Legal protections accorded to minority shareholders in Kenya in corporate entities
Alfayo, Ongeri Wycliffe
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The House of Lords had good intentions when it decreed in 1897 that a company had in law a fictitious separate personality distinct from its subscribers and promoters. With this decree the court in effect established an iron curtain in the name of a corporate veil between the company and the people in the backstage_ the real minds behind the company. Ever since there have been a myriad of instances when the iron curtain has been lifted to hold responsible those that have attempted to benefit fraudulently from behind the shield that is the separate legal personality of the company and its corporate veil. The study gives a historical background on the legal framework that existed prior to the enactment of the Companies Act No. 17 of 2015. The study considers the high threshold required of minority shareholders whenever they seek a remedy for infringement of their interests. Arising from that background the study considers the extent to which the principles of separate legal personality and corporate veil hamper the utilization of the legal avenues for the protection of the interests of minority shareholders. The study considers the fiction and contract Arian theories of corporate governance. It considers the proposition of their proponents and the criticisms advanced against them. In the end, the study considers the justification for departure from the theories in order to make a case for corporate law to be invoked to protect the interests of minority shareholders. The study analyses the provisions of the Companies Act, Capital Markets Act and subsidiary regulations that enshrine avenues meant to protect the interests of minority shareholders. The study points out the lacunas that are still persistent. In the penultimate the study analyzes a case study in order to contextualize the hindrances of the principles of separate legal personality and corporate veil in the pursuit for the protection of the interests of minority shareholders. Ultimately, the study makes recommendations that are meant to improve the corporate environment in which the minority shareholders can invest their resources.