Piercing the corporate veil: English and Ghanaian perspectives

The doctrine of piercing the corporate veil is a fundamental principle in both English and Ghanaian corporate law. It allows the courts to look beyond the legal entity of a corporation and hold individuals accountable when they exploit the corporate structure to perpetrate wrongdoing or avoid legal obligations. While corporations offer limited liability protection to shareholders, the doctrine functions as a mechanism to unveil deceptive strategies used by individuals hiding behind corporate facades. Thus, English and Ghanaian courts may “pierce the veil” when presented with evidence of deception or abuse of the corporate form.Footnote ¹³

The English courts endeavour to uphold the integrity of the corporate framework and safeguard against abuses that undermine trust in the business environment. They have consistently upheld the principle that the corporate veil will be pierced in cases where the courts have deemed that the company is a facade, mere sham or being used for fraudulent purposes, thus exposing deceptive practices where individuals misuse corporate entities for personal gain.Footnote ¹⁴ For instance, in the landmark Gilford Motor case,Footnote ¹⁵ the court found that Mr Horne had established a company solely to evade his contractual obligations to his former employer. Recognizing that the company was being used as a façade to circumvent these obligations, the court pierced the corporate veil to expose and address the deceptive practices underlying the corporate structure. Additionally, cases like Gencor ACP Ltd v Dalby Footnote ¹⁶ and Trustor AB v Smallbone (No 2) Footnote ¹⁷ illustrate the resolve of courts to hold directors accountable for breaching their fiduciary duties – particularly when they engage in asset diversion or unjust enrichment through affiliated entities under their control.

The English courts extend their scrutiny of the veil of incorporation beyond individual actors utilizing companies to encompass parent companies exerting influence through subsidiaries.Footnote ¹⁸ Legal precedents such as DHN Food Distributors v Tower Hamlets LBC Footnote ¹⁹ and Chandler v Cape Footnote ²⁰ exemplify this judicial stance. In such scenarios, the court may view the parent company and its subsidiary as unified entities, particularly when the parent holds significant sway over its subsidiary’s operations.Footnote ²¹ This conceptual fusion acknowledges the reality of complete dominance, wherein the overarching control of the parent often dictates the subsidiary’s actions and decisions.Footnote ²² Treating the parent and subsidiary as a unified entity enables the courts to ensure a more comprehensive and equitable application of the law, particularly concerning compensation conditions and statutory provisions.Footnote ²³

Ghana’s company law draws significantly from English law.Footnote ²⁴ Its legislation has followed a similar trajectory as English statutes on company law.Footnote ²⁵ Analysis of Ghanaian case law reveals that similar to their English counterparts, the Ghanaian courts emphasize the significance of preserving the distinct legal identity of a company. This is evidenced by a cautious approach to piercing the corporate veil, which is only done in rigorous circumstances where metaphors such as “façade”, “mask”, “mere device” and “puppet” apply.Footnote ²⁶ Thus, under Ghanaian common law, the corporate veil may only be pierced or set aside, when necessary, by considerations of justice, public policy or provisions outlined in the Companies Act 2019 (Act 992). This decision is reached after carefully evaluating the evidence presented during legal proceedings.Footnote ²⁷

Two notable cases vividly demonstrate the Ghanaian judicial stance against the misuse of corporate entities for illicit purposes. In Worldwide Shipping v Darko,Footnote ²⁸ the court scrutinized the actions of a company’s managing director and deputy managing director, who accepted payment for goods never delivered without offering any explanation. The court concluded that they had exploited the company’s legal status for personal enrichment. Similarly, in EDC Stockbrokers v CIG Microfinance,Footnote ²⁹ the court addressed the claimant’s allegations of fund diversion for personal gain against the defendants. In both cases, the court lifted the corporate veil, holding the individuals behind the corporate façade personally liable.

While the Ghanaian courts have embraced the doctrine of piercing the corporate veil, their approach has predominantly adhered to traditional common law principles without significant expansion. For instance, in the case of Blue Sky Products v Attorney General and Lands Commission,Footnote ³⁰ the court decided to pierce the corporate veil of Blue Sky Products despite finding no illegal conduct by the company’s members. The court relied on the “mere façade” exception because it was necessary to ascertain the true nationality of the appellant, which was crucial for resolving the company’s claim regarding land ownership. The incorporation of the company by foreigners was interpreted as an attempt to circumvent Ghanaian laws governing land ownership. By using the company as a mere device or mask, the foreign nationals sought to circumvent the legal restrictions on land acquisition in the country, especially in light of restrictions on land leases for foreign nationals.

