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There goes the corporate veil ... or does it?


Recent case law may have many business men and women quaking in their boots. Sian Davies, senior solicitor in the family team at Glanvilles, explains the ramifications of the recent case Prest v Petrodel Resources Limited and others [2013] UKSC 34


What is the corporate veil?


An incorporated company is a legal entity wholly separate from its members/ shareholders with rights and liabilities of its own. Accordingly, in any litigation involving the member/shareholder, the courts cannot make orders directly in respect of shares and/ or properties held by the company as these are seen as assets of the company. There have always been exceptional circumstances where the corporate veil can be lifted, for example, fraudulent trading and disqualified directors. By lifting the veil, the court will have the opportunity to look at the company assets and make orders in respect of those assets as it sees fit.


So what’s changed?


In Prest v Petrodel Resources Limited and others [2013] UKSC 34, the Supreme Court lifted the corporate veil on the husband’s company allowing a more substantial settlement in the wife’s favour. In short, the parties were married in 1993. The husband has been prominent and successful in the international oil development and trade. As well as the matrimonial home, there were a number of other properties acquired by the husband in the name of the company. The Supreme Court ordered the husband transfer to the wife, some of the assets held by the company, as part of the £17.5 million settlement.


How did this happen?


The Supreme Court had to consider whether it was open to the Court in family proceedings to treat the assets of a company to which the spouse is the sole controller, as being assets to which that spouse is entitled.


The High Court on hearing the matter concluded that the husband was entitled to the properties held by the companies, therefore it was available for division. The Court of Appeal, on hearing the case did not uphold the High Court’s decision. In the alternative, the Court of Appeal found that the company was a separate legal entity and owned assets in its own right.


So, the case went to the Supreme Court as a result of the wife’s further appeal. On June 12, 2013, the case concluded. The Court considered this case in light of trust law rather than company law. As such, the Court declared that the properties owned by the company, were in fact held on trust for the husband. The result: the wife received £17.5m by way of settlement, to include the transfer of some of the company’s properties.


It is important to remember in this case that there was no suggestion of dishonesty or fraud, as in usual cases of lifting the corporate veil. In this particular case, the husband, not the company, had funded the purchase of the properties. Consequently, the Court found that the company was holding the properties


Paris Smith publishes practical guide to IT contracts


Paris Smith LLP has just had published the third edition of Drafting and Negotiating IT Contracts co-authored with Paul Klinger by partner Rachel Burnett, head of the IT/IP team.


Currently the leading work in this area, it is designed to assist professionals working in the IT industry by providing a perspective on IT contracts that is practical rather than academic.


The authors draw on their substantial experience in the industry to discuss contracts from the perspective of each party involved in the negotiations. For those who wish to understand the wider legal context, Drafting and Negotiating IT Contracts also examines the legislation and case law underpinning IT contracts.


www.businessmag.co.uk


The major distinguishing characteristic of Drafting and Negotiating IT Contracts is its in-depth focus on contract negotiation and a detailed consideration of the negotiability of contract clauses in practice. The IT industry continues to be innovative in developing new models for business transactions and relationships, and this book promises to keep readers fully up to date.


Burnett’s experience has been gained as a solicitor. She also works with the undergraduate law programme at the Open University, and before her legal career, she was an IT professional. She is author of a number of publications on IT law.


Sian Davies


on trust for the husband, thereby allowing the court to transfer them to the wife under the Matrimonial Causes Act.


End result ... lesson to learn?


The Court now has firm guidance as to when to lift the corporate veil in family proceedings. Spouses should be very mindful if deliberately hiding assets in businesses/corporate structures to defeat potential claims in divorce.


Details: Sian Davies 023-9249-2300 sian.davies@glanvilles.co.uk www.glanvilles.co.uk


Fareham firm makes good move


An expanding law firm which advises businesses across the south has capped off back-to-back record growth with the relocation of a branch office.


Turnover at Graeme Quar & Co, headquartered in Fareham, has risen to 39% over the financial year and follows an increase of 37% previously. The commercial law practice, which has created five extra jobs over the past 12 months, has seen instructions come in from current and new clients.


In order to meet increased demand from the A3 corridor up to London, Graeme Quar & Co has moved from The Spain at Petersfield to a larger building at Lyndum House, nearby at the High Street.


THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – SEPTEMBER 2013


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