Key Takeaways
- Prest v Petrodel is a landmark UK Supreme Court decision setting strict criteria for when courts can lift the corporate veil, making it much harder to claim company assets as personal.
- In most cases, courts will not pierce the corporate veil unless there is clear evidence that a company was set up to evade existing legal obligations.
- If you do nothing after a claim or dispute involving company assets, you risk losing crucial rights to protection or recovery, potentially facing serious financial consequences.
- After Prest v Petrodel, to prove a company is a “sham,” you must show deliberate misuse of the company structure to conceal true ownership or avoid lawful obligations.
- Company directors should regularly review ownership structures, as ignorance of recent case law will not protect you from liability or asset exposure during divorce, debt, or creditor actions.
- Creditors have a higher burden to prove wrongdoing when seeking to access company assets after Prest v Petrodel, so early legal advice dramatically improves your position.
- In family law and divorce cases, courts now look for evidence of beneficial ownership or trusts when considering company-held assets, not simply the individual’s control of the company.
- Delays in seeking legal advice over disputed company or asset issues may prevent you from securing an effective remedy within strict time limits set by the court.
- We are rated Excellent on Trustpilot with over 130 five-star reviews and a 4.9/5 rating.
- If you are unsure whether your company structure could come under scrutiny or you need to protect your assets after Prest v Petrodel, contact our expert lawyers for tailored legal guidance.
To get tailored advice on how Prest v Petrodel affects your business, family interests or creditor position, contact our specialist lawyers for a free consultation on 0207 459 4037.
What Did Prest v Petrodel Decide About Lifting the Corporate Veil in the UK?
Many company owners and directors mistakenly believe that a company’s assets are always safe from personal claims. However, the Supreme Court in Prest v Petrodel significantly strengthened the legal barrier protecting company assets—in most situations, courts will not “lift the corporate veil” unless there is clear proof that the corporate structure was specifically used to defeat existing legal obligations.
This decision redefined the legal test for when a court may disregard the separate legal personality of a company. If you have concerns that your company or its assets could be targeted in a dispute, our expert litigation lawyers can assess your situation and recommend practical protection strategies.
For clarity on your legal position if you’re facing a claim or asset dispute, arrange a free, confidential consultation on 0207 459 4037 or enquire online.
What Is the ‘Corporate Veil’ and What Changed After Prest v Petrodel in the UK?
The “corporate veil” describes the separation between a company and its shareholders or directors. Under the principle confirmed by Salomon v A Salomon & Co Ltd [1897] AC 22, a company is a distinct legal entity—this protects personal assets from company liabilities.
Prest v Petrodel Resources Ltd [2013] UKSC 34 was a game-changer because the Supreme Court confirmed that courts cannot simply override this separation for fairness or convenience. A much stricter test must be met before company assets can be treated as personal.
The case now gives business owners and directors much greater legal certainty and sets clear boundaries for when protections will apply.
What Are the Key Facts and Background of Prest v Petrodel?
Prest v Petrodel centred around Michael Prest, an oil entrepreneur, and his wife Yasmin during their divorce. Several high-value properties were owned by companies under Michael’s control and his wife sought a financial settlement that included those assets.
- The companies argued they were the legal owners and their assets could not be seized to satisfy Michael’s personal divorce settlement.
- The wider question for the courts became: When can a judge “look behind” the company and allow a spouse, creditor, or other claimant to access company-owned assets to meet a private liability?
This dispute created an opportunity for the Supreme Court to clarify exactly when company assets may be exposed.
What Did the Supreme Court Decide in Prest v Petrodel?
The Supreme Court refused to allow the transfer of properties from Michael Prest’s companies to his wife except where trust principles applied. The key findings were:
- A court may only “pierce the corporate veil” in cases where an individual has used the company structure to avoid a specific, pre-existing legal obligation, such as complying with a court order or repaying a debt.
- Simply having full control of a company or holding assets through it does not justify treating those assets as personal property.
- Where it can be shown the company is holding assets on trust for a party (beneficial ownership), the court can order a transfer without lifting the corporate veil.
The ruling restricts courts from disregarding a company’s separate legal personality unless the most stringent criteria are met.
When Will UK Courts Now Lift the Corporate Veil After Prest v Petrodel?
