Attempting to Hide Assets on Divorce

Divorce represents a significant turning point in the lives of individuals, often accompanied by numerous legal and financial disputes that must be navigated. Among the critical areas of concern during the divorce process is the intricacies surrounding financial relief. In the UK, the Matrimonial Causes Act 1973 (MCA) provides the legal framework guiding financial settlements, including essential provisions aimed at ensuring fairness and justice for both parties involved. One such provision is Section 37 of the MCA, which addresses transactions intended to reduce or prevent financial relief. This blog will delve into the implications of s37, exploring how it functions, its significance, and the impact it can have on divorce proceedings in our blog looking at hiding or attempting to hide assets on divorce.

Understanding Financial Relief in Divorce

Financial relief in divorce refers to the financial arrangements that must be made when a marriage breaks down. These arrangements can cover a wide range of factors, including the division of assets, maintenance payments and any necessary financial settlements. The objective of financial relief is to ensure that both parties can achieve a fair standard of living after the dissolution of the marriage.

In many divorce cases, one party may attempt to shield their assets from division during the financial settlement process. This can occur through various means, including selling or transferring assets to third parties. Such actions can complicate the divorce process and result in a less equitable outcome.

Section 37 of the Matrimonial Causes Act 1973

Section 37 of the MCA addresses transactions that are perceived as attempts to defeat or evade financial relief claims during divorce proceedings. Specifically, it states that the court may scrutinise transactions made by either party that have the intention of defeating a claim for financial relief. The section allows courts the authority to challenge and revisit transactions that may be deemed suspect based on their timing and intent.

Key Provisions of Section 37

1. Transactions Within the Relevant Timeframe: The provisions apply to transactions made within a specific period before a financial relief application. This is typically defined as the period leading up to the divorce applications or hearings. Courts will assess whether these transactions were made with the intent to deprive the other party of their rightful financial relief.

2. Intent to Defeat Claims: Courts must determine whether the transactions were made with the intention to defeat a financial relief claim. This does not mean simply that the assets were transferred; rather, there must be evidence suggesting that the transfer was done to evade responsibility or obligations arising from the marriage.

3. Consideration of Value: The value of any transferred assets can also play a crucial role in how the court views a transaction. If the assets were sold or transferred for significantly less than their market value, this may raise red flags regarding the intention behind the transaction.

Examples of Transactions that May Be Scrutinised

Courts consider many types of transactions when evaluating whether they fall under the purview of s37. These may include:

– Gifts to Family or Friends: If one party transfers significant assets to relatives or friends just before the divorce proceedings, the court may investigate the nature of the transfer to determine if it aimed to shield assets from the other party.

– Changes in Property Ownership: Transferring property ownership to a third party during the divorce process can be seen as an act intended to hide or protect those assets. This raises questions about whether such actions were taken in good faith.

– Business Transactions: Business owners might attempt to manipulate their financial situation by altering the ownership structure of corporate assets. This could involve transferring shares or assets to business partners or family members to reduce overall net worth.

– Cash Transactions: Large cash withdrawals or transfers to third parties, especially shortly before divorce proceedings commence, can arouse suspicion and may be subject to investigation by the courts.

Consequences of Transactions Evaluated Under Section 37

If the court determines that a transaction was intended to defeat a financial relief claim, several potential outcomes may follow:

1. Set Aside of Transactions: The court may set aside any transactions it deems improper. This means that the original ownership of assets can be restored, and the financial relief process may continue as if the transaction never occurred.

2. Adjustment of Financial Settlements: The outcome of such investigations may also alter the financial settlements proposed or agreed upon during the divorce process. For example, if a party is found to have hidden assets, the court may adjust settlements to reflect a fairer division of property.

3. Potential Legal Penalties: In some cases, intentional attempts to deceive the court or the other party can result in legal penalties. This may include restrictions on future legal actions or adverse impacts on the party’s claims to assets.

Protecting Your Interests

To navigate the complexities of Section 37 effectively, it is vital for both parties to be proactive in protecting their interests. The following strategies can be helpful:

1. Full Financial Disclosure

Both parties should engage in comprehensive financial disclosure, revealing all relevant assets and accounts. Transparency is vital for establishing trust and ensuring that both parties have a fair opportunity to claim what they are owed.

2. Seeking Legal Guidance

Consult with us, experienced family lawyers,  who can provide essential insights into navigating the legal landscape surrounding financial relief claims. A legal professional can help ensure compliance with the MCA and advise on appropriate actions should any suspicious transactions arise.

3. Documenting Transactions

Maintaining accurate records of all financial transactions is key to providing evidence in court should the need arise. Documentation can support claims regarding the legitimacy of any asset transfers and demonstrate that they were conducted in good faith.

Conclusion

Section 37 of the Matrimonial Causes Act 1973 plays a crucial role in protecting the integrity of financial relief during divorce proceedings. By scrutinising transactions designed to reduce or prevent financial claims, the law seeks to ensure fairness in the division of assets. Understanding the implications of this provision is essential for both parties as they navigate the complexities of divorce, enabling them to make informed decisions that protect their financial interests.

Divorce can be a complicated process filled with emotional turmoil; however, by being aware of the challenges presented by s37, individuals can better advocate for their financial rights and work toward an equitable resolution. Engaging the services of a legal professional can streamline the process and empower both parties to reach a fair outcome in a timely and efficient manner.

Alexander JLO Solicitors are well aware that going through divorce can be very difficult. Whilst the implementation of no-fault divorce back in 2022 has made the legal process much simpler, there are times, especially in relation to financial matters, when input from an experienced solicitor is vital.

With that in mind we have developed a revolutionary new service which will ascertain whether or not it’s wise to have legal advice on finances when going through divorce. Simply called Form Easy it will assess your level and type of assets and determine if you qualify for a free, no-obligation consultation to discuss your case with us and decide on the best ways forward for you. Simply click the Form Easy button, or visit the page here, answer a few short questions and we will let you have our input on whether we can help. 

At Alexander JLO we have decades of experience of dealing with all aspects of family law and will be happy to discuss your case in a free no obligation consultation. Why not call us on +44 (0)20 7537 7000, email us at info@london-law.co.uk or get in touch via the contact us button and see what we can do for you?

This blog was prepared by Alexander JLO’s senior partner, Peter Johnson on  2025 and is correct at the time of publication. With decades of experience in almost all areas of law Peter is happy to assist with any legal issue that you have. He is widely regarded as one of London’s leading divorce lawyers. His profile on the independent Review Solicitor website can be found Here