Ghanaian statutory intervention concerning the grounds for piercing the corporate veil remains narrowly defined, primarily centred on administrative lapses attributed to directors. The Ghana Companies Act 2019Footnote ³¹ outlines specific conditions under which the corporate veil may be lifted, such as when a company operates without a member for over six monthsFootnote ³² or with fewer than two directors for more than four weeks.Footnote ³³ Breaching specific sections of the act, like failing to affix the company’s nameFootnote ³⁴ or violating minimum capital requirements,Footnote ³⁵ can also trigger veil piercing. Additionally, additional legislation, such as the Corporate Insolvency and Restructuring Act 2020Footnote ³⁶ and the Internal Revenue Act 2000,Footnote ³⁷ specify breaches that could warrant lifting the corporate veil.

Matrimonial property disputes in the Ghanaian legal context

The evolving landscape of corporate law intersects with non-traditional commercial domains such as family law, presenting intricate challenges for legal systems worldwide. One such challenge revolves around the veil-piercing doctrine and its application in divorce proceedings to influence the fair distribution of marital assets. This issue is particularly significant in jurisdictions like Ghana, which recognize the critical importance of equal property rights, especially for women. Over the years, Ghanaian legislative and judicial reforms have aimed to protect the rights of spouses to property acquired during marriage. However, the emergence of financially dominant partners utilizing corporate structures to obscure or control the distribution of assets poses a significant obstacle to achieving fair outcomes in divorce settlements. This intersection of family and corporate law necessitates carefully examining legal principles, societal objectives and evolving human behaviours to ensure fairness and justice in matrimonial disputes.

As a member of the UN and a subscriber to the UN SDGs, Ghana recognizes the right to equal co-ownership of marital property.Footnote ³⁸ According to the SDGs, granting access to ownership and control over land and other property forms ensures women’s equal rights to economic resources.Footnote ³⁹ Similarly, reports from international financial institutions highlight equal rights to property acquired during marriage as crucial pathways for women to acquire land.Footnote ⁴⁰ In alignment with these principles, legislative and judicial reforms in Ghana have taken progressive strides towards safeguarding women’s rights to marital assets.Footnote ⁴¹

The Ghanaian Supreme Court currently upholds a presumption of equitable ownership of property acquired during marriage. While the Ghanaian courts respect the fundamental right granted to each individual under the Constitution to own property solely,Footnote ⁴² it asserts that ordinary incidents of commerce have no bearing on marital relations between spouses who jointly acquire property during marriage.Footnote ⁴³ Thus, the court champions the “equality is equity” principle, maintaining that in the absence of contrary agreements between spouses, any property acquired during marriage is considered joint property to be equitably shared upon divorce.Footnote ⁴⁴ Under this equitable maxim, the courts determine what is considered “equitable” and the respective proportions to which each spouse is entitled, solely on a case-by-case basis.Footnote ⁴⁵

The Ghana Land ActFootnote ⁴⁶ is also a significant legislative intervention to safeguard the marital property rights of spouses.Footnote ⁴⁷ This act enshrines the principle established by the Ghanaian Supreme Court, which holds that unless the spouses express a contrary intention, there is a presumption in favour of equitable ownership of all properties acquired during marriage.Footnote ⁴⁸ Consequently, the law dictates that spouses will be treated as parties conveying an interest in land unless they explicitly state otherwise on the conveyance document.Footnote ⁴⁹ Under this legislation, the registrar of lands will only register the interest in land in the joint name of both spouses.Footnote ⁵⁰ However, registration in only one spouse’s name no longer presents an issue. In such cases, the spouse holding the legal title must hold the property in trust for themselves and the other spouse. This arrangement ensures that a spouse cannot unilaterally transfer the interest in landed property acquired during marriage through sale, exchange, lease or mortgage without the express agreement of the other spouse.Footnote ⁵¹

In cases where marital assets are held under a business’s name, jointly or solely owned by the spouses, the usual presumption of equitable ownership, commonly applied to property acquired during marriage, loses effectiveness.Footnote ⁵² As a result, despite efforts to enhance the protection of the property rights of spouses accumulated during marriage, a notable challenge arises when financially dominant partners employ corporate structures to obscure or manipulate the distribution process.

In matrimonial conflicts, especially amid divorce proceedings, the distribution of assets can become highly contentious, particularly when one spouse wields considerable financial leverage. Financially advantaged spouses may procure movable or immovable assets through closely held companies to shield them from classification as marital property.Footnote ⁵³ These companies, usually under the ownership and control of the financially advantaged spouses, serve as convenient tools for obscuring asset ownership. Financially advantaged spouses might also funnel assets through corporations employing intricate ownership structures or legal arrangements, complicating efforts to identify and assess marital assets accurately. Additionally, some individuals may resort to fraudulent practices, such as surreptitious transfers of marital assets into corporate entities, aiming to evade their inclusion in divorce settlements.

