Question 73: How will the property division be carried out when dividing the common properties of the spouses as shares in a joint stock company? Are properties or shares divided?

In the answers to other relevant questions in this Book, it sets out how to divide properties such as a capital contribution in limited liability companies. In this question, in the case of properties being shares in joint stock companies, when dividing the common properties of the spouses upon divorce, the same principles we still apply as when dividing properties as capital contributions in limited liability companies (considering the nature of the property rights: voting rights, dividend rights, priority of share purchase, transfer, gift, debt repayment by shares, etc.).

In particular, it first needs to determine if they are common properties of the spouses, formed and created or if the spouses have agreed that they are common properties of the spouses in a duly written document during the marriage period although the information on the stock only requires one owner name according to the Law on Enterprises. The division will, first of all, prioritise the voluntary consent of the spouses.

Secondly, if the spouses cannot reach an agreement, the division of common properties of the spouses will be based on the principle of division of common properties of the spouses as prescribed by law, taking into consideration the efforts of each spouse as previous analysis. These properties will be divided in the direction of dividing shares to both according to the respective proportion of shares or dividing shares to a spouse and the other spouse will be compensated by the appropriate amount from the spouse having shares.

However, it is different for shares in a joint stock company because it constitutes a special form of properties which has many legal issues when affecting the stock, leading to direct effects on shareholders’ rights and on the survival of businesses as well as the work of many employees. It is inevitable in some cases that a conflict arises between the Court’s judgements and decisions and the rights and interests of the shareholders in the company. To understand the above issue, let’s analyse a specific case as follows:

For example, Mr. V holds 59% of shares in X JSC[2]. The properties Mr. V used to contribute capital to X JSC is the common properties of Mr. V and his wife, Ms. T. Both spouses decide to divorce and divide their properties. Both of them have qualifications in management and operation so they want to have the right to hold shares of X JSC and will return the value of money to the opponent. The case is accepted to settle by the Court. The Court declared Mr. V to hold 59% of shares in X JSC and return cash value to Ms. T.

This is a common decision in judgements about the division of common properties of the spouses, which are shares in a JSC. Specifically, the Court will assign the right to decide shares holding to a spouse who is the person named in share certificate and the one actively participates in the operations of the JSC. This person shall be responsible for paying the amount of money equivalent to the value of the shares that the other spouse is entitled to. This is also based on the principle of protection of the legitimate interests of each spouse in production, business and occupation so that the spouses can continue working for income generation[4].

In divorce cases, when considering the division of common properties of the spouses, which are shares, the Court may not only rely upon the Law on Marriage and Family but also rely on relevant laws such as the Law on Enterprises, and the Law on Investment. The Judge may also consider the adverse effects that the company may encounter from the division of the shares due to the divorce of a shareholder in the company in order to make the most reasonable and proper judgement within the framework of the law.

In the Court’s decision in the example mentioned above, although the current Law on Enterprises grants the right to freely transfer shares in the JSC to shareholders, in most cases in practice, the Court will encounter conflicting opinions from the disputing spouses usually linked to their opposing desires. The Court will focus on the arguments and element of proof provided by the spouses as well as on the provisions of law, conducting their analysis impartially to make the best decision. In the example above, factors considered by the Court before making a decision to divide the common properties of the spouses who hold shares in JSC may include: rules of common property division of spouses during the marriage period, rights and interests of shareholders in JSC X which may be affected by the division as well as the opposition of either spouse on valuation and other related issues.

It can be said that it is feasible to evaluate a value for a newly established business or a bankrupt business. However it is extremely difficult to evaluate a value for an operating and developing enterprise since there are also intangible assets such as brand, reputation, and market shares apart from properties. When the valuation of the Court is incorrect, it will directly affect the interests of the litigants. For example, a lower valuation will cause damage to the spouse receiving compensation and vice versa. For a JSC which creates jobs for hundreds and thousands of employees, in addition to the material value created by the enterprise, there are also certain social contribution values. So, the decision for a spouse to operate as usual is also a provision of the law[6]. Hopefully, through the practical knowledge of the trial, it will help readers solve the above matters as well as understand the principles used by the Court as the basis for making decisions or judgements for divorce cases where the common properties of the spouses being shares in JSC.

[2] Joint stock company.

[4] Article 7.4.(c) of the Joint Circular 01/2016/TTLT-TANDTC-VKSNDTC-BTP.

[6] Article 59 of the Law on Marriage and Family 2014.

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