Division of the enterprise upon divorce between former spouses

Divorce is always a difficult and long-term process, especially when the spouses have jointly acquired a lot of property and do not want to agree on its distribution.

In practice, all this creates significant problems for each of the spouses, because it is necessary to prove what exactly and by whom was purchased during the time of joint residence.

This all also applies to the division of a joint business or enterprise upon divorce. What is the relevance of the chosen topic?

Therefore, in this article, we will talk about how in 2023 the issue of the division of an enterprise in the case of a divorce between former spouses will be regulated while analyzing the current regulatory legal acts of Ukraine.

What does the Family Code say about the issue of division of the enterprise upon divorce?

From the analysis of the provisions of the Civil Code, it can be concluded that the division of a joint business between spouses is not currently regulated by Ukrainian legislation.

This is explained by the fact that the Civil Code contains only a general rule of law that the wife and husband have the right to divide jointly acquired property and that their shares are equal.

Instead, the source of law in matters of division of property of spouses regarding the determination of their share in a joint enterprise is judicial practice.

Analysis of court practice

Regarding the division of property that was included in the authorized capital of the enterprise

If the spouses contributed funds to the authorized capital of the enterprise, which was acquired by them jointly during the marriage, then such funds are the direct property of the enterprise itself.

Therefore, one of the spouses has only the right to a financial claim for the recovery of 50% of the funds contributed to the authorized capital or 50% of the income received during the existence and operation of the enterprise (resolution of the Supreme Administrative Court in case No. 6-38cs15 of 06.03.2015).

Regarding the receipt of income from the activity of the enterprise

The following should be noted on the account of income from the enterprise's activities. In this case, the income is distributed between the spouses only when the full net profit has already been determined (after paying all tax payments, business expenses, etc.) and paying dividends to the participants.

Thus, from the analysis of the case, it can be seen that the plaintiff requested to collect 50% of the undistributed profit of the enterprise among its participants and income from its activities.

However, the charter of the enterprise stipulated that the profit received by the enterprise is distributed only by the decision of its owners or through general meetings.

Having analyzed the financial statements of the enterprise, the court concluded that for the entire time of its existence, the income received from its activities was not distributed among the participants, and because of this, the defendant never received any profit from the direct activities of the enterprise.

And therefore, the plaintiff's demands were not satisfied, since the company's income was assigned to the defendant's property. (The ruling of the Kherson Court of Appeal dated March 26, 2019, in case No. 661/1663/17 was left unchanged by the Supreme Court ruling dated June 4, 2020).

Do you need to split the business in a divorce? In this case, contact the Prikhodko and Partners law office.

Our lawyers will always help you effectively divide jointly acquired property during marriage, taking into account your interests, because we understand such complex cases. Get in touch!