Case law: Case illustrates when a court can treat an asset owned by a company as belonging to a spouse in a divorce settlement
A spouse seeking to remove an asset to a remote location and put its ownership into the name of a company, raises the strong inference that they are trying to avoid the asset being taken into account in a divorce settlement. In such cases, the court may 'lift the corporate veil' and treat the asset as belonging to the spouse not the company, a recent ruling has highlighted.
This update was published in Legal Alert - July 2018
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A court has ordered a Russian husband to transfer a valuable asset to his wife as part of their divorce settlement, notwithstanding that it is owned by a limited company.
The usual rule is that assets registered in the names of companies – which, in law, are separate legal entities - even if they are wholly owned and controlled by a spouse – are not taken into account in a divorce settlement as they are company assets. However, in exceptional circumstances the courts can 'lift (or 'pierce') the corporate veil' and treat its assets as belonging to the spouse.
In this case, the court lifted the corporate veil because it found that the husband had intentionally taken exceptional steps to put the asset beyond the reach of the English courts and, therefore, his wife. The asset had been taken to Dubai, and ownership of it had changed several times for no apparent reason other than to avoid it being taken into account in the divorce negotiations.
The judge commented: "In my judgment, it is clear that [the latest corporate owner] is simply another 'cipher' and alter ego of [the husband], and another attempt by [him] to evade enforcement…". He went on to say that "…there is an irresistible inference that [the sale was] taken at [the husband's] instruction, and in a deliberate attempt to place [the asset] beyond the reach of the orders that the English court had made".
The judge was driven partly by the fact that it would be far easier for the wife to enforce the order in Dubai if the order was made against the company directly. He was therefore satisfied that piercing the corporate veil was clearly necessary in the interests of justice.
- A spouse moving or considering removing assets to remote locations and put their ownership into the names of corporate entities, raising the strong inference that they are simply trying to avoid the asset being taken into account in divorce negotiations, should be aware that the English courts may 'lift the corporate veil' and treat the assets as belonging directly to the spouse
Case ref: Akhmedova v Akhmedov  EWFC 23
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