Dealing with companies as relationship property when spouses separate

A recent case has clarified issues between spouses over the running of a company owned by them as relationship property.

A husband and wife own shares in a company that had been trading for the same duration as the relationship.  The shares in the company were therefore relationship property. 

The spouses separated and the wife, who was also a director of the company along with the husband, transferred a large sum of money from the company’s bank account into her own account. 

The husband claimed in the High Court that this was a breach of the wife’s duties as a director.  The wife was ordered to return the funds. 

The wife has also refused to take normal steps in running the company, such as signing the company’s financial statements, agreeing to purchase equipment to enable the company to continue to run, and refusing to agree to distributions to be made for reasonable expenses. 

This lack of action from the wife as a director had put the management of the company into a state where it could not fulfil its duties.

The husband sought orders from the Court that would see an expert appointed to value the company, that he purchase the company and pay out any outstanding debts and that any remaining funds be placed into a solicitor’s trust account until a resolution is reached as to the division of relationship property.

The husband also wanted an order granting him Power of Attorney over the other director to sign tax returns for the company, which he alleged were outstanding.

The wife argued that the dispute, as it related to the company value and shares, should be heard exclusively in the Family Court.  She alleged that it was her husband’s intention to acquire property that was jointly owned. 

The High Court indicated that the Family Court did not have exclusive jurisdiction over every type of proceeding between ex-spouses or partners, and that the husband’s claim related to claims of shareholder oppression and unfair prejudice, which fell within the jurisdiction of the High Court. 

The High Court set aside the wife’s objection to jurisdiction and said that the matters raised by the wife could be determined at a hearing in the High Court.

When dealing with separation issues which include companies and shares, it is important that you also get advice as to the ongoing responsibilities as a director and shareholder of those companies, because those duties do not cease when separation occurs.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

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