Division of individual entrepreneur property upon divorce

During divorce, in practice, it quite often happens that the former spouse previously created an individual entrepreneur for one of its members and, of course, in such a case, the question arises as to how to fairly distribute the property of the individual entrepreneur.

The situation is quite problematic for its quick solution and contains many practical nuances in the field of proof. What is the relevance of the chosen topic for today?

And therefore, in this article, we will talk about the peculiarities of the division of the property of the individual entrepreneur during a divorce between citizens.

What should you pay attention to when dividing a joint business (individual entrepreneur ) between spouses?

According to the general rule established in Ukrainian legislation, the shares of each spouse in the property acquired under the right of joint co-ownership are equal.

However, if we are talking about the distribution of assets of a joint business, then it is necessary to clearly define what exactly is subject to division - the property of the joint venture, income from conducting business activities, the contribution to the creation of the joint venture, etc.

Resolution No. 11 of the Plenum of the Armed Forces of Ukraine dated December 21, 2007, determined that the property of a private enterprise or an individual is not considered to be the joint property of a married couple, and therefore only the income that the husband and wife received together from entrepreneurial activities are subject to division.

However, in the decision of September 19, 2012, the Constitutional Court explained in detail the provisions of Article 61 of the Civil Code and pointed to the fact that the authorized capital and property of a private enterprise is the object of the right of joint property of a married couple, and therefore it is subject to division on an equal basis.

However, there is a note that such property must necessarily be acquired by the spouses at the joint expense of the husband and wife. From this moment on, there have been significant changes in the judicial practice regarding the distribution of the property of the individual entrepreneur  in the event of a divorce.

Judicial practice

In the resolution dated February 1, 2023, in case No. 210/3216/15-ts, the Supreme Court of Ukraine drew attention to the fact that if the sole proprietor is married and his property is used for business activities, it is considered joint under the following conditions:

• the property of the individual entrepreneur  must necessarily be acquired by citizens during the period of validity of the marriage;
• the source of the funds for the purchase of the property of the individual entrepreneur is the joint finances of the married couple.

Therefore, the property of the individual entrepreneur can be the object of joint property of the spouses, but with a mandatory combination of the above conditions.

This legal opinion is also contained in the resolutions of the Central Committee of the Supreme Court of November 15, 2023 No. 557/14//20-ts and June 21, 2023 No. 654/3751/18.

Summing up, the legal conclusions of the resolutions of the Supreme Court of Appeals of Ukraine, it can be said that the main criterion for the division of the property of the individual entrepreneur between the members of the spouses will be the determination of the source of the funds with which such property was purchased.

If the property of the individual entrepreneur was acquired from the property with the joint funds of the spouses and is used for conducting business activities, then in this case, the husband or wife has the right to demand compensation of half of the value of such property.

If one of the spouses spent their own funds on the acquisition of the property of the individual entrepreneur and can prove it with relevant evidence in the case, then such property remains in his possession without the right of the other spouse to monetary compensation.

At first glance, questions regarding the division of the property of a sole proprietorship during a divorce seem too easy to solve, but in practice, everything is much more complicated than it can be seen from the beginning.

Therefore, the best option for the effective distribution of the property of the individual entrepreneur during the dissolution of the marriage will be to turn to qualified specialists - the "Prikhodko and Partners" law office.

Our team understands the legal nuances of this issue and is always ready to help the company's clients implement its solution in practice. Do not delay and contact us!