By routing assets through such entities – real estate holdings, investments or business stakes – the financially dominant spouse can shield them from direct scrutiny during divorce proceedings. This tactic proves incredibly potent as it muddles efforts to distinguish between personal and corporate assets, impeding the financially disadvantaged spouse’s ability to assert rightful claims to marital property. This strategy effectively camouflages asset ownership within the corporate framework, making it challenging for the other spouse to lay legitimate claim to these assets during divorce settlements. Such actions subvert the principle of equitable distribution and breach the trust and integrity essential for the just resolution of matrimonial disputes.

This intersection of family law and corporate law poses a significant challenge for courts tasked with ensuring equitable outcomes in divorce proceedings. On one hand, courts are bound to uphold established legal principles, such as the principle of separate legal personality, which recognizes corporations as distinct entities from their owners or shareholders. However, courts must navigate a complex landscape in divorce, where assets may be intentionally transferred or concealed within corporate entities to manipulate the distribution process. They must balance the need to respect corporate law principles with the imperative to address evolving human behaviours and corporate practices that may exploit legal loopholes for unfair advantage. The following section explores the approaches the Ghanaian and English common law have taken to tackle emerging challenges and protect the rights of financially disadvantaged spouses.

Legal intersections of matrimonial disputes and corporate structures

As outlined in the preceding section, the intersection of family law and corporate law has posed enduring challenges for courts striving to secure equitable outcomes, particularly in divorce cases where one party may seek to shield assets through intricate corporate structures. One notable instance of this legal conundrum emerged in the 2013 English case of Prest v Petrodel,Footnote ⁵⁴ where the UK Supreme Court grappled with the issue of piercing the corporate veil to achieve a fair distribution of assets during divorce proceedings. This case marked a significant extension of the concept of piercing the corporate veil into family law, prompting a re-evaluation of traditional legal principles regarding corporate entities and their shareholders. Beyond the shores of England, similar discussions have taken place in jurisdictions like Ghana, where the Supreme Court has also grappled with the delicate balance between upholding the integrity of corporate law and ensuring fairness in matrimonial disputes. This section explores the nuanced approaches the English and Ghanaian courts take to address the complexities of matrimonial disputes involving corporate entities.

In both English and Ghanaian courts, the initial step in assessing the possibility of piercing the corporate veil in matrimonial cases displays striking parallels. While both legal systems acknowledge the authority to pierce the corporate veil, they exercise this power judiciously and cautiously, reflecting a shared commitment to maintaining the integrity of corporate structures while ensuring equitable outcomes in matrimonial asset distribution.

The Supreme Court of the UK extended the concept of piercing the corporate veil to family law in the 2013 case of Prest v Petrodel, seeking to ensure a more equitable distribution of assets. The case centred on whether the court had the jurisdiction to mandate the transfer of specific properties owned by companies within the Petrodel Group to the wife, Mrs Prest, during ancillary relief proceedings following a divorce. The affluent couple possessed a significant matrimonial home in the UK and a secondary property in Nevis. Mrs Prest argued that her husband’s wealth exceeded these assets by far. She asserted that properties held by various companies within the Petrodel Group, entirely owned and controlled by Mr Prest, were essentially his own. Among these properties was the couple’s matrimonial home. The Supreme Court faced the task of preventing the exploitation of company law to conceal assets or avoid liability, especially in instances involving divorcing spouses and single-man companies, while upholding the integrity of the Salomon principle. Lord Sumption emphasized that family courts “do not occupy a desert island in which general legal concepts are suspended or mean something different”.Footnote ⁵⁵

The majority in the case of Prest v Petrodel Footnote ⁵⁶ determined that transferring assets to a company to obstruct a spouse’s ability to claim financial support or assets during divorce proceedings does not meet the stringent criteria necessary to justify piercing the corporate veil. They emphasized that such actions do not fulfil the rigorous standards for disregarding the corporate entity and holding individuals personally accountable. Consequently, the likelihood of piercing the corporate veil in cases involving matrimonial assets remains low due to the strict standards upheld by the court.Footnote ⁵⁷

This cautious approach extends beyond the English courts and is mirrored in the treatment of veil piercing concerning the distribution of matrimonial assets in Ghanaian legal proceedings. Although the Ghanaian courts retain the authority to order ancillary relief in divorce cases,Footnote ⁵⁸ the precedent for piercing the corporate veil remains stringent. Unambiguous evidence of fraudulent behaviour or illegal activity is required to justify such an action.Footnote ⁵⁹

