Joe was Mr. Business – suits, meetings, trips. When things went south, Joe told Rose the company was "separate" from their marriage. After all, his name was on 90 percent of the shares.

Two years later, following the GKW v RNK ruling by the Court of Appeal this September, Rose walks away with half. Not 10 percent. Half of the company.

In that case, the Court of Appeal basically said: "We'll examine who built it. You go with what you contributed." For decades, some spouses would mysteriously transfer the family home to "Investments Limited" right before divorce proceedings.

Or suddenly, the brother-in-law would somehow own half the company shares. For years, the courts, held back by the rule that companies are separate legal entities, watched as spouses got played.

Not anymore, the law has evolved. Judges can now drag companies into divorce proceedings, especially these "family companies" that somehow own all the family assets. They call it "piercing the corporate veil" - fancy legal talk for "we see what you did there."

Kenya’s Matrimonial Property Act defines what's a contribution into matrimonial property. Contribution doesn’t mean money only. Both financial and non-financial contributions count.

The law says that making breakfast at 4 am so your spouse can catch that Mombasa flight for a business deal is contribution. Managing the home or watching children while your spouse manages the business is also contribution. That emotional support during the tough startup years when the business wasn’t making enough money? Contribution.

But critically, it's not an automatic 50:50 split. The Supreme Court made that clear a few years back. Each case gets weighed on its own scale: actual contribution determines the share. Length of marriage, size of the estate, actual involvement - it all matters. In one case, the stay-at-home spouse got 20 percent. In another, 40 percent. Everything is in the details.

How does one prepare for this before marriage? Clarity of what you own, and if need be, an agreement.

Nobody wants to talk money and ownership before marriage. It feels like you're planning for failure. But if you're bringing a business into marriage or planning to start one, document as much as you can, and consider a prenuptial agreement.

Any prenup must be fair though. Courts will tear up any agreement that looks like one person got conned. For instance, sign it a reasonably long time away before the wedding, otherwise it may look like coercion.

What about during marriage?

If you are building or investing in something together, put both names on it. It is the safest route to protecting both of you.
Have meetings, and also keep records. Who put in capital? Who sacrificed their career to raise children? Who spent weekends at the office? Transparency strengthens.

And please, stop with the asset shuffling. The company shares in your mother's name? Company formed last month that mysteriously owns your matrimonial home? Courts see through all that. In one court case, the husband transferred company properties to relatives and employees, but the court ruled that half of them belonged to his wife.

Courts are especially suspicious of timing. Assets moving around just before or during divorce proceedings are a big red flag.

What happens when things fall apart?

To be clear, the best matrimonial property division is the one that never happens. But if despite all effort things are going the divorce way, consider doing the following.

As much as is practical, keep the company or the business going, otherwise there might be nothing left to split. You may need to involve third parties for this.

Get your company valued promptly. Not by your cousin who "knows business", but by a professional who will ensure to include a list and value of all the company’s assets and liabilities.

Document your contributions, both money and the non-financial. The school trips that freed your spouse to attend business meetings.

The family dinners where you entertained investors and clients. The career you paused. Write it all down.

Understand the math: generally, current company value minus pre-marriage value equals matrimonial portion. Your contribution percentage of that equals your share. Seemingly simple formula, but in reality quite complex, and interspersed with strong feelings.

Dependent on the actual circumstances, you get either shares, cash, or equivalent value from other assets.

Just one more thing: how does this affect all of us?

Your business partners' divorces can affect your company. If your partner splits and their spouse gets shares, well, you might have a new business partner you never chose. Smart businesses have, for instance, shareholder agreements covering this.

Also, estate planning might just get complicated: your will saying "all shares to my brother" doesn't mean much if your spouse has legitimate matrimonial property claims. Update those succession plans.

If you are in a family business with siblings, their marital issues are now your business issues. That company your parents started might get carved up in ways no one ever imagined.

To sum it up, the days of "what's in my name is mine alone" are gone. The economic partnership of marriage is now legal reality - two in one, as the pastor might have said. That partnership might lead to unequal shares but it exists.

The Court of Appeal's decision isn't about encouraging divorce. It's about acknowledging reality while you are still married, and living it.

The lesson is that courts will go beyond traditional company law to ensure justice. So, that spouse who gave up their career? Their contribution is real. Document it. Value it. Respect it. Not because you are planning to split, but because recognising contribution strengthens the family and your investments.

Importantly, if it ever gets to this level, consider mediation before litigation. Courts are where marriages and businesses go to die expensively. Mediation is where they end with dignity intact and bank accounts less damaged.

Njuguna Muri is a partner in Muri Mwaniki Thige & Kageni LLP Advocates). Email: [email protected]