Can divorcing spouses protect assets by citing company law?
However, he said family law was applied differently in both countries, with dependent spouses tending to do better in the UK when it comes to property distribution, while dependent spouses do better in Ireland in terms of maintenance.
Mr Davy, a partner with Hayes Solicitors, said the Irish courts can direct a husband or wife to transfer a company shareholding to their partner in a divorce case, but this is usually only done after careful consideration.
“If the husband was in business with his father and brothers, the court would most likely see it as impractical to transfer his shareholding to his spouse. Often a valuation of a company shareholding is given in court, and then the court will transfer other assets to the partner in recognition of the value of that shareholding,” he added.
Under Irish law, spouses must list all their assets including company shareholdings in divorce cases. All assets including the company shareholding can then be divided up.
In fact, the Irish courts have already visited the issue in the case of Bd v Jd. In that case, the court ruled the corporate veil could be pierced because there was no prejudice to any third party in doing so, and everyone was happy with making provision for the wife from the assets or earnings of the company.
However, in his Supreme Court judgment, Mr Justice Adrian Hardiman noted: “Lest the case be regarded as a precedent for proceeding in this way in other, quite different, circumstances, I would remark that the interests of the company itself and of other persons interested in it in any capacity might, in a proper case, require consideration.”
“It must not be forgotten that the company is, in law, a person distinct from its shareholders,” he added.
However, critics argue the Court of Appeal Prest judgment will enable wealthy spouses to protect their assets in divorce disputes.
In her appeal to the Supreme Court, Yasmin Prest will have the backing of a dissenting opinion from one of the Court of Appeal judges, who said Mr Prest’s invocation of company law to protect his assets should not have been allowed to “defeat the Family Division judges’ overriding duty to achieve fairness”.
Mark Pery-Knox-Gore a partner in the commercial department of Beauchamps solicitors, believes the Irish courts would most likely follow the UK Supreme Court if it holds that the corporate veil can’t be lifted in this case.
“Company law is always developing and keeping pace with the business world. That said we would probably follow the idea that there is just one law, and it cannot be overruled to suit the court’s perception of what is a fair result. The courts here have been reluctant to lift the corporate veil except in limited and well-defined circumstances.”