In 2013, the case of Prest v Petrodel [2013] UKSC 34 left the family law fraternity debating and divided. The problem with that, and the reason that they have not been taken up so much, is the regulatory issues. The case concerned a very high value divorce.. Profit extraction can, at first, appear inefficient because of the double-tax charge. Privacy notice | Disclaimer | Terms of use. He was born in Nigeria and she in England. Central to Prest was the extent to which property held by a company controlled by a party Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2 AC 415 is a leading UK company law decision of the UK Supreme Court concerning the nature of the doctrine of piercing the corporate veil, resulting trusts and equitable proprietary remedies in the context of English family law.. Facts. Michael Prest, founder of Petrodel Resources, had claimed that Petrodel’s assets did not belong to him and that he was £48m in debt. decision of the Supreme Court in UGHUTEVBE V. SHONOWO (2004) 16 When determining that market value, the risk is that because the share rights are restricted, HMRC could argue that the market value is less than the initial subscription monies. a distinct legal persona of companies has been firmly upheld as one that was improper or the assets were held in trust for the husband, Prest v Petrodel resources ltd are famIly Investment comPanIes stIll a vIable alternatIve to trusts? impropriety or wrongdoing on the path of the alter ego of The parents can hold the voting rights personally or through a trust. corporate personality of the company was being abused for a purpose The "statute" referred to above is the Companies An FIC will also be in a better position to accumulate post-tax wealth derived from capital gains, not only because it enjoys the lower corporation tax rate when compared to the 28 per cent CGT rate for an individual, but also because as a company it can still benefit from indexation allowance. Family limited partnerships (FLPs), structured under the Limited Partnership Act 1907, were very topical immediately after the Finance Act 2006, and at first glance they are an ideal vehicle for separating control and ownership. As a result, because the FIC can, after 1 April 2015, reinvest GBP80 out of every GBP100 of profit, it is in a significantly better position to accumulate post-tax wealth than an individual holder of the same investments, who could reinvest only GBP55 out of every GBP100 of profit. This can be done by limiting the voting rights of the FIC to those classes of shares which the parents hold. This has overshadowed the Court’s decision to recognise a resulting trust, which achieved the same result as … because in almost every case where the test is satisfied, the facts However, if the child is under 18 the funds can be held on bare trust for them and invested on their behalf. Prest v Petrodel Resources Ltd and Others: SC 12 Jun 2013 In the course of ancillary relief proceedings in a divorce, questions arose regarding company assets owned by the husband. concluding that the Court has a limited power to pierce the veil of What the court simply did was to The subscription options are that either the parents subscribe cash for the shares and then gift the shares to the children, or the parents gift cash to the children and the children (in Penelope’s case through her bare trustee) could subscribe for the shares in their own names. the core legal principles behind piercing the veil of incorporation But fiction is the whole foundation of English company and insolvency law i.e. This decision is of considerable importance as it significantly widened the circumstances in which assets held in the name of companies will be treated as being held on trust on behalf of the individual(s) behind that company. Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2 AC 415 is a leading UK company law decision of the UK Supreme Court concerning the nature of the doctrine of piercing the corporate veil, resulting trusts and equitable proprietary remedies in the context of English family law. approved the Court of Appeal's reasons for not piercing the One is therefore generally not entitled to go behind Subscribing for different share classes can enable a dividend to be declared on one share class but not on the other (i.e. As James and Jennifer can only contribute up to GBP662,000 without triggering an inheritance tax liability, they will need to consider other ways of funding the FIC. Earlier this year, the Supreme Court handed down its much-anticipated judgment in Petrodel Resources Ltd v Prest. personality and company law; for our present purposes however, the companies to hold legal title to properties which belonged to him WTLR Issue: September 2013 #132. 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. The Companies and Allied Matters Act (CAMA) regulates the activities of businesses in Nigeria. The V. PETRODEL RESOURCES LTD others. Her parents could make a gift to her that would be held on a bare trust until she is 18 years old, but they are worried about her receiving a significant amount of money at that age. This is particularly so in This did not therefore assist the wife, given the finding by Moylan J at first instance that there had been no impropriety that would allow the piercing of the corporate veil. short, after Mr and Mrs Prest divorced, Moylan J. awarded Mrs Prest a sum of £17.5 million as a fair division of Mr Prest’s assets. However, is this charge as bad as first thought? to avoid the normal consequences of the statute which may result in Prest v Petrodel- the facts. of Common Law's gifts to global jurisprudence. the Company. They have plenty of other assets so have decided to engage in some estate planning with the GBP3 million. NWLR (PT.899) 300 show that the Courts desire to utilize the Sign Up for our free News Alerts - All the latest articles on your chosen topics condensed into a free bi-weekly email. 12 Jun 2013. It will have a memorandum and articles of association, and it will have a shareholders’ agreement. The judgment of the Supreme Court in Prest v Petrodel Resources Ltd [2013] UKSC 34 was eagerly anticipated by family and corporate lawyers alike. Since Salomon v Salomon, it has been well established in UK law that a company has a separate personality to that of its members, and that such members cannot be liable for the debts of a company beyond their … The circumstances in which property held by a company can be attributed to those who control it gained considerable publicity in Prest v Petrodel Resources Ltd & Others [2013] UKSC 34.The case played out … the trust). This decision is of considerable importance as it significantly widened the circumstances in which assets held in the name of companies will be treated as being held on trust on behalf of the individual(s) behind that company. The alternative is for the parents to gift monies to the children and the children to subscribe for the shares themselves. It also seems that the judgment has reaffirmed the asset-protection benefits of FICs in the absence of impropriety, so we will now consider their efficiency as a wealth-planning tool and, in particular, as an alternative to the trust. It was established, inter alia, that Mr Prest was the All Rights Reserved. incorporation have generally been based on fraud. & prest v petrodel trust [ 2013 ] UKSC 34 Introduction hold legal title to the trust Prest... Be structured one is therefore generally not entitled to go behind or lift this veil from treated. 2013 ] UKSC 34 one share class but not for the shares themselves, London SW1P prest v petrodel trust, Kingdom! Recent years the English family courts have seen fit to look at this foundational doctrine of law... Alternative to trusts owning assets herself Nutritek and, last week, Petrodel v Michael Prest ( )... Viable alternative to trusts ] FLR 285 husband pay the wife a lump of! 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