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Lifting the Corporate Veil in Matrimonial Law

25 Jun 2013, 09:25 by Priya Bakshi

Labels: barrister, commercial, commercial-law, court, divorce, family-law, fraud, lawyer, legal-proceedings, matrimonial-law

In commercial cases the key principle is that a company is independent of its shareholders and so one cannot get at the company's assets in legal proceedings unless there has been fraudulent or dishonest use of the company, 

On 12 June 2013 the Supreme Court unanimously allowed the corporate veil to be lifted in financial divorce proceedings in the case of Prest v Petrodel Resources Limited and others [2013] UKSC 34. The question in this appeal brought by Mrs Prest was whether the court had power to order the transfer of properties to her given that they legally belonged not to Mr Prest but to his companies. 

Under the Matrimonial Causes Act 1973 section 24(1), it states that the court may order that "a party to the marriage shall transfer to the other party...such property as may be so specified, being property to which the first-mentioned party is entitled, either in possession or reversion."

On the facts of this case, Mr Prest, and not his companies, originally provided the funds for the acquisition of the properties. He had control of the company assets as if they were his own during the marriage. Mr Prest concealing these facts coupled with the continuous failure to cooperate with disclosure and transparency, the Court inferred that both he and the companies were attempting to conceal the true beneficial ownership of the properties. 

Mrs Prest won in her appeal and the Court held that the properties invested in Mr Prest's companies were on trust for him. It was ordered that these assets be handed over to his wife. Therefore, in these exceptional circumstances, the Court disregarded the corporate veil in order to give effective relief. 

This landmark ruling has provided some clarity as to when the courts can lift the corporate veil, and that business people cannot deliberately hide assets in companies to protect them in the event of a divorce.

 

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Ancillary Relief

05 Aug 2010, 16:27 by Rebecca Fitton-Brown

Labels: civil, court-of-appeal, criminal, divorce, family

The Court of Appeal has ruled that a husband or wife who comes across documents showing that their spouse is concealing assets in divorce proceedings, can no longer use such documents. If the husband or wife has taken copies of such documents for the use of their legal advisors, it is unlawful and they must be handed back. It is not clear how far the use of any information derived from such documents may be restricted e.g. the mere existence of an undisclosed bank account.

This is in line with civil and criminal laws, but will make it more difficult to prove non-disclosure of assets in some matrimonial cases.

 Written by Rebecca Fitton-Brown, Barrister at New Walk Chambers specialising in Family Law.

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Business Assets in Ancillary Relief

08 May 2008, 15:21 by Rebecca Fitton-Brown

Labels: ancillary-relief, care, divorce, family

One complicated issue that can arise in ancillary relief proceedings upon divorce is where the marriage's only major asset is a business run by one of the parties. A business is a good example of an asset that often cannot be divided in two by the court, but this can result in injustice where there are no other assets to distribute. In the recent case of H v H [2008] EWHC 935 (Fam) the High Court considered this conundrum, and emphasised that it is useful in this case to look at periodical payments, tied if appropriate to the wealth generated by the business. This can provide a party with a de facto income stream from the business with less interruption to the business than a division of its assets.

Written by Rebecca Fitton-Brown, Barrister at New Walk Chambers, specialising in Family Law.

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