23 July 2020 - Events
Last week's Supreme Court ruling in the long-running case of Prest v Petrodel Resources has generated much comment on how fairly to treat one-man companies in divorce settlements. The decision is highly important as it has upheld the integrity of the corporate veil. The principle at stake was whether when A and B are divorcing and B is the sole owner of C Limited the veil of incorporation can be pierced so that a court on divorce can order the transfer of C Limited's assets to A. The Supreme Court rejected arguments that case law decided in the Nineteenth Century should be cast aside in divorce cases. Instead it reaffirmed that the veil can only be pierced if the corporate structure had been used for the purpose of concealing a wrongdoing. In this case the Supreme Court decided that the companies did not have the beneficial ownership of the properties in their name because they belonged to Mr Prest. The companies had failed to produce evidence of their claim to own them. Mr Prest had failed to disclose his assets fully. Accordingly, from the limited facts available and by drawing adverse inferences from the lack of cooperation of the husband the Supreme Court decided that he, not the companies, had provided the funds for the property purchases and therefore he was their true owner. It added that this was likely to be the position in other cases where the main home is owned through a company. The decision is case specific, but it does highlight the crucial importance of setting up and running companies transparently, and with full corroborating documentation on ownership and intentions. It also highlights the importance that companies caught in divorce crossfire set out their case fully and cooperatively in order to ensure that final awards are not made that they might regret. Withers' family, contentious trust, corporate and wealth planning client teams can answer any questions you may have in relation to divorce, the structuring of assets through trust/corporate structures, wealth protection and tax planning. If you would like to speak to an advisor, please contact James Copson, partner at Withers LLP, on James.Copson@withersworldwide.com or +44 (0)20 7597 6044.