Vulnerability of company assets in family court
The Supreme Court recently issued a judgement in a divorce case which has potential implications for business.
The position was that Mr Prest owned a number of companies that held properties. Mrs Prest sought a financial award and asked for the properties held by the companies to be transferred to her in part satisfaction of her award.
The Supreme Court considered various arguments, it held that the family courts have no jurisdiction to direct the transfer of corporate property on the basis that the company is controlled by a spouse. It also held that “piercing the corporate veil” and looking behind the separate legal personality will only succeed in very limited circumstances. However, in Prest it was felt that it was not appropriate to disregard the separate legal ownership; rather the companies held the various properties on trust for Mr Prest beneficially. It was on this latter argument that the claim succeeded.
The lead judgement pointed out that this case was “highly fact specific” and centred around specific transactions. However, there are significant implications for companies and the position on investments and the supporting documents may need to be reviewed.
Date: 27th November, 2013
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