Article “Division of joint property and company as joint asset” by attorney-at-law Ilja Sipari
The division of joint property is often a very time-consuming operation, but in-depth legal disputes are not very common in litigation. In some cases the parties dispute whether an object belongs to the joint property or was the spouse’s separate property, but the main subject of the dispute is still the division of specific property between the ex-spouses and the value of the property.
The situation becomes significantly more complicated and problematic when the joint property includes a company.
First, it is difficult to assess the value of a company. The management board is responsible for the company’s financial accounts and, in most cases, the board has the power to exercise significant influence over the value of the company. For example, a company’s balance sheet may be significantly affected by which receivables are considered uncollectible and written off. In addition, it is possible to enter into various transfer or loan agreements which also affect the value of the company.
Secondly, it is important to know that pursuant to the case law of the Estonian Supreme Court, the value of an object as of the time of loss of ownership must be taken into account when determining the amount of compensation for the division of joint property and joint ownership. The Supreme Court has stated that the payment of fair compensation is ensured if the value of the lost property is determined as accurately as possible as of the time of the loss of property.
This means that the proceedings in the county court can be time-consuming but if the dispute reaches the circuit court, the parties have the right to request a new expert examination to determine the value of the joint property. However, this gives the malicious party enough time to manipulate the value of the joint ownership.
In addition to the status of a member of the management board, one of the spouses can also exercise the rights of a shareholder. The Commercial Code stipulates that if a part belongs to several persons jointly, these persons may only jointly exercise the rights related to the part. At the same time, the Commercial Code also states that in certain cases it is presumed that a shareholder present at a shareholders’ meeting has the right to represent other joint shareholders. Thus, one of the spouses may influence the value of the company through the decisions taken at the shareholders’ meeting, and if the other spouse is unable or unwilling to participate in the management of the company, this may result in an unpleasant surprise in valuing the joint property.
In conclusion, it is always advisable to use in disputes concerning the division of joint property a lawyer who in addition to family law is also acquainted with the legal regulation related to the joint property. If the joint property includes a company, a lawyer with a good knowledge of commercial law can effectively assess the activities of the company’s board and intervene if necessary.
Among other, a shareholder has the right to receive information from the management board about the activities of the company and to examine its documentation. The management board may refuse to provide information and documents only if there is reason to believe that it may cause significant damage to the interests of the company. In such a case, the shareholder has the additional right to submit a petition to the court to oblige the management board to provide information or provide access to documents.
If the assessment of the management board activities reveals that the board has not acted in accordance with the interests of the company, then the management board members who have caused damage to the company by breaching their obligations must compensate the damage. Thus, a company’s assets may also include a claim against a (former) member of the company’s management board, which in turn affects the company’s value.
In conclusion, a company as a joint property can be very problematic, and a long litigation for the division of joint property provides the malicious ex-spouse with various opportunities to manipulate the value of the joint property. At the same time, with the assistance of a competent lawyer it is possible to protect one’s interests and share property in a fair manner.
Attorney-at-law of Law Firm LINDEBERG