prest v petrodel trust

This amount can still be used to fund the FIC, but to keep the benefit of it James and Jennifer could either subscribe for additional ‘B’ ordinary shares which have voting rights and dividend rights or make loans to the FIC. This has overshadowed the Court’s decision to recognise a resulting trust, which This alternative structure is shown below. Prest v Petrodel Resources Ltd - FICs as an alternative to a trust Wednesday, 18 September 2013 Ever since the Finance Act 2006 clampdown on the use of trusts by UK domiciliaries and, as a separate development, the 2009 amendments to the corporation tax legislation, family investment companies (FICs) have become an extremely useful and sometimes essential tool in the family wealth-planner’s … The issue was whether those properties could be brought into the calculation of the matrimonial assets. The basis upon which the Supreme Court reached this decision (Lord Sumption giving the lead judgment) was by a different route from Moylan J, and it considered a number of different angles used by family lawyers to access assets held in corporate and trust structures on divorce. VTB was concerned with a different problem – the consequences of lifting the corporate veil, but approved (with one exception that is irrelevant here) Munby, J’s six principles that set out when a court is entitled to lift the corporate veil. 12 June 2013 . behind or pierce the corporate veil.". Neutral citation number [2013] UKSC 34. nevertheless concluded that in applications for financial relief The Court of Appeal by a majority Introduction. Petrodel Resources Limited (1), Petrodel Upstream Limited (2), Vermont Petroleum Limited (3) v Yasmin Aishatu Mohammed Prest (1), Michael Jenseabla Prest (2), Elysium Diem Limited (3) [2012] EWCA Civ 1395 (Court of Appeal, Lord Justice Thorpe (dissenting), Lord Justice Rimer, Lord Justice Patten, 26 … The content of this article is intended to provide a general reversed the decision of the trial Judge, holding that unless the The same could have been said of recent decisions at first instance on the corporate veil (particularly Ben Hashem v Shayif), until two magisterial judgments of the Court of Appeal this year: VTB Capital v Nutritek and, last week, Petrodel v Michael Prest. It will be interesting to see the principles applied by the There is no specific way an FIC needs to be structured, and this is why an FIC is potentially such a useful investment vehicle. Prest v Petrodel Resources Ltd & Ors [2013] UKSC 34 (12 June 2013) March 22, 2018/in Company /Private Law Tutor. In practice, the risk of these claims being brought, and then being successful, is low for a number of reasons. that there is a limited principle of English law which applies when The Matrimonial Causes Act 1973, s24 gives the court the power to order one party to the marriage to transfer any property to … Since Salomon v Salomon, it has been well established in UK law that a company has a separate personality to that of its members, and that such members cannot be liable for the debts of a company beyond their … The "statute" referred to above is the Companies The court was asked as to the power of the court to order the transfer of … personality has not be rendered obsolete by the decision in VTB was The Companies and Allied Matters Act (Chapter C20) Laws of the in similar situations. The appeal concerns the position of a number of companies belonging to the Petrodel Group which were wholly owned and controlled by Michael Prest, the husband. This does lead to questions in respect of the recent Mostyn J decision in DR v GR and others [2013] EWHC 1196 (Fam). Supreme Court case of AKIN-WUNMI ALADE V. ALIC NIGERIA LTD Sadly, the trust’s force now seems to be waning. This can prove to be a very efficient way of funding university education. incorporation could not be pierced as the husband had not been Petrodel Resources Ltd and Others v Prest and Others: CA 26 Oct 2012. personality. Facts. that the companies were trustees of the properties in dispute. matters of apportioning specific findings of civil liability or But … Prest v Petrodel Resources Ltd. Share. The trustee is given legal title to the trust property, but is obligated to act for the good of the beneficiaries. properties in dispute. It was of key interest as it was a legal cross over between family law and company law. Prest v Petrodel Resources Ltd emphasises the importance of properly and transparently running companies. The Supreme Court has just handed down its judgment in the landmark case of Prest v.Petrodel. approved the Court of Appeal's reasons for not piercing the The majority of commentary in the wake of Prest v. Petrodel Resources Ltd has focused on the Supreme Court’s discussion of a court’s jurisdiction to pierce the corporate veil. In Prest v Petrodel the husband was a wealthy oil trader who had built up a portfolio of properties; all of which were in the names of various companies. Care would also need to be taken, if James and Jennifer had subscribed for preference shares, that the GROB rules are not in point on a redemption. In what will easily pass as a classic case, the UK Supreme Court Prest v Petrodel resources ltd are famIly Investment comPanIes stIll a vIable alternatIve to trusts? This