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High Court Pierces Corporate Veil in Big Money Divorce Case

Legal and beneficial ownership of company shares are two very different concepts and, as one case strikingly showed, family judges have the power to look behind the corporate veil in ensuring a fair division of assets between divorcing couples.

The case concerned a group of companies that had been established by a highly successful businessman. A restructuring of his business affairs had resulted in shares in the group being placed in the legal ownership of members of his family. Following the end of his seven-year marriage, his ex-wife sought financial provision from him and argued that he was the beneficial owner of the shares.

In ruling on that issue, the High Court noted that the businessman was part of a close family whose members looked after each other. The restructuring was not a sham and was not motivated by a desire to reduce his wife’s entitlements. However, the businessman’s statement that he was running the group solely for the benefit of other members of his family was a blatant lie.

He had never intended to part with control of the business and, in the circumstances, the Court found that the other family members held their shares solely as nominees, or bare trustees, for his benefit. He was the 100 per cent beneficial owner of the group, its underlying companies and its assets.