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Company Assets in a Divorce


Expect Fewer ‘Hiding Places’ – Wealth Protection in Company Structures

Will Not Be Safe in a Divorce

Suzy Hamshaw, a family lawyer with Charles Lucas & Marshall, believes courts will look more closely at how company assets are held in a divorce and in particular whether they are being held on trust for a spouse.

Suzy Hamshaw - Divorce Specialist, Family Law Expert and Financial Claims on Divorce

Suzy Hamshaw

The Supreme Court has unanimously allowed an appeal by an oil tycoon’s former wife – reversing the decision of the Court of Appeal. The case addressed whether the court could treat properties belonging to a limited company as if they were assets belonging to the husband where he was the sole shareholder of the company.

In the original proceedings the High Court found that the husband had sole control of the companies and could deal with the assets as he wished and so they should be treated as belonging to him. The Court of Appeal reversed this decision, applying company law that a company and its shareholders are separate legal entities and that the assets of a company belong to it and not to its shareholders.

The Supreme Court reversed this decision but applied different principles to the High Court. In deciding the case, the court used trust law rather than company law to declare that the properties were on the particular circumstances of the case, not owned by the company but held on trust for the husband and therefore formed part of his assets on the divorce.

In doing so the Supreme Court upheld the company law principle that the corporate veil can only be pierced in very limited circumstances and that assets held by a company are not owned by the shareholders unless it can be shown there had been a fraudulent or dishonest use of the company to avoid an existing obligation.

This was an important decision both for family lawyers and company lawyers. The court was clear that the relaxed approach of family courts to ownership of assets cannot continue and that the strict interpretation of the law of property applied across all legal divisions.

However, it also sent a clear signal that the court will look closely at assets in the ownership of a company and how they came to be and that attempts to hide assets from the divorce courts by transferring assets into a company will not necessarily succeed.

This should pose no problems for properly run companies and the court has reaffirmed the law on the piercing of the corporate veil which will only happen in very rare circumstances. However, directors may wish to take this opportunity to examine their company’s asset portfolio to determine in what capacity the company assets are being held.

For further information contact Suzy Hamshaw on 01635 521212 or suzy.hamshaw@clmlaw.co.uk

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Suzy Hamshaw
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Suzy Hamshaw

December 9th, 2013 at 11:57 am