A significant illustration of the approach taken by the Ghanaian courts is evident in Akoto v Akoto,Footnote ⁶⁰ which showed the Ghanaian judiciary’s willingness to look beyond the corporate facade to ensure fairness and justice in the distribution of marital assets. In this case, the Supreme Court pierced the veil of incorporation to ensure that Mrs Akoto received a fair share of properties held by a company controlled and managed by her husband, Dr Owusu Akoto. The court’s decision was based on the discovery of fraud: Dr Akoto had sold the jointly owned matrimonial property to establish a company that benefited only himself. This action was deemed fraudulent against his wife. Recognizing the unfair use of the corporate veil to deprive Mrs Akoto of her rightful share of matrimonial property, the Supreme Court intervened. The court was prepared to prevent such unjust utilization of corporate structures, provided that the actions met the established requirements for piercing the corporate veil.

However, a challenge arises when a financially dominant spouse purchases property through a company they own and control. In such situations, the disadvantaged spouse struggles to provide enough evidence to meet the traditional criteria for piercing the corporate veil, which is necessary to treat the company’s assets as jointly owned.

Two significant cases in Ghanaian jurisprudence illuminate this situation: Gloria Odartey Lamptey v Nii Odartey Lamptey Footnote ⁶¹ and Nana Obeng Akrofi v Dorothy Obeng Akrofi.Footnote ⁶² In both instances, the Supreme Court reaffirmed the strict requirement of providing evidence of fraud, façade or illegality as essential prerequisites before contemplating the piercing of the corporate veil in matrimonial disputes.

In the divorce case between Gloria Odartey Lamptey and Nii Odartey Lamptey, the petitioner, Mrs Odartey Lamptey, sought a 50 per cent share of various properties and business interests as part of her divorce settlement. Her claim extended to two plots of land, a house, a residential property, five acres of land, a cattle farm and a Cadillac Escalade vehicle. Mrs Odartey Lamptey also sought a 50 per cent interest in the shares of Glow Lamp International School, asserting that although her husband was the sole shareholder, the assets were acquired with his personal funds and remained under his control. However, following the principles of veil piercing, the court maintained the separation of legal personalities between Mr Odartey Lamptey and the corporate entity. The court recognized the properties and shares as part of the company’s assets, not personal assets, thereby denying Mrs Odartey Lamptey’s claim. This decision was based on the court’s interpretation that there was no evidence of an intention to evade legal obligations or conceal assets for personal benefit. Thus, despite the assets being acquired and controlled by Mr Odartey Lamptey, the court declined to grant Mrs Odartey Lamptey access to them, upholding the corporate veil.

In Nana Obeng Akrofi v Dorothy Obeng Akrofi, the respondent sought recognition as a co-owner of Ultimate Hotel Limited and Classfam Ghana Limited, as well as shares in the matrimonial home, which were held under these companies. Although the trial judge was inclined to pierce the corporate veil due to the parties’ roles as directors and potentially grant joint ownership of the marital home, the Supreme Court emphasized that such an action requires exceptional circumstances. The court concluded that the respondent was entitled only to director’s fees and dividends from the companies, stressing that the companies themselves should be the proper defendants in any ownership claims. As a result, the court declined to recognize the respondent as a co-owner of the assets, including the matrimonial home.

In the cases discussed, the Ghanaian courts consistently refrained from piercing the corporate veil in matrimonial disputes, demonstrating a cautious approach similar to the initial stance observed in English law. This reluctance underlines a broader judicial reluctance to disturb the established doctrine of separate corporate personality, particularly when addressing the power imbalances between spouses involving corporate entities. The courts maintain that merely concealing marital assets within corporate structures does not fulfil the stringent criteria required to justify piercing the corporate veil.Footnote ⁶³

In Gilbert Anyetei v Susanna Anyetei, the court gave a glimpse of their reasoning behind this approach. It emphasized that if a company was established during a marriage and it is proven that the spouse not listed as a shareholder contributed to its establishment, then the shares of the company – not the properties it owns – are considered jointly acquired assets. These shares are subject to division between the spouses, but the company’s movable and immovable properties are not unless the criteria for piercing the corporate veil are satisfied. The court reasoned that once the shares are distributed, both spouses would indirectly gain proportionate interests in the company’s properties.Footnote ⁶⁴

As societal norms and corporate financial structures evolve, the legal doctrine of piercing the corporate veil must adapt to ensure fairness, especially in divorce settlements involving financially advantaged spouses. The mere division of company shares between spouses often fails to reflect the true economic value of assets when one spouse has hidden significant resources behind a corporate structure. This issue specifically arises when a financially advantaged spouse uses the corporate veil to obscure personal assets by placing them under the company’s name without the intent of giving the company actual ownership. These assets should be recognized as personal property and treated separately from genuine company assets.

