According to the principle as set out in Article 33 of the Law on Marriage and Family 2014 determining the common properties of the spouses, the properties created by the spouses during their marital period are considered as their common properties. Therefore, shares in a joint stock company or capital contributions in a multi-member limited liability company registered in the name of only one spouse but in a case where the spouses jointly bought or contributed during the marital period shall be qualified as the common properties of the spouses.
Upon divorce, the common properties of the spouses will be divided in half and the efforts of each spouse in the process of creating and developing the common properties will be taken into account[2]. Therefore, if the spouses cannot come to an agreement on common property division, the common properties will be divided by the Court as prescribed in the law. Specifically, the Court will focus on the evidence provided by the parties to determine the contribution of each spouse and divide it in appropriate proportions.
According to the Law on Enterprises 2014, limited liability companies and joint stock companies are enterprises with the legal entity status. Consequently, the owners and shareholders of these two types of companies shall take responsibilities for the debts and other asset obligations of the company within the amount of capital contributed to the enterprise. This is a company of capital contribution, so owners and shareholders can freely transfer their contributed capital and shares respectively. Therefore, in the process of dividing the common properties of the spouses in a divorce case involving properties, which are composed of capital contribution of the involved spouses in a limited liability company or shares in a joint stock company, there are two options available to the Court, which are set out as follows:
In the first option, the Court will determine who is managing and running the company, who has his or her name on the certificate of capital contribution or the shareholder registry book in order to let him or her to own the contributed capital and shares. This spouse must pay the other spouse the value of his or her capital contribution, or that of shares corresponding to the ratio in which the other spouse is divided. The spouse receiving capital contributions or shares must use his or her personal assets instead of the properties of the company to pay the other spouse. This option is usually considered by the Court in cases where the spouse’s name is not mentioned in the certificate of capital contribution or shares and he or she has no participation in the management, or administration of the company or rarely participates in and does not have lots of influence on the operation and development of the company. The option is implemented based on the principle of protection of the legitimate interests of each spouse in their production, business and career activities to create conditions for them to continue working and to generate incomes[4]; and
The second option, after determining the division ratio corresponding to the contribution of the spouses, the Court shall divide properties towards the inclination of dividing for the spouse who is named in the certificate of capital contribution or share certificate, and shall donate the capital contribution and shares corresponding to the proportion for both spouses to participate in the management and administration of the company. This option is usually considered by the Court when: (a) during the marital period, both spouses have a contribution in the establishment and development of the enterprise even though only one of them is named on the certificates; and (b) at the same time during the divorce dispute, the spouses have the desire to continue to participate in the management and administration of the company.
The consideration of choosing one of the two options above depends
largely on the evaluation of the Court on the wishes of both the spouses as
well as their contribution and creation to the enterprise that the capital
contribution or share capital is common property of the spouses in their dispute. This
division is naturally the division of the properties rights in the enterprise
in proportion to their capital contribution and shareholder rights in the
enterprise. The value of the property rights corresponds to the capital
contribution in the limited liability company, and the shares in the joint stock
company will be determined based on the property value of the enterprise at the
time of the property division.
[2] Article 59 of Law on Marriage and Family 2014.
[4] Article 59.2.(c) of the Law on Marriage and Family 2014.
If you would like more information on how we can assist you with divorce issues, please contact us at: +84 (28) 36223522 or email us at info@phuoc-partner.com