You could be forgiven for thinking that everything will be taken into account in a divorce financial settlement– even assets held by a spouse’s company. Indeed this has been the decision in the majority of cases to date where assets held in the name of a company owned by one spouse are transferred to the other to achieve fairness… until now.
Recently, in a shock decision in the Court of Appeal a wealthy husband was able to keep assets held in various companies out of the settlement. This overturned the initial decision to allow assets to be transferred to his wife to make up her ‘fair’ award of £17.5 million.
The husband and wife of dual Nigerian and British citizenship had four teenage children, were highly educated and had successful careers. During their marriage they enjoyed a high standard of living with their matrimonial home in London being worth £4 million. There were also a number of other properties that the husband acquired in London, mostly in the name of three companies.
Of the three Judges, two agreed that the husband as a shareholder had no interest or entitlement to the companies’ assets and that he and the companies had separate identities. The other reason given was that married couples who choose to use corporate vehicles for tax and wealth protection should not ignore the legal status of those companies and the assets it holds when things go wrong between them.
The only Judge to disagree was a family law Judge who said: “Devious men who want to avoid making fair provision for their wives will rejoice at this decision”.
This is an important decision and is the first time the impact of well established company law principles have been felt when considering whether assets of the family are to be transferred to a former spouse. This decision comes as a stark warning that it is important in the good times to plan for the bad…
A pre-nuptial agreement before marriage is recommended as a good way to protect both partners’ assets in relation to properties owned and assets such as cars and possessions, but in cases such as these, where shares are involved, a pre-nup may not go as far as to be binding on the company.
If you would like advice on how this decision may affect you or require advice on any other matrimonial matter, please contact a member of our Family team on 01625 442100.