This approach is consistent with the capital maintenance rule, which protects creditors by requiring companies to retain sufficient capital to meet obligations.Footnote ⁶⁵ It prevents improper transfers that would diminish corporate funds and jeopardize creditor interests. Applying the concealment principle – especially trust law principles – helps distinguish authentic corporate assets from personal assets masked as company property. Courts can then intervene to ensure such transfers are legitimate rather than a means to hide personal wealth. This upholds the integrity of corporate capital for creditor protection while allowing fair asset division in divorce proceedings, as it captures each spouse’s true economic contributions.

Building on these observations, other legal systems have introduced additional measures to promote fairer asset division in matrimonial disputes. Unlike the current position of the Ghanaian courts, the English legal framework offers a second layer of scrutiny aimed specifically at uncovering assets concealed within corporate entities. This supplementary step enables the courts to look beyond the formal corporate veil, making it more difficult for a financially dominant spouse to shield assets by placing them under the company’s name. As a result, the distribution of property is more likely to reflect the actual contributions of both spouses, fostering genuinely equitable outcomes.Footnote ⁶⁶

This second step was notably developed in the case of Prest v Petrodel,Footnote ⁶⁷ where the UK Supreme Court adopted the concealment principleFootnote ⁶⁸ to counteract attempts by wealthier spouses to shield assets through corporate entities. Lord Sumption explained the concealment principle as a tool enabling the court to identify relevant parties and hold them accountable within established legal norms without necessarily piercing the corporate veil.Footnote ⁶⁹ Rather than disregarding the separate legal identity of the company, the court may lift the veil to reveal the true ownership of assets when one spouse utilizes corporate structures to obscure matrimonial assets.Footnote ⁷⁰

In English law, as established by the case of Prest v Petrodel, a clear distinction is made between “piercing” and “lifting” the corporate veil – a distinction that is not as sharply defined in Ghanaian common law, where these terms are often used without differentiation. “Piercing the veil” refers to situations where the courts intervene to treat a company as no different from the individual who controls it, usually when that individual has used the company to avoid legal responsibilities. This action essentially disregards the company’s separate legal identity. Conversely, “lifting the veil” occurs under what is known as the “concealment principle”. Here, the courts maintain the company’s legal status as a separate entity but look deeper into its operations to uncover hidden truths, such as the real ownership of assets. This approach does not dissolve the company’s identity but peels back its layers to apply traditional legal principles where necessary. This nuanced legal framework in English law provides courts with effective tools to address cases, particularly in matrimonial disputes, where one spouse may use corporate structures to hide assets or evade obligations, ensuring a fair distribution of assets without compromising the legal integrity of corporate entities.Footnote ⁷¹

In advancing this legal doctrine, the UK Supreme Court outlined that when a company, ostensibly owning certain assets, is effectively controlled by the same party seeking to evade equitable distribution in divorce proceedings, a resulting trust may arise. This legal construct signifies that the controlling spouse retains the beneficial interest in the assets despite legal ownership resting with the company. This means that although the company legally owns the assets, it is understood that it holds them on behalf of the controlling spouse, who retains the beneficial interest. Consequently, these assets become subject to equitable sharing as part of the matrimonial estate. The Supreme Court’s analysis in such cases encompasses thoroughly examining all pertinent facts and circumstances to ascertain whether the wealthier spouse maintains beneficial ownership of assets registered under the company’s name.Footnote ⁷²

In the case of Prest v Petrodel, the Supreme Court applied the concealment principle. By lifting the corporate veil of Petrodel Resources, the court reached behind the corporate structure to apply the existing legal principle of resulting trusts.Footnote ⁷³ By using this approach, the separate legal personality of Petrodel Resources was preserved while simultaneously allowing for the fair handling of marital assets that Petrodel Resources held but Mr Prest effectively controlled. The court’s decision was informed by evidence provided by Mrs Prest, which demonstrated Mr Prest’s beneficial ownership of the properties held by companies within the Petrodel Group. This evidence included Mr Prest’s contributions to the purchase price of the properties.Footnote ⁷⁴ The court concluded that Mr Prest retained control over these assets under a resulting trust, leading to Mrs Prest being entitled to half the value of these properties under the Matrimonial Causes Act 1973.Footnote ⁷⁵

