One of my friends was recently faced with a decision she found to be somewhat insulting. Her husband’s family has a “family business”, which business was incorporated. The corporation was in the process of re-structuring and wished to issue shares to the son (her husband) and daughter. It was requested that she sign a document indicating that she would not force the sale of the corporation if she and her husband ever separated or divorced. The Wife’s first thoughts were that this request was unfair as she believed that if her husband had an interest in the corporation then part of that interest also belonged to her. She certainly hoped that the sister’s spouse was also being requested to sign the same document.
I suggested she needed to speak with the corporate counsel who could better explain that in fact the family was likely worried about the state of the corporation on a long term basis – they could not be faced with having to buy her out or her forcing a sale of the corporation in the event of divorce. It was important to safeguard the corporation and in fact the sister’s spouse most likely was being required to sign a similar document.
In Family Law married parties are entitled to a division of property based on their net family property. In order to determine a value for the husband’s interest i.e. the value of his shares in the corporation, he would be required to provide, as part of his full and fair financial disclosure, a valuation of his shareholdings in the family corporation. This should be prepared by a certified business valuator or other method agreeable to both parties. Once the Wife received the valuation, if she was not satisfied with the value, it is open to her to proceed to obtain her own critique of the valuation and arrive at her own values. Once the value has been agreed upon this would be inputted into the net family property calculations under the husband’s property. So in fact, by valuing the husband’s shares in the corporation and putting that on his side of the ledger, the Wife is receiving her one-half of the value of that asset.
It is important in these situations to obtain advice from a lawyer who specialize in the area of corporate law and one that specializes in family law prior to signing any documents provided to you by your spouse or his/her family relating to the family business to ensure that you receive all that you are entitled to. Any agreement signed by you should require that you obtain independent legal advice.
Although you may believe that you will never divorce and this issue is a non-issue, it is better to safe guard your interests just as the family is safe guarding the interests of the corporation.