Divorce is always a challenging process, especially when spouses share a business. In Belarus, a company share or assets related to entrepreneurial activity are considered jointly acquired property if they were created or purchased during the marriage. This approach raises many questions: how to determine the actual value of the business, who has the right to manage it, how shares are distributed, and how the interests of third parties, such as partners or creditors are taken into account.
Court practice shows that dividing a business often becomes the most complex part of divorce proceedings. It is important here to consider not only family law but also corporate regulations, as well as the specific provisions of contracts and company charters. Mistakes or a formal approach can result in loss of control over the company, financial losses, or lengthy disputes.
Therefore, the division of business during divorce requires professional preparation: from a thorough analysis of corporate documents to developing a legal strategy for protecting interests. In this article, we will review the key points spouses should pay attention to in order to minimize risks and preserve both assets and business reputation.
General Principles of Division of Spouses’ Property
In a divorce, the key question is determining what property is subject to division. Under Belarusian law, the principle of joint ownership of property acquired during marriage applies. This means that regardless of which spouse’s name the property is registered under, both have equal rights to the common assets, including business interests.
What Property Is Considered Jointly Acquired
Jointly acquired property includes everything obtained by the spouses during the marriage using shared income: real estate, cars, bank deposits and securities, as well as company shares, stocks, and other business assets. Even if the business share is registered to only one spouse, the other is entitled to claim a part of it if it was acquired or created during the marriage.
Business Assets and Their Specific Features
Unlike ordinary property, business assets have particular characteristics:
- Their value can fluctuate significantly.
- They are tied to obligations toward partners and creditors.
- Disposal of shares and stocks is often restricted by corporate documents (for example, requiring the consent of other participants for transfer).
This complicates the division process, since it is necessary to consider not only formal ownership but also the real ability to dispose of the asset.
Exceptions from the General Regime of Joint Property
Not all property is divided equally. The personal property of spouses includes:
- Assets acquired before the marriage.
- Property received as a gift or inheritance.
- Personal-use items (excluding luxury goods).
If one spouse invested personal funds into the development of the business, this may also affect the division order, and the court will take it into account during the proceedings.
Business Valuation in Divorce
Dividing a business in divorce is impossible without determining its value. The compensation received by the spouse who does not participate in company management or the way business shares are distributed depends on this valuation. The process requires consideration of many factors, and in most cases, professional legal advice is indispensable.
Methods of Determining the Value of a Share or Company
Several approaches are applied in business valuation during divorce:
- Income method – takes into account the company’s expected future profit, discounting cash flows.
- Comparative method – based on analyzing the market value of similar companies or transactions.
- Asset-based method – based on the value of the company’s assets and liabilities.
The choice of method depends on the nature of the business, its scale, and financial transparency.
Involving Independent Experts
To avoid disputes between spouses, an independent business valuation is usually carried out. Experts conduct a detailed analysis of accounting and corporate documents, as well as contracts with counterparties. Their conclusion carries significant weight in court, as it provides an objective determination of share value.
Impact of Debts and Obligations on Valuation
When valuing a business, not only assets but also liabilities are considered. Loans, debts, or ongoing litigation reduce the company’s market value. In some cases, liabilities may even “nullify” the nominal value of a share. Therefore, a spouse claiming a part of the business must understand that along with potential profits, they may indirectly share in the risks as well.
Options for Dividing a Business
Once the value of the company or a business share is determined, the main question arises how exactly should business assets be distributed between spouses? Legal provisions allow for several options, and the choice depends on the parties’ agreements, the company’s structure, and their willingness to continue cooperating.
Sale of a Share and Distribution of Proceeds
One of the “cleanest” methods is the sale of a share or the entire business to a third party or to the company itself, followed by division of the proceeds. This option eliminates the need for further cooperation between former spouses and allows each to use the money at their own discretion. The downside is that such a sale may take time, and in market conditions, the company’s value does not always match the spouses’ expectations.
Transfer of a Share to One Spouse with Compensation to the Other
In most cases, the business is transferred to the spouse who was actively involved in its management. The other spouse receives monetary compensation equal to the value of their share. This solution helps preserve the company’s stability and avoids jeopardizing its operations. The challenge lies in determining the amount of compensation and identifying the sources of payment. It is also necessary to reach an agreement on the procedure for transferring the share.
