In the majority of divorces, it's not uncommon for both parties to have shares in a family-owned company. Most often, the company includes others in the family, but the most typical situation is one where spouses own 50 per cent of the shares each. This arrangement is often been recommended by the accountant of the family to reduce the burden of tax on income.
In this scenario, the recent revisions to guidance from HMRC underscore the importance of examining all options to deal with the shareholdings of spouses in a divorced business prior to any separation taking place.
Why are shares important in divorce?
Shares are important in divorce because they determine the division of assets. In a divorce, one of the spouses may be entitled to a share of his or her spouse's assets.
A share is a portion of an asset that is owned by an individual, and it can be either monetary or non-monetary in nature. The term shares can also be used to refer to stocks and other securities.
What Are the Risks Associated with Transferring Shares in a Divorce?
The risks of transferring shares in a divorce will depend on the type of shares, whether there is a prenuptial agreement, and whether the transfer is being made as part of the settlement or as a gift.
Transferring shares during divorce proceedings can be risky because it can trigger tax liabilities and capital gains taxes. This is more likely to happen if the transfer was not made as part of an agreement with your spouse.
In some cases, it may be best to wait until you have finalised your divorce before transferring any shares however, there should be an agreement, or a court order regulating this.
How Much Information is Required for a Share Transfer and How Can This Be Beneficial for Different Parties Involved?
A divorce share transfer is the process of transferring shares from one person to another. This can be done through a physical or electronic share certificate, or through the transfer of a shareholding in an intermediary company.
The first step in a divorce share transfer is to determine which type of share certificate you have. There are two types, namely: physical and electronic certificates. Physical certificates are paper documents that are issued by the company and signed by an authorised officer, while electronic certificates are digital copies that can be verified electronically with the company's records keeper without any manual intervention.
Do I need help from Simplicity Legal to complete a Stock Transfer if I am Divorcing?
The answer to this question is not straightforward. It really depends on the situation and the circumstances. The first thing that you need to do is find out what type of divorce you are filing for. There are two types of divorces:
1. Simplified Divorce (DIY Divorce) - You can use this type of divorce where (1) no children under the age of 16 and; (2) you and your spouse agree on how you wish to deal with the financial assets and debts.
If you and your spouse have been separated in excess of 2 years then you do not require their consent to divorce.
If you and your spouse have been separated for less then two years then you do require their consent.
2. Ordinary Divorce - you must use this divorce process if (1) you have children under the age of 16; (2) you are applying for divorce on the basis that your spouse has committed adultery (3) you are applying for divorce on the basis that your spouse has engaged in unreasonable behaviour; (4) you cannot agree on how to deal with your financial assets and debts.
The divorce may be "defended", this means that your spouse either disputes the divorce, or the orders that you are seeking from the court.
The divorce may be "undefended", this means that your spouse does not dispute the divorce, or the orders that you are seeking from the court.
Conclusion: The Importance of Knowing Your Legal Options Regarding Share Transfers in a Divorce
In the event of a divorce, it is important to understand the legal options you have when it comes to transferring shares.
There are some who feel that there should be a way for decisions to be made by both parties and not just one when it comes to the division of property following a divorce. One possible solution would be a 50/50 split, but this may not work in all cases.
In conclusion, it is important for divorcing couples to know their legal options when it comes to transferring shares in a business.
The information and opinions contained in this blog are for information only. They are not intended to constitute advice and should not be relied upon or considered as a replacement for advice. Before acting on any of the information contained in this blog, please seek specific advice from Clarity Simplicity Ltd.