Article by Vanessa Lloyd Platt and Simon Wolman
Lloyd Platt and Company – Divorce and Family Lawyers
In February 2022 the Financial Remedies Court issued an efficiency statement requiring the use of an assets and income Schedule known as an ES2 at hearings. The ES1 and ES2 were designed to provide the Court with a summary of the parties’ assets and to broadly identify the issues between them.
Purpose of the ES1 and ES2
The Asset Schedule of the ES2 and the background for knowledges is to be contained on the ES1. These must be agreed upon between the parties and lodged at Court. The intention behind this is to make it easier for the Court to see who has what and help them make their decisions as to how the assets are to be divided. Both sides need to fill in these and agree the same ES2.
The ES2 must be filed at the same time as an ES1 one day before any hearing. It is possible to comment on the form about the other side’s finances if required. The property sections are divided into property of one of the party’s sole name or jointly owned. It is important it cover gross value i.e. how much is the property worth without deduction, less the mortgage, less ERP, less cost of sale and potential CGT to produce the net equity and the value of the interest.
What Needs to Be Included
Bank accounts must be set out and cash, investments and policies, business interests, chattels, liabilities and pension and non-pension assets as well as annual incomes. However, what has now emerged by the use of the ES2 is that its use in the higher net worth cases can be problematic. The ES2 as currently drafted can give a distorted view of what might be immediately available.
Where there is long-term incentive planning for example receive (Restricted Share Unit) RSUs, CSUs, share options. This is because there is clearly a distinction between what is immediately available and what will become available in the future when certain criteria are met nor time. There are circumstances where those criteria might not be met and therefore the Court would not understand the full significance of the asset in its current form.
Liquid vs. Illiquid Assets
The Court expects both liquid and illiquid assets to be set out on the same schedule. Unless the Court has a very full understanding of the composition of these assets and how the shares can be safely computed there is a danger that sometimes clearly illiquid could be treated as being liquid.
In the view of this firm the ES2 needs reforming to allow for a sub-total of the liquid and therefore immediately available wealth and the illiquid assets (which could include any business interest deferred elements).
Call for Reform
It is understood that many Counsel have expressed the view that there appears to be anomalies caused by the way in which the form expects the information to be provided and those of us at Lloyd Platt are asking that the movement to amend the form gathers pace to avoid any future difficulties and a waste of Court’s time being wasted in having to do schedule after schedule to convince the Court of the true net value of the assets both now and potentially in the future.
We are asking that lawyers join with us in expressing this view as soon as possible in order to cut down unnecessary Court time to make matters far clearer than they are at present.
If you agree with our perspective or want to contribute to this discussion, please get in touch with Lloyd Platt and Company today. Together, we can work towards a more efficient process for the benefit of all involved.
