Sharing a joint business during divorce

In the context of divorce, the division of business assets is executed through the allocation of shareholdings. It is a common misconception that the business is divided solely based on the nominal value of the shares. In all cases, a comprehensive and detailed business valuation must be conducted to determine the true market value of the business subject to division.

A full business valuation encompasses an assessment of the legal entity’s operational activities aimed at generating revenue and profit, as well as the valuation of securities, intangible assets, and business goodwill.

It is important to note that not only the shares themselves but also the income derived from business activities and any increase in the company’s value during the marriage are considered part of the matrimonial property. If one of the spouses founded the business prior to the marriage, two separate valuations must be conducted: one as of the date of the marriage and another as of the date of divorce. In such cases, only the increase in value during the marriage is subject to division.

Following the valuation, the business value is either equally divided between both spouses or allocated in kind to one spouse, with monetary compensation or an equivalent share of other assets granted to the other. This applies regardless of whether only one spouse was actively involved in the business prior to divorce. The Supreme Court has clarified that alternative methods of division may be employed if there are sufficient grounds to establish that in-kind division is either technically impossible or legally inadmissible. Technical impossibility refers to situations where share separation cannot be achieved objectively, while inadmissibility is based on the conclusion that the co-owners’ relationship prevents joint administration and use of the property.

In practical terms, businesses are typically allocated in kind to one spouse, while the other receives financial compensation or another part of the matrimonial estate. This approach is favored to ensure the continuity of business operations, as effective management often requires unilateral decision-making, which can be obstructed by adversarial relations between former spouses, potentially leading to business failure.

It should be emphasized that business valuation costs are borne by the parties involved. The cost of valuation is determined by the scale and complexity of the business.