+61 2 9929 8840

    Property Settlement Australia

    How is a Business Divided in a Divorce? 1024 631 Dorter

    How is a Business Divided in a Divorce?

    When a couple divorces or separates, a property settlement, also known as the division of assets, is almost always necessary.

    In some cases, this process will involve assets like a home, cars, money, and superannuation and in other cases, it may involve complex and highly valuable assets, such as a business.

    In this article, we’re going to discuss how a property settlement involving a business should be handled, including the various steps that should be taken.

    Property Settlements and Businesses

    The breakdown of a marriage or de facto relationship can have a significant impact on a business. Whether both parties to the relationship own the business or it is owned by one party only, the future of the business could be impacted as the business is considered part of the marital property pool.

    It’s important to be aware that the breakdown of a relationship where a business is involved could impact not only the couple, but also any other owners of the business, as well as anyone else with an interest in the business.

    What happens to the business when a couple breaks up?

    As we touched on above, it doesn’t matter whether the business is owned by one party or both parties to the relationship – in most situations, it is considered to be an asset that could be divided in the property settlement.

    The way assets, property and liabilities are divided in a property settlement involves a 4-step process. These steps are:

    1. Identify all assets and liabilities – during this step the value of the business will need to be identified.
    2. Step 2: Identify the contributions of all parties – contributions can be financial and non-financial, as well as direct and indirect. Even if one party never worked in the business, their contributions to the relationship could make them entitled to a percentage of the business.
    3. Step 3: Work out the future needs of each party – factors such as parenting, health and age can impact the future needs of each party.
    4. Step 4: Review the agreement – the property settlement agreement must be just and equitable.

    Identifying the assets in step one is particularly important and it also involves valuing them too. In the case of valuing a business, this can be complex as many factors determine the value of a business. This can also be an area of contention for separating couples, so it is highly recommended that a professional business valuation expert is engaged to avoid disputes arising.

    The aim of these steps is to work out the percentage of the overall property pool that each party is entitled to.

    Who actually gets the business in a property settlement?

    The way assets are split can be complex and will differ from situation to situation. When it comes to a business, there are many different outcomes that could occur.

    One potential option is that the one former spouse buys out the other spouse’s interest in the business. Another option is that the business is split, with each party receiving part of the business. Selling the business to third party and splitting the proceeds in the property settlement is another option. If there is agreement, there are certain circumstances where former spouses could continue to own and operate the business as is.

    The right option is dependent on the unique factors of your situation and the type of business operated. In some cases, the former spouses may have an amicable relationship where their split hasn’t interrupted the business operations, while in other cases, there has been a significant loss of trust and it’s not possible to come to an agreement.

    It’s best to seek legal advice before making a decision regarding a business in a property settlement as there can be long-term consequences of these decisions that could be overlooked.

    What if the former spouses cannot reach an agreement for their property settlement?

    The family law system in Australia has been designed to allow people to reach agreements together or to use other resources to avoid having to go through Court proceedings. However, while the system allows for this, it’s not always possible to come to agreements, and in matters that involve complex property and assets, like a business, Court intervention may be necessary.

    In this scenario, the parties apply to the Federal Circuit and Family Court of Australia for a property division. The Court will use the same 4-step process we outlined earlier to determine an appropriate split of assets and liabilities, including the business. It’s important to note that the Court may require that an independent valuation of the business takes place where the parties cannot agree on the value.

    As a property settlement is meant to be a way to finalise the financial relationship or sever the financial ties of the former spouses, the Court will be likely to make a decision where one person may receive the business while the other receives other assets that equate to their share of the assets and property, or if this is not possible, the Court may order that the business is to be sold. The aim will be to not only finalise the financial relationship but also to ensure that the property settlement is just and equitable.

    Can you protect a business?

    Protecting a business from being impacted by a relationship breakdown is possible, however, it is highly recommended that a lawyer is engaged.

    Whether you’re considering marriage or in a relationship and own a business, or you’re considering starting a business while in a relationship or marriage, there are various options available to you. A binding financial agreement that outlines how assets are managed in the event of a relationship breakdown is one of these options.

    As many unique factors are at play with relationships and businesses, we highly recommend seeking legal advice if you wish to protect your business or any other asset.

    Talk to our property settlement family lawyers

    If you’ve separated and are having difficulties in determining a property settlement agreement or you’re wanting to protect your assets, talk to our property settlement family lawyers today.