Joint Ownership After Divorce: Pros and Cons
Sometimes spouses decide to maintain joint ownership of the business even after divorce. This option is possible if their relationship allows for continued professional cooperation.
Pros: The business continues operating without disruption, and control over the asset is preserved.
Cons: Risk of personal conflicts, difficulties in decision-making, and potential litigation in the future.
The Role of Corporate Documents and Third Parties
When dividing a business in divorce, it is crucial to consider not only family law but also the corporate rules established within the company. These rules directly affect how the division may be carried out and what restrictions apply to the spouses.
Company Charter and Founding Documents
The company charter or shareholders’ agreement often contains provisions on the procedure for transferring shares, participants’ rights, and restrictions on share disposal. For example, other participants may have a pre-emptive right to purchase shares. In such cases, the spouse claiming a part of the business cannot automatically become a participant and may only be entitled to monetary compensation.
Consent of Other Participants or Shareholders
In companies with multiple founders, the transfer of shares to a new person often requires the consent of other participants. This serves to protect the business from the appearance of unwanted co-owners. Therefore, in divorce proceedings, the second spouse is not always able to directly join the company’s membership, even if they are formally entitled to a share.
Rights of Creditors and Business Partners
The division of a business may affect the interests of third parties. Creditors are concerned with maintaining the company’s solvency, while business partners care about stability of management. Changes in ownership structure or redistribution of shares may cause concern among them and even lead to additional audits or revisions of cooperation terms.
Practical Recommendations
Dividing a business during divorce is a complex process that requires careful planning and thorough preparation. To minimize risks and protect the interests of both parties, the following recommendations may be helpful:
1. Engage a lawyer and an appraiser
A lawyer can properly interpret corporate and family law provisions, while an independent appraiser ensures an objective valuation of the business or shares. The joint work of these professionals helps ensure fairness in division and reduces the risk of future conflicts.
2. Prepare documents in advance
It is advisable to collect all documents related to the company’s activities in advance: accounting reports, contracts with partners and suppliers, corporate documents (charter, minutes of participants’ meetings). Clear and complete documentation simplifies business valuation and accelerates the division process.
3. Consider the consequences of division to protect the business from risks
It is important to anticipate potential consequences for creditors and business partners, comply with corporate procedures, and observe the restrictions outlined in the company’s charter. It is also necessary to design a compensation mechanism that does not undermine the company’s financial stability or create conflict situations with third parties.
Court Practice and Disputed Situations
Even with properly prepared documents and business valuation, disputes often arise that require court intervention.
Common causes of legal disputes:
- Disagreements over the value of a share or overall business valuation.
- Objections to transferring a share to one spouse or to the mechanism of compensation.
- Violations of corporate procedures during division.
Court Approach to Business Division
Courts take into account the financial condition of the company, its obligations toward creditors, the rights of third parties, and each spouse’s share. Independent experts are often appointed to confirm the value of the business.
Tax and Financial Consequences of Business Division
Dividing a business during divorce may lead to additional tax and financial obligations, which should be considered in advance.
Income and Profit Tax
When selling a share or receiving compensation, a spouse may be required to pay personal income tax or corporate profit tax.
Company Debts and Liabilities
A business share may include part of the company’s debts or credit obligations. It is crucial to determine who will be responsible for existing financial liabilities when dividing assets.
Financial Planning
Understanding the tax and financial consequences allows spouses to prepare a strategy in advance, avoid unpleasant surprises, and minimize risks for both parties.
Conclusion
The division of business in divorce is a complex and multifaceted process that requires careful attention to asset valuation, corporate documents, and potential financial consequences. Proper preparation and planning help reduce the risk of conflict and protect the interests of each spouse.
Our experienced lawyers are ready to accompany the entire business division process: providing legal and financial advice, preparing documents (including settlement agreements between the parties), cooperating with appraisers, and, if necessary, representing your interests in court. With our support, you can go through this stage as safely and efficiently as possible, while preserving both your business and your rights.
Contact us
If you have any questions related to the division of business in divorce in Belarus, we will be happy to help! Our long-term experience will help you choose a lawyer to represent your interests.
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