Purchasing Property Via an Offshore Company May Muddy the Legal Waters


Purchasing a residential property under the aegis of an offshore company may have its advantages, but it can also give rise to dispute as to the identity of its beneficial owner. The High Court was presented with just such an issue in the context of an insolvency case.

The case concerned a property that was acquired by a Liberian company to serve as a couple’s matrimonial home. More than a decade after the purchase, the husband executed a deed by which he made declarations of trust to the effect that his wife had, since the date of its incorporation, been the company’s – and thus the property’s – sole beneficial owner.

Some years later, after a judgment for about $18 million had been obtained against him, the husband was declared bankrupt on his own petition. The judgment creditor and the husband’s trustees in bankruptcy subsequently launched enforcement proceedings under Section 423 of the Insolvency Act 1986.

The claimants asserted that the deed amounted to a gift of the husband’s interest in the company to the wife and had been entered into for the purpose of putting an asset – ultimately the property – beyond the reach of his creditors. For her part, the wife contended that the purpose of the deed was to create clear lines of demarcation between her assets and those of her husband.

Dismissing the claim, the Court noted that all the money used to set up the company and acquire the property had been provided by the wife’s father. His purpose in doing so was to provide her with financial independence from her husband. From the date of its establishment, any interest that the husband may have had in the company was held on trust for his wife.

Howsoever shares in the company might be distributed, it was the father’s intention that the wife alone should be its beneficial owner. That intention was known to, and acknowledged by, the couple at the time of the company’s acquisition. The deed accurately reflected that position and had not been entered into with a view to undermining the position of past or future creditors. The husband had, during the course of the proceedings, been discharged from bankruptcy.

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