The principle of separate legal personality of a company has been affirmed in yesterday’s Supreme Court case of Prest v. Petrodel Resources Limited, and the principles upon which the court will act to “pierce the corporate veil” have been clarified, but it remains the case that upon divorce, the court will look carefully at the reality of the structure to achieve a fair distribution of assets. The decision has important implications for all those engaged in the trusts and corporate services business.
A unanimous Supreme Court overturned the decision of the Court of Appeal yesterday in the case of Prest v. Petrodel Resources Limited and others  UKSC 34 (400 KB PDF). At stake was the issue of whether it is open to the court, in an application for ancillary relief in divorce proceedings, to treat assets of a company of which one spouse is the sole controller as being assets to which that spouse is “entitled” for the purposes of Section 24(1)(a) of the Matrimonial Causes Act 1973. Lying at the heart of the matter are the competing objectives of the commercial and family law divisions, the former of which seeks adherence to established legal principles to ensure commercial certainty for parties dealing at arm’s length, while the latter aims to achieve a “fair result” in circumstances where the parties are dealing at anything but arm’s length.
It has been widely reported that the Prime Minister of the UK, David Cameron, will call upon the British Overseas Territories (BOTs) which are regarded as low tax jurisdictions to “get their houses in order” (The Daily Mail, 5 June 2013) and that offshore financial centres such as Bermuda, Cayman, BVI, Jersey and Guernsey will be urged to “sign up to greater tax transparency” (Royal Gazette, 6 June 2013).
Bermuda has always defended its status as a low tax jurisdiction, and has always made it clear that it is not a tax haven, nor a place where the fruits of tax evasion can be harboured. It is relevant to recall the efforts that Bermuda has made over the last 30 years to justify its claim to being a leading offshore financial centre, not a tax haven.
At MJM we take great pride in giving back to the community.
MJM attorneys and staff believe in social responsibility and we invest our time, skills and talents into community causes. Over the years, we have demonstrated our commitment to the community in which we live and work by taking a hands-on approach to community causes and charitable events.
We are particularly proud to support and participate in Bermuda’s annual ‘End-to-End’ event, Bermuda’s premier annual charitable pledge event committed to promoting the happiness and well-being of our Island community through all-inclusive activities.
The internet should give us all pause for thought, particularly in the context of estate planning. In preparing a will, we focus on home, bank accounts and a lifetime of accumulated tangible treasures that we wish to pass on to loved ones. And we select trusted friends or family members to take responsibility for the task of seeing these things make it into the right hands.
Social networking accounts, and the data they store, are rarely contemplated in this context. For those of us less tech-savvy than the rest, the question may well be, does it matter? The answer must be a resounding YES, as the information that has the potential to be lost can be irreplaceable. Many people use their Facebook or Google account as a personal databank, or store all of their pictures, music, videos and other digital content in “the cloud”. While there is some variation amongst social networking providers as to what happens to the account on the death of the account holder, one thing seems to be certain: access by next of kin to information stored in the account will be limited at best. Some sites will delete data stored in an account after a period of inactivity, while others allow an account holder to nominate a person to “inherit” the content in certain proscribed circumstances. Others, still, like Facebook, “memorialize” an account, which means the profile remains in existence forever, access being restricted to friends only. In part, the lack of consistency in approach with regards to the death of account holders is the result of privacy and probate laws not keeping pace with the reality of the internet, as well as a failure to properly define “digital assets”. As well, establishing policies to deal with the death of account holders is neither sexy nor fun.
In an effort to achieve a fair division of matrimonial assets, the Court is increasingly demonstrating its willingness to scrutinise the beneficial interests of divorcing spouses under family trusts.
A high divorce rate seems to have become the norm rather than the exception in the western world. This reality, and the Court’s determination to achieve fairness on the dissolution of marriage, has generated a measure of uncertainty with respect to the treatment of trusts. In a discretionary trust context, a beneficiary has only a right to be considered in the exercise of the trustees’ discretion and this has shielded beneficiaries on divorce, who had no fixed entitlement to any portion of the trust fund. However, the Court, in divorce matters, is concerned about achieving a fair division of marital assets and increasingly has taken the view that a divorcing spouse’s interests under a trust should be subjected to closer scrutiny.