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UK Divorce Law and Your Family Business: How to Protect Your Assets

UK Divorce Law and Your Family Business: How to Protect Your Assets

Following a recent landmark judgement on the Petrodel case in the Court of Appeal, divorcing couples may find it tougher to separate any family assets held in companies and are predicting an increase in protection of family wealth through corporate structures.

The case involved Mr Prest, a super-rich international oil trader, and the ruling is expected to have an impact on any spouse trying to get a share of a family-owned business.

The family courts had previously approached company-held assets as part of the overall pie to be divided under divorce, and that was the approach taken by the High Court in earlier hearings in this case, where the ex-wife was awarded a share in her ex-husband’s corporate assets, which included 14 properties in various countries. The judge ruled that the properties were effectively Mr Prest’s assets and ordered him to transfer the properties to his ex-wife as part of the settlement process.

But Court of Appeal judges found in favour of the ex-husband’s company, saying that the High Court had been wrong to find that Mr Prest’s sole ownership of the property-owning companies made him entitled to freely dispose of their assets.

The ruling means that future financial proceedings arising out of divorce cannot expect settlements to draw on company-held property. In practice, this means that if one party ties up their assets within the structure of a legitimate limited company, they may be able to avoid their financial obligations on divorce.

However, one of the appeal court judges dissented, saying that allowing Mr Prest to shield the companies’ properties from the settlement would defeat “the Family Division judge’s overriding duty to achieve a fair result.”

“It’s a controversial decision,” said Chesham-based IBB Solicitors.

“It’s been widely criticised, because it opens the door to spouses escaping substantial divorce settlements, and will not just affect the very wealthy.”

“Knowing how to handle family business assets in any new divorce proceedings is made all the more complicated as the ex-wife in this case has been given leave to appeal against the ruling and that will be heard in the Supreme Court in March 2013, so we may yet have this over-turned.”

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