Are company assets available for division within divorce proceedings?
March 29, 2013 11:19 am
As I write, family lawyers across the country are awaiting the outcome of an appeal in the case of Petrodel v. Prest which was heard by the Supreme Court in early March 2013. The decision is eagerly anticipated as it could change the way in which cases involving company assets are dealt with.
In this particular case, Mr Prest was the sole shareholder of a group of companies collectively known as The Petrodel Group. Mr and Mrs Prest married in 1993 and had four children. Unfortunately in 2008 their marriage broke down and divorce proceedings ensued. They had always led an affluent lifestyle funded by the wealth of Mr Prest. As well as properties overseas, the companies, of which Mr Prest was sole shareholder, owned 12 properties in London including the family home worth £4 million.
Although the Judge in the first instance had found Mr Prest to be somewhat evasive when it came to disclosing his assets he considered Mr Prest to be worth £37.5 million. Accordingly he awarded Mrs Prest the sum of £17.5 million including properties owned by the various companies. The Judge considered that, as a sole shareholder, Mr Prest had ownership and control over the assets of the companies and as such the Judge was entitled, within the meaning of the Matrimonial Causes Act to order the transfer of the properties to Mrs Prest.
Clearly unhappy with the decision the companies appealed and the Court of Appeal took the view that, although Mr Prest was the sole shareholder of the companies, the properties were company assets and not capable of being transferred to Mrs Prest. The majority view was that a company is treated as a separate entity and as such owns assets in its own right.
This caused concern for family lawyers, and caused a number of commentators to refer to this as the “cheat’s charter”. The worry being that a husband could defeat a wife’s claim for financial provision by ensuring that all family assets were owned by a company in which he was sole shareholder thereby preventing a wife from being able to make any claim against these assets within divorce proceedings.
Mrs Prest appealed the decision and the case was heard by the Supreme Court on the 5 March. The Supreme Court’s decision is awaited and will set a precedent for the way in which future cases are decided.
It is important to note from the original Judgment that, although the Judge had some criticisms in the way that Mr Prest had dealt with the proceedings, he concluded that there was no impropriety in the way that the assets were held by the company. He simply determined that Mr Prest had ‘complete control and effective ownership of the company which equated to a beneficial ownership of their assets’. A finding of “Impropriety” would have entitled the Court to “pierce the corporate veil” and award assets to Mrs Prest in any event.
For specific advice concerning your own circumstances please contact Demelza Butler, Family Solicitor at Blocks Solicitors on 01473 343 908 or email firstname.lastname@example.org