There has been a lot in the news recently about a so called ‘cheat’s charter’ that allows the wealthier party in a divorce case to ‘hide’ money and assets out of reach of the spouse that is claiming a stake on the business that he or she has never worked in or taken an interest in, or in the money that you have worked hard to save for and invest.
Some in the legal profession were left astounded at the decision arrived at late last year by the Court of Appeal in the case of Prest v Prest, which rejected the more liberal position that the judges in the Family Division have adopted over many years. Basically, it had become the position that when dealing with finances in divorce, a spouse was entitled to disclosure of all financial documents that related to his/her spouse: be that investments, business related: whatever. The notion of the corporate veil, which exists in all commercial matters simply did not seem to be relevant in family cases at all. However, this new decision has changed all of that.
No longer can it simply be assumed that all that a company owns, automatically belongs to you as well. If you can show that your business assets are distinguishable from you as an individual, your spouse will not be able to lay a claim to it whilst dealing with the division of financial assets in the divorce proceedings. Whilst many have said that this has now allowed the more unscrupulous business owner to hide assets in a divorce case, the unarguable reality is that the corporate veil has rightfully been pulled in to place in family cases making it harder for unscrupulous spouses to assume a right to their other half’s business interests.
Pinder Reaux & Associates