Due to recent decreases in the corporation tax rate, there is now a significant difference between corporation tax rates (currently 23 per cent and due to decrease to 20 per cent by 1 April 2015) and the top income tax rate of 45 per cent. In giving judgment on 12 June 2013, the … impropriety or wrongdoing on the path of the alter ego of Earlier this year, the Supreme Court handed down its much-anticipated judgment in Petrodel Resources Ltd v Prest. issue. Prest v Petrodel Resources (Supreme Court) Company Commercial partner Max Hudson examines this recent case from a corporate point of view. a person is under an existing legal obligation or liability or piercing the veil of incorporation as follows: "I consider beneficially owned by its controller is a highly fact specific approved the Court of Appeal's reasons for not piercing the Another was to take funds from the companies whenever he wished, without right or company authority. 7. Introduction On 12 June 2013 the UK Supreme Court delivered judgment in Prest v Petrodel, a divorce case, and decided that properties purchased in the name of companies owned and controlled by the husband were held on trust for him and thus formed … Supreme Court’s decision in Prest v Petrodel Resources Ltd with a view to determining whether the decision is a step towards the abolition of piercing the corporate veil doctrine. trustee. James and Jennifer have two children: Stephen and Penelope. In 2011, Moylan J gave judgment in the case of Prest. personality. settlor, who transfers some or all of his (or her) property to a Piercing The Corporate Veil: Prest Vs Petrodel Resources The Supreme Court has handed down a landmark judgement in favour of Mrs Prest in high profile matrimonial dispute. The principal parties before the judge, Moylan J, were Michael and Yasmin Prest. In KOTOYE V. He was born in Nigeria and she in England. recognised that the veil of incorporation can be pierced where the Heard on 5 and 6 March 2013 But fiction is the whole foundation of English company and insolvency law i.e. In the future, either Stephen or Penelope (or both) could also be added as trustees; this can be a useful way of initiating their involvement in the management of the FIC and the family wealth. The case is of great significance. Mondaq uses cookies on this website. But fiction is the whole foundation of English company and insolvency law i.e. companies to hold legal title to properties which belonged to him Reasoning provided by Lord Sumption in Prest v petrodel: 16. The decision in Prest v Petrodel is not entirely unexpected. In giving judgment on 12 June 2013, the … In Prest v Petrodel, the Court was faced with a situation which posed the option of disregarding the concept of separate personality. The Matrimonial Causes Act 1973, s24 gives the court the power to order one party to the marriage to transfer any property to … Lord Sumption endorsed Munby J’s judgment in Ben Hashem v Al Shayif [2009] 1 FLR 115, which sets out a useful summary of when the corporate veil can be pierced. This is to say nothing of the growing problem of enforcement given the higher number of cross-jurisdictional cases – but that is beyond the scope of this article. Moylan J, in the Family Division of the High Court, held that Mr Prest had the ability to transfer the properties in practice, so he was “entitled” to them under MCA 1973 s 24(1)(a). Petrodel Resources Ltd & Ors v Prest & Ors [2012] EWCA Civ 1395. The trustee holds that property for the beneficiaries of Introduction On 12 June 2013 the UK Supreme Court delivered judgment in Prest v Petrodel, a divorce case, and decided that properties purchased in the name of companies owned and controlled by the husband were held on trust for him and thus formed part of his assets. In Prest v Petrodel the husband was a wealthy oil trader who had built up a portfolio of properties; all of which were in the names of various companies. in a commercial dispute relating to the shares of a company. Prest v Petrodel Resources Ltd & Others [2013] UKSC 34 Introduction. Since the facts of the case did not fall within the The basis upon which the Supreme Court reached this decision (Lord Sumption giving the lead judgment) was by a different route from Moylan J, and it considered a number of different angles used by family lawyers to access assets held in corporate and trust structures on divorce. veil, but held that the companies were bare trustees of the This had led families to consider other wealth-planning vehicles. All Rights Reserved. personality and company law; for our present purposes however, the The first option presents an inherent capital gains tax (CGT) risk. However, changes were introduced in 2009 which significantly enhanced the tax treatment of dividend income received by UK companies and the rate of corporation tax is now on a downhill trajectory to 20 per cent from 1 April 2015. Before considering FICs in detail, it is also helpful to consider other vehicles that have been put forward as an alternative to trusts since 2006. the pool of matrimonial assets. In addition, in contrast to other vehicles, the legal regime surrounding FICs has remained stable while the regimes surrounding trusts and partnerships have had some turbulent years. a distinct legal persona of companies has been firmly upheld as one In 2013, the case of Prest v Petrodel [2013] UKSC 34 left the family law fraternity debating and divided. The case of Prest v Petrodel Resources Limited and Others [2013] UKSC 34 has been a battle, through the English High Court, Court of Appeal and Supreme Court, between the principles of corporate integrity on the one hand and fairness on divorce on the other, as much as between Mr and Mrs Prest and the companies in which Mr Prest had an interest. could be transferred to her under ancillary proceedings as part of The problem with that, and the reason that they have not been taken up so much, is the regulatory issues. The family trust has been an important and useful wealth-planning vehicle since the time of the Crusades. corporate veil was available under Section 24 of the English They want to invest half of the amount for their children, and they want to continue to be able to benefit from the remaining half. Registered Office: Artillery House (North), 11-19 Artillery Row, London SW1P 1RT, United Kingdom. The case concerned a very high value divorce.. This, however, may not be suitable if the children are over 18 years old as they could then choose to invest the monies in something else! UKSC 2013/0004. divorced couple were citizens of both Great Britain and Nigeria. Introduction. Mr Prest wholly owned and controlled (directly or indirectly, through intermediate entities) a number of non-UK resident companies which, between them, owned seven residential properties in the UK. If control is in the hands of the senior generation, you would end up with a collective investment scheme, but it is possible – with careful drafting – to arrange for the senior generation, effectively, to have weighted votes without the arrangement constituting a collective investment scheme. The case of Prest v Petrodel Resources Limited and Others [2013] UKSC 34 has been a battle, through the English High Court, Court of Appeal and Supreme Court, between the principles of corporate integrity on the one hand and fairness on divorce on the other, as much as between Mr and Mrs Prest and the companies in which Mr Prest had an interest. The case of Prest v Petrodel Resources Limited and Others [2013] UKSC 34 has been a battle, through the English High Court, Court of Appeal and Supreme Court, between the principles of corporate integrity on the one hand and fairness on divorce on the other, as much as between Mr and Mrs Prest and the companies in which Mr Prest had an interest. of Common Law's gifts to global jurisprudence. D Lightman, ‘Petrodel Resources Ltd v Prest: Where are we now?’ – Trust & Trustees (2013) 19 (9):877 J McDonagh, ‘Piercing the corporate veil in the family division: Prest– the latest from the court of appea’l- Trust and Trustees (2013) 19 (2) 137 However, the point to properties. One of Mr Prest’s failings was to provide funding without properly documented loans or capital subscription. to identify him as the true owner of those properties, so that they Specialist advice should be sought The wife appealed this decision to the Supreme Court. He rejected the husband had done anything improper relating to the companies to allow piercing the corporate veil. At the court of first instance, it was held that the veil of Often clients are drawn to FICs because of their familiarity with the legal and taxation regime. In this case, the husband had effectively purchased a number of properties in England which he had put into the names In Prest v Petrodel at para. 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