A similar application of these principles can be observed in the case of M v M,Footnote ⁷⁶ where matrimonial assets valued at over £107 million were hidden within a labyrinth of offshore corporate structures crafted by the husband. Despite the complex nature of these arrangements, the court rejected the husband’s assertion that the properties were held offshore solely for tax mitigation purposes. Instead, the court determined that the husband, acting as the “puppet master”,Footnote ⁷⁷ held beneficial ownership of the assets, including properties in England and Russia. In line with the precedent set by Prest v Petrodel, the court concluded that these assets were held on resulting trusts by the companies for the husband’s benefit.Footnote ⁷⁸ Consequently, the court ordered the transfer of these properties to the wife as part of the equitable distribution of marital assets.Footnote ⁷⁹

In navigating matrimonial disputes involving corporate structures, English and Ghanaian courts are committed to upholding legal principles. However, the English courts appear more willing to adapt to evolving societal norms and challenges, as cases like Prest v Petrodel demonstrate. In contrast, the Ghanaian courts maintain a cautious stance on piercing the corporate veil, prioritizing the requirement for concrete evidence of impropriety before disregarding the separate legal personalities of corporate entities. While this cautious approach aims to uphold legal integrity, it may risk undermining the principle of equitable distribution of matrimonial assets, which the Ghanaian courts have diligently developed over the years. Thus, the Ghanaian courts must strike a delicate balance between these competing interests, refining and adapting their approaches to ensure justice prevails in the intricate intersection of family and corporate law.

Adapting the English veil-piercing approach to Ghanaian marital property cases

The equitable division of marital assets, mainly when such property is concealed within corporate structures, poses a novel challenge for the Ghanaian courts. In previous cases where this issue has arisen, the courts have prioritized preserving contractual and commercial arrangements inherent in company law.Footnote ⁸⁰ Although the principle of separate legal personality of companies is crucial, it can sometimes conflict with the obligation of courts to ensure fairness and justice, particularly when a wealthier spouse deliberately hides marital or personal assets from their financially vulnerable partner. Achieving equitable outcomes in such cases hinges on effectively balancing the pertinent legal principles. This balancing act necessitates courts to meticulously evaluate the individual circumstances of each case, aiming to attain a just resolution that upholds both equity and fairness.

The intersection of Ghanaian and English common law offers a valuable pathway for advancing Ghana’s judicial approach to the distribution of marital assets within corporate structures. By drawing from English legal practices, Ghanaian courts can develop a nuanced strategy that clearly distinguishes between the principles of veil piercing and veil lifting. This distinction allows for a balanced approach that upholds the equitable distribution of marital property while respecting corporate legal principles. Veil piercing should be reserved for exceptional cases where there is clear evidence of fraud or misuse of the corporate form to evade marital responsibilities. In contrast, veil lifting should be systematically applied to discern the actual ownership of assets concealed within corporate entities, ensuring transparency and fairness in marital asset distribution. This dual approach would enhance the effectiveness of Ghana’s legal framework in dealing with complex cases involving corporate structures and marital assets.

As discussed previously, the English courts have increasingly adopted the concealment approach, where the court “lifts” the corporate veil and looks beyond formal legal structures to scrutinize the underlying substance of transactions and arrangements. The approach employed by the English courts in cases such as Prest v Petrodel Footnote ⁸¹ and M v M Footnote ⁸² involves identifying a resulting trust when a property is formally owned by a company but effectively controlled by one spouse. Rooted in equity, the principle of resulting trust holds that when a party contributes funds for property acquisition or transfer without a sufficient explanation, they maintain an equitable interest in that property. The presumption inherent in resulting trust is that the contributor retains ownership interest unless compelling evidence indicates an intention to gift and relinquish ownership.Footnote ⁸³

This approach differs from how the courts handle situations where individuals hide assets by transferring them to other natural persons. In such cases, a constructive trust is imposed to prevent unjust enrichment, recognizing that the person holding legal title to the asset does so for the benefit of another due to their actions or agreements.Footnote ⁸⁴

Consequently, in cases where legal ownership vests in a corporate entity, determining beneficial ownership often rests on identifying the person who effectively controls the company.Footnote ⁸⁵ Recognizing a spouse as the beneficial owner underlines their significant economic stake or influence over assets acquired during the marriage. This distinction is particularly critical in jurisdictions like Ghana, which adhere to equitable distribution principles, where the courts aim for an equitable division of marital property.