was due to the fact that Moylan J had left this option open, having not made any finding on the point (save that the matrimonial home was held on trust for the husband as it has a special significance for the Family Court). and its controller which will make it unnecessary to pierce the the Company. He ordered Mr Prest to transfer to the wife six properties and an interest in a seventh which were held in the name of two of the husband’s companies. Michael Prest (husband) and Yasmin Prest (wife) were married for 15 years and had four children before the wife petitioned for divorce in March 2008. Because the parents do not retain any shares in their own names the GROB concerns are significantly reduced. The Companies and Allied Matters Act (CAMA) regulates the activities of businesses in Nigeria. This can be done by limiting the voting rights of the FIC to those classes of shares which the parents hold. Clearly, that is what you have with a limited partnership under the 1907 Act. The Companies and Allied Matters Act 2020 ("CAMA 2020", "the New CAMA", or "the Act") was assented to by President Muhammadu Buhari on 7 August 2020. The Supreme Court has just handed down its judgment in the landmark case of Prest v.Petrodel. In giving judgment on 12 June 2013, the … The trustee holds that property for the beneficiaries of The Court trustee. utilize the law of trusts, based on the facts of the case, to One of Mr Prest’s failings was to provide funding without properly documented loans or capital subscription. V. PETRODEL RESOURCES LTD others. PREST. a distinct legal persona of companies has been firmly upheld as one This was in reliance on the obiter dicta in Nicholas v Nicholas [1984] FLR 285. The value of the judgement was not in question, as the courts had already ruled the husband – a Nigerian oil tycoon – would have to pay his wife £17.5m, largely due to his conduct during the case, and he was not arguing over this. held that the properties be transferred to the appellant, Mrs. She argued that the corporate veil should be pierced As a result, because the FIC can, after 1 April 2015, reinvest GBP80 out of every GBP100 of profit, it is in a significantly better position to accumulate post-tax wealth than an individual holder of the same investments, who could reinvest only GBP55 out of every GBP100 of profit. The relatively short and significant judgment in the Supreme Court case of Prest v Petrodel Resources Ltd has gathered vociferous interest from academics and practitioners. JUDGMENT LORD SUMPTION Introduction [1] This appeal arises out of proceedings for ancillary relief following a divorce. could be transferred to her under ancillary proceedings as part of The parents can hold the voting rights personally or through a trust. It was (3) that led the Supreme Court to decide in the wife’s favour. The double-tax charge on (i) profits in the company and (ii) subsequent profit extraction by the shareholder was traditionally why a company was unattractive as a wealth-holding vehicle. The application of the doctrine is frequently referred to as The majority of commentary in the wake of Prest v. Petrodel Resources Ltd has focused on the Supreme Court’s discussion of a court’s jurisdiction to pierce the corporate veil. the company. Introduction On 12 June 2013 the UK Supreme Court delivered judgment in Prest v Petrodel, a divorce case, and decided that properties purchased in the name of companies owned and controlled by the husband were held on trust for him and thus formed part of his assets. The case of Prest v Petrodel has been long awaited because of its potential to re-shape the law in relation to the piercing of the corporate veil. note is that the element of fraud is a similar instance wherein the By using our website you agree to our use of cookies as set out in our Privacy Policy. Part I – Prest 2. Facts: Mr Prest was an … delivering the lead judgment, set out the principle regarding Yasmin Prest. Family limited partnerships (FLPs), structured under the Limited Partnership Act 1907, were very topical immediately after the Finance Act 2006, and at first glance they are an ideal vehicle for separating control and ownership. But fiction is the whole foundation of English company and insolvency law i.e. As a result, while it is clear that the Supreme Court strongly endorsed the legal delineation between companies and individuals, and the limited circumstances in which the corporate veil could be pierced, it did seek to find a ‘fair’ outcome for the wife. Prest and piercing the veil: Prest v Petrodel Resources Ltd 2013 – When a couple divorces, either spouse can make a claim for ancillary relief. that was improper or the assets were held in trust for the husband, In this case, the husband had effectively purchased a number of properties in England which he had put into the names A primary objective of the parents is to retain control of the assets in the FIC but also to get GBP1.5 million out of their estates and held for the benefit of their children. Her parents could make a gift to her that would be held on a bare trust until she is 18 years old, but they are worried about her receiving a significant amount of money at that age. companies to hold legal title to properties which belonged to him The Court In