    Our experienced legal team is here to offer advice, guidance and representation for all types of family law matters, including complex property settlements.

    Call us today on 02 9100 0437 or book a no obligation consultation here.

    Multiple Jurisdictions 1024 683 Dorter

    Multiple Jurisdictions

    Litigation of issues across multiple jurisdictions involving the same subject matter and parties is becoming increasingly common, particularly in family law. It will often involve a careful analysis of which jurisdiction or Court is preferred and consideration of whether the issues or proceedings can be transferred or consolidated.

    In a family law context it is becoming more common to see third parties, such as Mum or Dad or grandparents, seek repayment of monies they may have advanced to one or both parties or an argument that real estate is held “on trust” for a third party following separation. In these situations a third party may assert certain legal rights to pursue repayment of monies or declarations that the third party is the beneficial owner (real owner) of real estate. What follows is that multiple jurisdictions (or Courts) may have the jurisdiction to decide the issue e.g. Federal Circuit and Family Court of Australia and Supreme Court of New South Wales. Our previous article on “Accrued Jurisdiction” provides an overview on such jurisdiction existing between different Courts and can be found here – What is Jurisdiction and Accrued Jurisdiction?.

    In these circumstances it is necessary to seek specialist advice about:

      1. Which jurisdiction (or Court) may be preferred to determine the issue;

      2. Whether the issue can be cross-vested, or transferred, between jurisdictions (or Courts);

      3. When and how to apply for a transfer of proceedings;

      4. How to deal with different Judicial Officers in different Courts; and

      5. What to do if the transfer does not succeed.

    Dorter Family Lawyers and Mediators specialises in family law disputes that involve multiple areas of jurisdiction and/or multiple Courts. If you require any assistance with the above we can assist.

    This post is an overview only and should not be considered as legal advice.  If there are any matters that you would like us to advise you on, then please contact us on (02) 9929 8840.

    Andrew Johnson
    Partner

    Rebekah Dorter
    Principal

    Property Settlement Time Limits 1024 685 Dorter

    Property Settlement Time Limits

    Separation can be a very stressful and emotional time, and parties may avoid or prolong finalising a property settlement with their ex-partner (which may or may not include a provision of spouse maintenance) for a variety of reasons.

    Whilst there are no time limitations for parties making an application to the Court for parenting orders for children, the Family Law Act 1975 (Cth) sets down strict time limits in relation to claims for a property settlement following either the making of a divorce order or the breakdown of a de-facto relationship.

    Time Limits for Property Settlements

    Section 44 of the Family Law Act 1975 (Cth) (Act) sets out the relevant time periods for parties to apply to the Family Court or Federal Circuit Court of Australia for a property settlement.

    • For married couples, a claim must be commenced within 12 months of a divorce order being made.
    • For de-facto couples, a claim must be commenced within 2 years of the date of final separation.

    Leave to make an application out of time

    Notwithstanding these time limitations, it is possible to make an application to the Court for leave (formal permission) to be granted an extension of time under the Act, and be permitted to have their property settlement heard and determined by the Court notwithstanding that these time periods have expired.

    When considering applications for an extension of time, the Court usually undertakes a two (2) step enquiry.

    The first step involves the Court considering whether hardship (substantial detriment) would be caused to the applicant party if leave were not granted.

    If the applicant party establishes hardship, the second step involves the Court using its discretion to determine whether or not the claim/s should be heard by the Court.

    Factors the Court may consider include:

    • the length of the delay in bringing the claim;
    • whether there is an adequate explanation for the delay in bringing the claim; and
    • the prejudice that may be suffered to the other party if leave is granted.

    Expert help for property settlements is available

    Applications for leave to commence proceedings out of time are highly technical areas of family law and ultimately depend upon the individual facts and circumstances of each case.

    If you find that you are out of time to commence a property settlement claim, it is vital that you obtain legal advice regarding the prospects of success in applying to the Court for leave.

    Alternatively, if you have been served with Court documents by your ex-partner (or his/her legal representatives) and you are aware that their claim/s are out of time, it is also vital that you obtain legal advice regarding the merits of your ex-partners claims.

    Dorter Family Lawyers and Mediators are experts in family law and can assist you in all areas of family law. If you would like to book an appointment to see one of our experienced family lawyers for a confidential discussion, please call our office on (02) 9929 8840 or email us at hello@inst1045122-8984.ozhosting.com