Following Prest v Petrodel, English courts apply a stepped analysis before lifting the corporate veil:
- Is there a legal obligation or liability the individual seeks to avoid (such as a debt or court order)?
- Is the company being abused as a device to deliberately frustrate enforcement of that obligation?
Both requirements must be fully satisfied—otherwise, company assets remain protected.
Where assets are held for a legitimate business reason, courts will not intervene. If your company faces scrutiny, expert advice during the earliest stages of a dispute can safeguard your position.
How Does Prest v Petrodel Affect Company Directors and Shareholders?
For directors and shareholders, the practical impact is significant but reassuring if structures are compliant:
- A company acting as a genuine commercial entity is protected, even if one individual controls it.
- Attempts to use company structures purely to frustrate creditors or hide assets create real risk of adverse court orders.
- Blurring the lines between company and personal finances without a clear commercial rationale may lead to scrutiny and potential loss of protection.
You may also find our guide on Directors’ Duties in the UK: Fiduciary Obligations, Breach & Key Risks under Companies Act 2006 helpful if you’re reviewing your position as a director.
What Is the Legal Test to Show a Company Is a ‘Sham’ After Prest v Petrodel?
A company is classified as a ‘sham’ only if formed or used with the deliberate aim of hiding the real ownership of assets or sidestepping a real legal duty. The Supreme Court clarified:
- There must be a specific obligation to evade—such as a judgment debt or financial order.
- The company structure must operate as a façade, masking the true reality for improper purposes.
Pure ownership or control, even of all shares, does not meet the test. There must be a direct and deliberate misuse of the company for an unlawful aim.
The standard is high. Claimants carry the burden of proving a company is used purely to evade legitimate obligations.
What Are the Practical Implications for Creditors, Family Law, and Divorce Cases?
Prest v Petrodel has real-world impact for those on all sides of asset disputes:
- Creditors: You now must show clear misuse before unlocking company assets. Simply proving a director controls a company is rarely enough unless you can link this to specific evasion.
- Family Law/Divorce: Divorce courts distinguish between company assets that are truly part of the marital pot (via beneficial ownership or trust) and those held as genuine business assets.
- Commercial Disputes: Co-owners and joint ventures must precisely document ownership and purposes to prevent confusion or abuse.
Acting swiftly is vital. Delays can see evidence lost or legal options reduced—especially given statutory limitation periods.
You may also find our article on Fraudulent Trading Explained: Director Liability and Corporate Remedies useful if your case involves allegations of improper asset transfers.
How to Protect Your Business and Personal Assets Under the Prest v Petrodel Principles
Directors and shareholders should invest in sound, practical safeguards:
- Keep clear, up-to-date records distinguishing between company and personal assets.
- Ensure every transfer or asset acquisition has a documented commercial reason.
- Conduct regular reviews of your company structure, shareholder agreements, and property ownership.
Where a legitimate and transparent business purpose exists, courts are far less likely to interfere—even in the face of high-value claims.
Contact our expert asset protection lawyers for a confidential company structure or liability review if you’re concerned about how your arrangements stand up under the Prest v Petrodel test.
Step-by-Step Actions Directors Should Take Now
- Audit all company holdings and asset arrangements for exposures.
- Review and update shareholder and director agreements to clarify ownership and purpose.
- Retain minutes and documentation for every major transaction.
- Act immediately if you receive a claim or formal notification of potential veil-piercing.
- Obtain a fixed-fee legal review of your company structure where high-value assets are involved.
What Laws and Deadlines Apply to Lifting the Corporate Veil in the UK?
Core laws and key time limits include:
- Companies Act 2006: Sets out fundamental rules for company formation and director duties.
- Salomon v A Salomon & Co Ltd [1897] AC 22: Confirms that a registered company is a separate legal person.
- Prest v Petrodel Resources Ltd [2013] UKSC 34: Strictly narrows when courts will pierce the veil.
- Insolvency Act 1986: Allows courts to unwind transactions in cases of wrongful or fraudulent trading.
- Limitation Act 1980: Most civil veil-piercing claims must be brought within six years from when the cause of action arises.
- Family Procedure Rules 2010: Set out divorce procedure, including the inclusion of company-held assets.