fact, where possible, there is a strong preference that parents do not retain any equity interest in the FIC as this will trigger the need to manage the GROB issue both immediately and in the long term. The Supreme Court considered three options: In respect of (1), the Supreme Court took the view that piercing the corporate veil is possible ‘in a small residual category of cases where the abuse of the corporate veil to evade or frustrate the law can be addressed only by disregarding the legal personality of the company’ (para 35). Claim by Mrs. Prest for ancillary relief under section 23 and 24 of the Matrimonial Causes Act 1973 in divorce proceedings against Mr. Prest. Family general partnerships (FGPs) are something our firm has used as an alternative way to separate control and ownership. established that a company in the eye of the law is different from personality of a company is to draw a veil of incorporation over they were held on trust for the husband. law decision in Salomon v A Salomon. It also makes the drafting of the documents more complex. The Prest v Petrodel Resources Ltd [2013] UKSC 34. The companies appealed this order on the basis that the Family Court had no jurisdiction to make it because although it was correct that the husband controlled the companies, they were separate legal entities and it was the companies that owned the properties not the husband. The main issue in Petrodel revolved around Mr Prest’s interest in seven properties owned by a group of companies under his control. Matrimonial Causes Act. The judgment of the Supreme Court in Prest v Petrodel Resources Ltd [2013] UKSC 34 was eagerly anticipated by family and corporate lawyers alike. The issue this creates is that the holder of the shares would have an ongoing income tax liability or, if the coupon is rolled up for a fixed period subject to the directors’ discretion to pay earlier, the holder may receive more money on the eventual redemption of the preference shares than was originally intended and so this issue will need to be balanced against the risk of a lifetime transfer. The next question is how monies can be extracted from the FIC in a tax-efficient way, and this is where the recent changes to the taxation of companies in the UK come to the fore. All Rights Reserved. 8, Lord Sumption said separate personality and property of a company is sometimes described as a fiction, and in a sense it is. company. Prest v Petrodel Resources Ltd & Others [2013] UKSC 34 Introduction. Central to Prest was the extent to which property held by a company controlled by a party Man. The case provides a framework for an examination of a number of issues relating to the veil-piercing rule. Here in Nigeria, the decided of cases on piercing the veil of power. to avoid the normal consequences of the statute which may result in money can be passed to Stephen and Penelope independently of the other). As James and Jennifer can only contribute up to GBP662,000 without triggering an inheritance tax liability, they will need to consider other ways of funding the FIC. its shareholders. They have plenty of other assets so have decided to engage in some estate planning with the GBP3 million. JUDGMENT LORD SUMPTION Introduction [1] This appeal arises out of proceedings for ancillary relief following a divorce. POPULAR ARTICLES ON: Corporate/Commercial Law from Nigeria. case of Prest v Petrodel. This essay will argue the decision has done little to fault the Salomon principle. ancillary to a divorce, a wider jurisdiction to pierce the separate personality. Moylan J, in the Family Division of the High Court, held that Mr Prest had the ability to transfer the properties in practice, so he was “entitled” to them under MCA 1973 s 24(1)(a). In Petrodel, They are considered to be collective investment schemes in the UK, and for that reason there are significant regulatory requirements: the need to appoint an FSA-authorised operator. The alternative is for the parents to gift monies to the children and the children to subscribe for the shares themselves. those in actual control of a company. Federation of Nigeria 2004 was initially They want to invest half of the amount for their children, and they want to continue to be able to benefit from the remaining half. Facts. Before considering FICs in detail, it is also helpful to consider other vehicles that have been put forward as an alternative to trusts since 2006. James and Jennifer have just sold their business for GBP3 million. WTLR Issue: September 2013 #132. If such an argument were successful, the children’s base cost in the shares will be lower than what was actually subscribed for them by their parents, so the children would make a much larger capital gain when the shares are eventually disposed of. Court cases similar to or like Prest v Petrodel Resources Ltd. Still a viable alternative to trusts of businesses in Nigeria real control remains with the legal and taxation regime Act... In giving judgment on 12 June 2013 familiarity with the GBP3 million they wish to give away a which... Whereby property is held by one party for the husband ’ s failings was to funds... Be lifted you ’ ll only need to retain control of the documents more complex them and on! 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