A divorce significantly impacts many aspects of life, including your professional life as an entrepreneur and, therefore, your assets. What happens to your company’s shares? And how will the assets eventually be divided?
A divorce between entrepreneurs doesn’t have to be more complicated than a couple without a business. However, it often becomes more complex if you are married under the statutory regime and your company was started during the marriage.
Marriage under the statutory regime is the most common in Belgium. In this case, there are three sets of assets: your assets, your partner’s assets, and joint assets.
If you start a business during the marriage, whether with your partner or on your own, that business becomes part of the joint assets. Even if all the shares are in your name, the economic value still belongs to the joint assets.
What does this mean in case of divorce?
Your partner can claim half the value of the business, even if they own zero shares. This principle applies to all business forms, from sole proprietorships to public limited companies.
Shares versus asset value
An important consideration for the entrepreneurial spouse is to clearly distinguish between the shares and the asset value of the business in a company.
The shares give you membership rights, such as voting rights, and can be a way to present yourself as the sole owner. If all shares are in your name, you can also better ensure the continuity of the business. Shares are primarily about ownership rights. However, the asset value of the shares, and thus the company, remains part of the joint assets.
This is often a problem in a divorce. Frequently, one partner owns a business but lacks sufficient liquid assets to pay the other half of the economic value. This may force the business-owning partner to sell shares, weakening their position in the company. Alternatively, they may need to seek financing from a bank.
What about salary and dividends?
In the statutory regime, it doesn’t matter whether you had the business before the marriage regarding income from the company. Professional income received after the dissolution of the marital estate is entirely yours. During the marriage, your salary and any dividends belong to the joint assets, even if they are deposited into an account in only one spouse’s name.
Reserves at risk?
It is a common misconception that only salary and dividends are considered in a divorce.
Reserves built up within a private company, for example, before the marriage, can also be included in the liquidation and division. Entrepreneurs often build these reserves within their company, which are paid out at a favorable tax rate after several years or upon the company’s liquidation.
Since the new marital property law, the spouse exercising their profession within a company, where the shares are their own, may owe compensation to the joint assets. The exact amount of this compensation must be assessed on a case-by-case basis.
‘Everything for myself’
In a regime of separation of property, there are no joint assets, and both partners only have personal assets.
Partners often choose this regime to protect each other from misfortune. If your business faces financial difficulties, creditors cannot go after your partner, though this could also be disadvantageous for your partner.
In the event of divorce, the business, and thus its economic value, belongs solely to you, and your partner is entitled to nothing unless you run the company with your partner and have legally arranged it otherwise.
To avoid such situations, notaries are now legally required to more thoroughly inform couples when drafting a marriage contract, especially since the stricter information obligations. In a separation of property regime, the notary must point out clauses that establish more solidarity between the partners.
Can I remove my partner from my business?
If both spouses are shareholders in the company and the marriage is on the rocks, the question often arises whether one spouse can remove the other from the business.
This is indeed possible, but you will need a “corporate law reason” to do so. A divorce can be a reason, but this must be examined considering the specific circumstances.
In any case, you will need arguments, such as demonstrating that the dismissal is necessary because your partner is underperforming or the company’s interests are at risk.