This approach to distributing marital assets ensures fairness and respect for the rights and interests of both parties involved. It aligns with equitable distribution principles, enabling the courts to consider each spouse’s economic contributions and interests throughout the marriage. While maintaining the distinct legal identity of the company, the focus on beneficial ownership guarantees the recognition and proper accounting of true marital assets. This strategy transcends mere formalities of legal ownership by prioritizing the identification of actual control and enjoyment of assets. By integrating such assets into the broader marital estate eligible for division, each spouse is afforded an equitable portion reflective of their individual economic and non-economic input and interests during the marriage. Through judiciously lifting the corporate veil and examining factors such as asset ownership and control, courts effectively safeguard the rights of financially vulnerable spouses while maintaining the integrity of corporate legal principles.

Adapting and tailoring English common law strategies to suit the unique context of Ghanaian law and society is not new to the Ghanaian legal landscape. Ghana’s legal system, deeply rooted in its colonial history with Britain, has been significantly influenced by English law. This close relationship between Ghanaian and English legal systems enables the Ghanaian courts to adapt strategies developed by the UK courts to address similar challenges within their legal context. Many legal principles and structures that shape Ghana’s legal framework were adopted from England. For example, Ghana’s application of resulting trusts, which provides a foundation for the fair distribution of assets in certain circumstances, closely resembles that of English law. Additionally, English court rulings also continue to hold persuasive weight in the Ghanaian courts, offering valuable guidance and interpretations on legal matters. Consequently, while the case of Prest v Petrodel does not set a precedent in Ghanaian common law, it serves as a persuasive authority.Footnote ⁸⁶

In Ghanaian legal practice, the application of trust law to protect the rights of vulnerable groups has a longstanding tradition. For example, trust law has been employed extensively within marital contexts to safeguard property rights, ensuring equitable outcomes for spouses.Footnote ⁸⁷ Provisions such as those found in the Ghanaian Lands Act rely on the principle of beneficial interest, which recognizes that even if the property is legally registered solely in one spouse’s name, the other spouse may hold a beneficial interest due to their contributions toward its acquisition, maintenance or improvement. This principle presumes joint ownership of such property, acknowledging the rights and interests of both partners in acquiring and managing marital assets. It ensures that both financial and non-financial contributions are considered, promoting equitable distribution upon the dissolution of the marriage.Footnote ⁸⁸ Extending this established safeguarding of marital property under trust law to situations where marital property is concealed within corporate structures will enable the Ghanaian courts to adapt to the evolving complexities of modern relationships and business practices, ultimately fostering greater trust and confidence in the legal system’s ability to ensure equitable distribution of marital property.

A recent illustration of why this broader application of trust law is necessary arises in Gilbert Anyetei v Susanna Anyetei, where the Ghanian Supreme Court dealt with two categories of property: one set registered in Mr Anyetei’s name and another under Kudiabor Investment Company, a one-person entity solely owned by him. While Mrs Anyetei was awarded some properties in her husband’s name, she received none of the assets listed under the company despite providing evidence of her contributions to their acquisition. The court treated the corporate assets as protected by the company’s separate legal personality, consistent with a view that only the company’s shares, rather than its physical properties, constitute jointly acquired property. This approach assumes that once the shares are distributed, both spouses indirectly gain proportional interests in the underlying assets.Footnote ⁸⁹

However, the result can be inequitable when the actual value or control of corporate-held property far exceeds that of the allocated shares. Adopting the approach of “lifting” rather than “piercing” the corporate veil to apply ordinary incidents of law, such as those from trust law, to manage marital or personal assets within corporate structures would represent a progressive development in Ghanaian legal practice. Drawing on the reasoning in Prest v Petrodel, Ghanaian courts could adopt a more rigorous examination of who actually purchased and controlled these corporate assets rather than automatically deferring to corporate formalities. Where it is clear that one spouse used a company’s name merely to conceal property acquired with personal funds, applying trust law principles – such as beneficial interest – would allow courts to treat such assets as part of the marital estate. Balancing respect for the corporate veil with a realistic assessment of ownership would help ensure that matrimonial property distribution truly reflects the contributions of both spouses, further advancing the protective objectives of Ghanaian law on marital property distribution.

Balancing fairness and legal certainty: mitigating litigation floodgates

Throughout this article, we have examined how the figurative veil of incorporation, while a fundamental concept in company law, can be misused by financially advantaged spouses to hide marital assets from their partners. In such situations, the strict requirements for piercing the corporate veil – such as proving fraud, the company being a mere puppet or a façade – are often unmet. Consequently, the corporate veil remains intact, and the courts are unwilling to disregard the company’s separate legal personality.

