This Content Was Last Updated on February 9, 2017 by Jessica Garbett
Lifting the veil of incorporation is rare in practice; however the courts do permit it, as a recent case illustrates.
Lifting the veil of incorporation is rare in practice; however the courts do permit it when the person or persons are using the incorporation of a company to evade or deliberately frustrate a legal obligation or liability.
Such an occasion occurred in the case of Petrodel Resources Ltd and Others v Prest, which was heard in the Supreme Court. Mr Michael Prest was born in Nigeria and Mrs Yasmin Prest was born in England; both have dual Nigerian and English nationality. They were married in 1993 and lived in England, although the husband was resident in Monaco from 2001. There was also a second home in Nevis.
The husband owned and controlled a group of oil trading companies, two of which owned seven residential properties in London. In the divorce proceedings, Mrs Prest applied for a lump sum of £30m. She also applied for a declaration that the properties were held by the companies on trust for the husband or that he was beneficially entitled to them.
Mr Prest who was resident outside the court’s jurisdiction offered a package worth a little over £2m. The Family Division judge found that the husband had attempted to conceal the value of his assets, estimated at £37.5m and that his purpose in vesting the legal interest in the properties was wealth protection and avoidance of tax.
The judge held that the properties were effectively his assets in spite of having been owned by the companies. This is a comparatively rare decision, as it contradicts the decision in Salomon v Salomon Ltd [1897] which established the principle of separate corporate identity.
Article contributed by ACCA