What Do the Courts Say About Lifting the Corporate Veil After Prest v Petrodel?
| Case | Facts | Outcome | Why It Matters |
|---|---|---|---|
| Prest v Petrodel [2013] UKSC 34 | Divorce; wife claimed company assets in settlement | Only transferred where trust ownership proven | Landmark – clarified assets available only via trust/principle |
| VTB Capital plc v Nutritek International | Alleged fraud through offshore companies | Veil not pierced; emphasis on policy/risk | Reinforces misuse, not mere control, is essential |
| Petrodel Resources Ltd v Prest (No 2) [2016] EWCA Civ 1395 | Enforcement of orders; offshore asset structures | No further veil-piercing beyond trust principles | Prest test also applies post-judgment |
| Akindele v Laker Ventures Ltd [2019] EWHC 1940 (Ch) | Third-party sought to enforce against company assets | Veil not pierced; insufficient evidence of sham | Proves claimants’ high burden for post-Prest cases |
Our Winning Approach to Prest v Petrodel Asset Protection and Disputes
Our litigation team approaches each case by:
- Performing a comprehensive audit of company structure, ownership records, and commercial justifications.
- Building evidence-led arguments, drawing on leading case law to defeat veil-piercing attempts.
- Advising directors and shareholders on restructuring and better governance, to minimise risk before issues arise.
- Leveraging trust law arguments where legitimate beneficial ownership is relevant, ensuring the right assets are protected or included where appropriate.
To discuss how we can help safeguard your assets or defend against veil-piercing claims, reach out to our specialist company law team for a strategic review.
Frequently Asked Questions
Can a court still access company assets in divorce after Prest v Petrodel?
Yes, but only if the evidence shows the company either held assets on trust for the spouse or was specifically formed to evade legal obligations. Courts follow a narrow, well-defined test, not just broad notions of fairness.
What evidence do I need to prove the company is not a ‘sham’?
Maintain full board minutes for each transfer, clear separation of company/personal accounts, and demonstrate genuine commercial activity (such as invoices, payroll, contracts). The stronger your documentation, the greater your protection.
Are company assets always protected from my personal creditors?
No, company assets are only protected if the company acts as a genuine business entity. If creditors can prove that assets were transferred to a company specifically to defeat claims, the court may allow enforcement against them.
Does Prest v Petrodel apply to small family businesses?
Yes, the principles apply whether your company is a multi-national or a single-director business. Family ownership and informality do not themselves remove the protection of separate legal personality if used properly.
How quickly do I need to act if my company’s assets are at risk?
Immediately. Delays may make a defence impossible due to lost evidence, missed limitation periods, or interim court orders freezing assets. Seek legal advice as soon as you’re notified of a dispute.
Can directors be personally liable for debts after Prest v Petrodel?
Generally not—except where there is misuse of the company structure to evade obligations, wrongful trading, or breaches such as unlawful dividends or personally guaranteed debts.
What if my company was set up years ago before this case?
The law now applies to all disputes, regardless of when the company was formed. The key is whether you are complying with current standards and have up-to-date documentation.
Will company structure reviews help protect me after this ruling?
Absolutely. Regular legal and governance reviews reduce your risk of being targeted by veil-piercing allegations—a small investment given the value often at stake.
Can I challenge a claim to lift the corporate veil without a solicitor?
While it’s possible, you risk overlooking key technical arguments and procedural steps. Our experience shows professional advice leads to faster, more robust outcomes.
What happens if I ignore legal warnings about company asset disputes?
You risk losing by default or facing severe court orders, including freezing or transfer of assets. Early engagement is essential to protect your interests.
Get Specialist Advice on Lifting the Corporate Veil After Prest v Petrodel
Understanding the strict tests for lifting the corporate veil is essential for any business owner, director, or party to a dispute in England and Wales. Prest v Petrodel has established high hurdles for those looking to access company-held assets in divorce, insolvency, or creditor actions. By taking practical steps—structuring, documenting, and managing your company correctly—you can dramatically minimise your exposure. However, delay or inaction can have irreversible consequences.
Our experienced solicitors offer bespoke, fixed-fee advice for asset protection and defence of corporate veil claims. Call us on 0207 459 4037 or book a Free Consultation now.
