Married at First Sight? The Impact of Your Marital Property Regime on Your Business

This article discusses some key considerations that are often unknown but should be carefully thought through in advance.

Who owns the shares?

The first and most important question is: who actually owns the shares? Many entrepreneurs assume they are the sole owners of the shares because they founded the company alone at the notary and are the only ones listed in the shareholder register.

However, this assumption needs to be reconsidered depending on the marital property regime. If you are married under a separation of property regime, the situation is simple: there is no joint property, and as the company’s founder, you will be the sole owner of the shares, exercising full control over them.

If you are married under a community property regime (such as the default legal regime), things become more complex. If the company was founded using personal funds, the shares issued will also be considered personal property. Personal funds typically include assets acquired before marriage or those received through a gift or inheritance. However, under a community property regime, there is a presumption of joint ownership. This means that proof must be provided that the funds used to establish the company were indeed personal.

If this proof cannot be provided, or if the company was founded using joint funds, then the “Title” and “Finance” distinction applies—provided the shares are registered in the name of one spouse and that the company restricts the transferability of shares (typically a private limited company), or only one spouse actively manages the business.
This distinction means that the spouse in whose name the shares are registered holds the membership rights and acts as the owner of the shares (Title). The other spouse has no say in managing the shares. However, the value of the shares remains jointly owned (Finance).

Example

Jan and Els are married under the default community property regime. Jan established a private limited company to conduct his business. Since he went to the notary alone to register the company, he is the sole shareholder listed in the register. Therefore, the Title-Finance distinction applies.

• • Jan can attend the general meeting and exercise voting rights on his own.
  • Jan can decide to sell the shares without Els’s consent.
  • However, the proceeds from the sale belong to the joint estate, meaning both Jan and Els can use the money under the “concurrent administration” of joint assets.

If the shares are registered in the names of both spouses, or if the company does not restrict the transferability of shares, then both the membership rights and the value of the shares are jointly owned. In that case, both spouses can independently manage the shares.

What about distributions from the company?

Distributions from the company, such as dividends, are subject to different rules.

• Under a separation of property regime, the dividends belong exclusively to the spouse who owns the shares.
• Under a community property regime, dividends automatically become part of the joint estate, regardless of whether the shares are considered personal or jointly owned.

What happens if the shareholder becomes incapacitated?

If you, as a shareholder, become incapacitated (e.g., due to a coma or dementia), this can create significant issues for the company. You would no longer be able to exercise your shareholder rights independently.

• Under a separation of property regime or where the Title-Finance distinction applies, the shareholder rights remain personal. In such cases, a court must appoint a legal guardian to manage the assets. A family member is typically preferred as a guardian.
• However, this is not always desirable. Family members may lack business expertise or knowledge of company operations. In companies with multiple shareholders, it may be preferable to appoint a business partner to manage the incapacitated shareholder’s assets—always in their best interest.

A power of attorney for future care (or continuing power of attorney) can be a solution. This legally regulated agreement allows the grantor (the incapacitated shareholder) to appoint an attorney-in-fact who will manage their financial affairs in the event of incapacity—without requiring court intervention.

• The grantor chooses their representative.
• They can specify which powers the attorney-in-fact has and under which conditions.
• The attorney-in-fact can attend and vote at general meetings on behalf of the incapacitated shareholder.

However, it is important to note that the attorney-in-fact does not automatically take over executive duties in the company. The company’s bylaws must specify what happens to management responsibilities in the event of incapacity.

What happens in case of divorce or death?

Finally, it is crucial to consider what happens to shares in the event of divorce or death. The marital property regime plays a decisive role here.

• Under a separation of property regime, the shares remain the exclusive property of the shareholder, even after divorce or death.
• Under a community property regime, the first step is determining whether the Title-Finance distinction applies.
  • If it does, the spouse holding the Title retains the shares in case of divorce or death.
  • However, the Finance (the financial value) remains joint property. Upon divorce or death, the joint estate must be divided, meaning the shareholder may have to compensate their former spouse or heirs for half the value of the shares.
  • This can be problematic if the entrepreneur does not have enough personal liquidity to make this payment.

Upon death, the shares in the deceased’s estate are subject to inheritance law, unless a will states otherwise. Additionally, any transfer restrictions, pre-emption rights, or purchase options set in the company’s bylaws or a shareholder agreement must be taken into account.

Better not to marry blindly?

Clearly, it is worth thoroughly examining the impact of marriage and the chosen marital property regime. The right structure can be tailored to ensure a fair and suitable arrangement for all parties.

We strongly recommend that engaged couples discuss these matters with an expert before marriage. Even couples who have been married for years may benefit from reviewing their situation to ensure their arrangement still meets their needs.

Interestingly, even contestants on Married at First Sight don’t take unnecessary risks—they all sign a marriage contract!

Our PKF BOFIDI experts are here to help

For further questions about how your marital property regime affects your business, feel free to contact our PKF BOFIDI team. We are happy to assist you.