Inspiring separating couples to make their own informed decisions

Posts tagged ‘Piercing the corporate veil’

Cheats Charter Diminished?

The Old Senate Chamber during the US Supreme C...

This week Lawyers working within the family law sector have waited with bated breath  for the outcome of the Supreme Court’s decision on the land mark case Prest v Petrodel Resources Ltd and Others [2013] UKSC 34.

This relates to an extraordinary case about an oil tycoon, Mr Prest worth about £48 million who attempted to evade his responsibilities to his wife upon Divorce by using legal arguments in relation to commercial law and corporate structures. This is known  by family Solicitors as the ‘cheats charter’.

Effectively, where one spouse has set up a Limited Company, this has a legal entity in its own right unless there is evidence of impropriety by the Director(s) , the Company cannot be Ordered to take any steps or action by the Court.

Whilst the Supreme Court voted unanimously for the Divorce Courts to be at liberty to redistribute assets that were held upon trust for the sole beneficial interest of Mr Prest by the Company (consisting of a multi million pound property portfolio); the Court made it clear that this was not a case whereby the ‘corporate veil‘ could be lifted.The Company was directed to transfer the property portfolio worth £17.5 million to the wife.

So in effect, the decision upon strict interpretation of the case, can be said to have strengthened the cheats charter, allowing those in business to consult further with their advisors to tighten up their corporate structures to make sure that there is no evidence of a link between the owner and the Company to avoid the outcome in this case.

That said, there is no doubt that the decision of the Supreme Court will be of huge benefit to spouses  where there are business structures (whether substantial or modest) that have been set up with the intention of defeating (usually the wife’s ) claims for financial remedies under the Matrimonial Causes Act 1973. The Supreme Court Judges have sent a warning shot to scheming, underhand spouses that where ever possible, Justice will be done within the ambit of the  UK law.

Regardless of the extent of your assets and respective financial positions; if you are contemplating Divorce  or separation from your partner or you have already separated, I would recommend that you consider in the first instance, the services of a family mediator to reach your own informed agreements about property, finance and/or children.

Family Mediation (in suitable cases) will prove to be less  stressful and will allow for on going communication between you and your ex partner. It will also limit both the financial and emotional costs of your break up. Please visit my website for more information.

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