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Business Assets and Divorce

There have been many headline grabbing divorce cases which are the stuff of nightmares for some highly successful entrepreneurs. While at one time they had the comfort of knowing that claims against them would focus upon the actual needs of their spouses and children (however generously interpreted)- they now involve sharing assets accrued during marriage over and above needs.

Business assets are often at the centre of these disputes. The recent case of Petrodel v Prest in the Court of Appeal has generated a great deal of interest and debate amongst family lawyers involved in this area of work.

In this case, the husband had companies in his control and the companies owned properties. The court originally decided that these properties could be transferred to the wife because they were held in the corporate structure the husband had set up for his own and his family’s benefit. As such, the companies were the husband’s mere nominees or agents. The consequence was that the Judge awarded the wife approximately half the total asset value. The Court of Appeal however, stated that the companies remained separate legal entities and the properties owned by them could not be transferred to the wife. The difference in the award as a result was massive.

Of course a party’s shares in companies will be valued in divorce proceedings and the court can order transfer of shares but this is not always a practical solution.

Had the husband acted with impropriety and the company was being used as a mere ‘sham’ to prevent the wife’s rightful share and had he used the corporate identity to hide facts or conceal wrongdoing the outcome may well have been different.

We await with interest to see whether this decision is overturned on appeal.