However, the English courts, notably in Prest v Petrodel, have demonstrated that the veil can remain intact yet be lifted to apply ordinary legal principles to achieve a fair and just outcome. In these cases, the courts maintain the company’s separate legal identity. However, it looks behind it to identify assets that are genuinely owned by the company versus those being shielded for the financially advantaged spouse. Assets found to be concealed in this manner are treated as marital property subject to equitable distribution.

Leveraging common legal principles to lift rather than pierce the corporate veil proves to be a valuable approach for avoiding the inequitable distribution of marital assets without compromising the protective benefits the corporate veil offers businesses, as discussed in the previous section. Nevertheless, this approach is not without contentious debate within legal circles. While hailed by some commentators as a necessary step towards fairness in divorce proceedings, others express concerns regarding the potential ramifications for commercial transactions and the broader application of corporate law principles.

Proponents of the Prest approach laud its significance in shifting the marital asset distribution landscape, particularly concerning the use of corporate entities to conceal personal wealth.Footnote ⁹⁰ They argue that the approach has broadened the circumstances in which assets held by companies could be considered as held on trust by individuals behind those companies, requiring a deeper examination of the purchase of assets and corporate structures.Footnote ⁹¹ The judgment emphasized that mere ownership by a corporate structure is not sufficient evidence of true beneficial ownership, urging judges to scrutinize all relevant facts of each case.Footnote ⁹² Thus, the approach under Prest is asserted as upholding fairness by preventing dishonest parties from shielding assets from their spouses.Footnote ⁹³

However, critics contend that this newfound approach introduces ambiguity into the veil-piercing doctrine, thereby amplifying uncertainty surrounding corporate law.Footnote ⁹⁴ By broadening the circumstances under which company assets could be considered as held in trust for individuals, the decision fails to clarify the concept, potentially unsettling commercial transactions.Footnote ⁹⁵ Businesses, wary of the increased risk that the courts may disregard the corporate veil in certain scenarios, might be dissuaded from utilizing corporate structures for legitimate purposes such as risk management or tax planning.Footnote ⁹⁶

While the possibility of lifting the corporate veil in marital asset distribution cases has sparked concerns over potential frivolous claims and disruptions to commercial arrangements,Footnote ⁹⁷ the English courts have demonstrated a cautious approach. They have clarified that lifting the corporate veil to uncover concealed marital assets is not applied universally.Footnote ⁹⁸ Despite the evolving landscape of family law and increased scrutiny of corporate structures in divorce proceedings, the courts remain hesitant to disregard the fundamental principle of a company’s separate legal personality, even when familial considerations are involved.Footnote ⁹⁹

The case of M v M, as discussed by the Supreme Court, highlights the need for substantial evidence to establish beneficial ownership. This highlights the fact-specific nature of such determinations. The courts require evidence showing that the property was genuinely acquired as a company asset, not merely as a means to conceal marital assets. This ensures a balanced approach to marital asset distribution while preserving the integrity of commercial arrangements.Footnote ¹⁰⁰

This rigorous legal framework, designed to protect commercial agreements and ensure equitable division of marital assets while deterring baseless claims, offers a promising model for Ghana’s legal system. The approach hinges on thoroughly examining evidence concerning the transferor’s actual intentions. Rather than outright dismissing claims that fail to meet the strict requirements for piercing the corporate veil, Ghanaian courts are encouraged to engage in tracing ownership. By scrutinizing the evidence, the courts can discern the true intent behind property or asset transfers to a company. Suppose evidence indicates that one spouse, despite not being the formal owner, has significant economic interest or control over a company-owned property. In that case, the courts should take into account these practical economic contributions when distributing marital assets.Footnote ¹⁰¹

Continuing from the consideration of practical economic contributions, factors such as substantial financial contributions, active involvement in property management or documented agreements indicating a beneficial interest can significantly influence the decision of courts on marital asset distribution. This judicial approach allows parties to present evidence supporting their claims diligently. However, if parties fail to provide adequate evidence or withhold necessary information, they may face unfavourable rulings, preventing them from using non-cooperation to evade scrutiny. In cases where evidence regarding the transferor’s intentions is lacking, the law may apply presumptions that parties can challenge with evidence that clearly demonstrates the intent for a direct transfer.Footnote ¹⁰²

By considering these factors and adopting a meticulous, case-specific approach, the Ghanaian courts can effectively prevent the concealment of marital assets within corporate entities. This focus on practical realities rather than strictly adhering to legal ownership structures supports the principle of equitable marital asset distribution. It promotes fairness in divorce proceedings and ensures transparency and accountability in the division of assets.