In an important recent decision the Court of Appeal reaffirmed some principles relating to a direct claim by a spouse for transfer of assets owned by a corporate entity.
In the case in question, the husband was very wealthy and had full and effective control of a number of properties in various worldwide jurisdictions. The full and effective control was by virtue of his 100% shareholding in companies which owned the assets.
In the High Court, the Judge decided that, based on the fact that the companies were owned by the husband, an order could be made to compel transfer of a number of the properties, representing 50% of the husband’s net wealth, to his wife. The husband appealed against this order.
The Court of Appeal decided by a majority that under the Matrimonial Causes Act 1973 s.24(1)(a), only in the case of clear impropriety, such as deliberately transferring assets to put them out of the reach of a spouse, the general rule that a limited company is a separate legal entity, and that assets owned by that company are owned by the company, and not the shareholders directly, should apply.
In summary, the Court of Appeal restated that going behind the separate legal entity status of a company, known as piercing the corporate veil, remains limited to cases of clear wrongdoing. Whilst the husband clearly had control of the company, it is separate from him.
A possible solution to the above scenario, from a wife’s perspective, would be for a court to order that the husband transfers a percentage of shares in the company to the wife, rather than the underlying assets.
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