Family lawyers across the country await the outcome of the Supreme Court Decision in Petrodel v Prest with baited breath. The conclusion of this case is eagerly anticipated due to its potential impact upon both family and corporate law.
The central issue at stake is whether courts can ‘pierce the corporate veil’, to look through the company structure, and transfer assets held by companies in the circumstances of divorce, where companies are wholly owned by one of the divorcing parties.
This intriguing conflict between family law and corporate law is expected to come to a head on Wednesday 12 June and the outcome may create legal shockwaves.
A Brief Recap of Petrodel v Prest
Earlier in the proceedings, the High Court held that Michael Prest, founder and owner of an energy company, Petrodel Resources, should pay £17.5 million to his former wife Yasmin. In making its judgement, the court decided that the order could be made directly against shares or properties because the husband was a 100% owner of the companies in which they were held and they therefore effectively belonged to him.
However, one of the underlying principles of company law is that companies are separate legal entities to the people that own them, the shareholders and the people that run them, the directors. This protects the owners and directors from actions against the company and vice versa. Therefore the decision in Petrodel v Prest to pierce the corporate veil in this way was overturned on appeal and the case was finally referred to the Supreme Court.
For more details about the Court of Appeal’s decision, see our earlier piece ‘No Piercing the Corporate Veil for Matrimonial Settlements’ and for a discussion of the potential implications see, ‘Matrimonial Assets: The Implications of Petrodel v Prest for Future Financial Remedy Proceedings’.
The Supreme Court Decision
The Supreme Court’s final judgement is expected on Wednesday 12 June; keep watching for our review and assessment of its future impact on family law for ‘big money’ divorce cases.
In the meantime, if you would like to know more about this case or wish to discuss other family law issues please contact the Family Law Department by telephone on 0207 611 4848.