The Managing Director of Perfect Milling Company was entitled to 25% gratuity of his basic salary at the end of his term as Managing director. However, when he launched a claim against Perfect Milling Company, the company was in bankruptcy and unable to pay. He then sued Madison Investment, claiming that they operated as a single economic unit under the Madison Group of Companies.
The High Court in a judgment delivered by Banda-Bobo J (as she was then) held that notwithstanding the principle that companies have a separate legal identity, the court is empowered to pierce it in certain circumstances to deduce who the actual owners are and attach liability to them in certain circumstances. In this case, the court held that Madison Investment had taken over the affairs of Perfect Milling and that they operated as one economic unit, for these reasons, Madison Investment was liable to pay the Managing Director his gratuity.
On appeal, the Supreme Court delivered a landmark judgment and lucidly provided an overview of the law relating to piercing the corporate veil. The Supreme Court in analysing the principle of lifting the corporate veil where companies operated as a single economic unit thereby held that ownership and control of a company are not, of themselves, sufficient to justify the piercing the corporate veil.
"Madison Investment, Property and Advisory Company Limited v. Peter Kanyinji SCZ Selected Judgment No. 48 of 2018,"
SAIPAR Case Review: Vol. 5:
1, Article 16.
Available at: https://scholarship.law.cornell.edu/scr/vol5/iss1/16