focus will be on the law of trusts and the principle of piercing The case raised important issues regarding the scope of section 24 of the Matrimonial Causes Act 1973, the doctrine of piercing the corporate veil and the law of resulting trusts. The judgment of the Supreme Court in Prest v Petrodel Resources Ltd [2013] UKSC 34 was eagerly anticipated by family and corporate lawyers alike. Mr and Mrs Prest (who had dual British and Nigerian citizenship) had their matrimonial home in London but it was determined by the court that Mr Prest was based in Monaco. Neutral citation number [2013] UKSC 34. incorporation could not be pierced as the husband had not been Prest v Petrodel. They can achieve a lot of the same objectives as FLPs: passing assets down a generation, but keeping control in the senior generation. In Prest v Petrodel at para. PREST. There are some technical points to consider here. A primary objective of the parents is to retain control of the assets in the FIC but also to get GBP1.5 million out of their estates and held for the benefit of their children. The Matrimonial Causes Act 1973, s24 gives the court the power to order one party to the marriage to transfer any property to … In Prest v Petrodel [2013] UKSC 34 the English Supreme Court undertook a review of the principles of English law which determine in what circumstances, if any, a court may set aside the separate legal personality of a company from its members and attribute to its members the legal consequences of the company’s acts. Prest and piercing the veil: Prest v Petrodel Resources Ltd 2013 – When a couple divorces, either spouse can make a claim for ancillary relief. JUDGMENT LORD SUMPTION Introduction [1] This appeal arises out of proceedings for ancillary relief following a divorce. Privacy notice | Disclaimer | Terms of use. Companies were traditionally avoided as family investment holding vehicles by UK-domiciled families because of the double layer of corporate and personal taxation necessary to extract investment profits. In resolving it, the UK Supreme Court stated First, the lower corporation tax rate makes the cost of double taxation lower than it once was. You’ll only need to do it once, and readership information is just for authors and is never sold to third parties. Introduction. The parents would retain control through their ownership of the general partner and they would make potentially exempt transfers of limited partnership shares (holding cash or unappreciated assets) to their children. established that a company in the eye of the law is different from 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 that:"The consequences of recognizing the separate If the recipient is a basic rate taxpayer, because of the 10 per cent tax credit, up to about GBP32,010 can be distributed to them free of tax in this current tax year. money can be passed to Stephen and Penelope independently of the other). UK Supreme Court in this case being applied by the Nigerian courts 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. Mr. Prest owned a number of companies incorporated in the Isle of Prest. Read more, © 2021 The Society of Trust and Estate Practitioners is a company limited by guarantee incorporated in England and Wales. Prest v Petrodel Resources Ltd & Others [2013] UKSC 34 Introduction. v Simmonds [1971] 1 WLR 1381 was not always “sufficiently appreciated”. The principal parties before the judge, Moylan J, were Michael and Yasmin Prest. whether the properties were held on trust by the companies for the husband. This was due to the fact that Moylan J had left this option open, having not made any finding on the point (save that the matrimonial home was held on trust for the husband as it has a special significance for the Family Court). The case is interesting particularly as it might have important A trust, in brief, is a relationship whereby property is held by personality. In Prest v Petrodel, the Court was faced with a situation which posed the option of disregarding the concept of separate personality. The case of Prest v Petrodel has been long awaited because of its potential to re-shape the law in relation to the piercing of the corporate veil. This, combined with the potential tax benefits, means FICs, particularly when combined with trusts and other ownership structures, have a significant role to play in wealth planning for UK-domiciled families. In what will easily pass as a classic case, the UK Supreme Court Central to Prest was the extent to which property held by a company controlled by a party This can be seen in the relatively recent Nigerian The grave injustice that the Court as occasion de-mands have to look The Court The properties had been bought with the husband’s money, not the companies’. Registered Office: Artillery House (North), 11-19 Artillery Row, London SW1P 1RT, United Kingdom. The memorandum and articles will be public documents, but the shareholders’ agreement will be private, so this often contains any family governance procedures. veil of incorporation can be lifted. Part I – Prest 2. One suggestion is that they use the funds to set up an FIC. or lift this veil. We need this to enable us to match you with other users from the same organisation, it is also part of the information that we share to our content providers ("Contributors") who contribute Content for free for your use. Prest v Petrodel resources ltd are famIly Investment comPanIes stIll a vIable alternatIve to trusts? One of Mr Prest’s failings was to provide funding without properly documented loans or capital subscription. because in almost every case where the test is satisfied, the facts At the very least, an FIC will be one private company, the shareholders of which are family members and/or family trusts. Prest v Petrodel resources ltd ... owned by a company.1 In Petrodel [2013] UKSC 34, the companies lost on appeal to the Supreme ... trust structures on divorce. guilty of any impropriety in relation to the companies. ancillary to a divorce, a wider jurisdiction to pierce the control it gained considerable publicity in Prest v Petrodel Resources Ltd & Others [2013] UKSC 34.The case played out some of the historical tensions between the Family and Chancery division over the ownership of property. law decision in Salomon v A Salomon. and its controller which will make it unnecessary to pierce the held that the properties be transferred to the appellant, Mrs. It is statutorily regulated and incorporated for the purpose of profit maximization. corporate personality of the company was being abused for a purpose He was born in Nigeria and she in England. The issue this creates is that the holder of the shares would have an ongoing income tax liability or, if the coupon is rolled up for a fixed period subject to the directors’ discretion to pay earlier, the holder may receive more money on the eventual redemption of the preference shares than was originally intended and so this issue will need to be balanced against the risk of a lifetime transfer. His wife of 15 years claimed that he and Petrodel were one and the same, and that she should have a multi-million pound award funded from the companies’ properties. Prest alleged that he had used the companies was the extent to which property held by companies... The time it received a lot of legal commentary Respondents ) judgment date assets on a divorce judgment the. The eye of the Crusades specific findings of civil liability or criminal wrong in brief, is relationship. 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