A Transfer of the Interest
One party transfers the interest, or part of it, to the other. Shareholder, partnership or unanimous agreements may restrict who is allowed to hold it, and those terms are checked before this route is chosen.
What Happens to a Family Business During Divorce in Alberta?
photo — small business owner at work (4:3)
A family business raises questions about ownership, value and treatment under Alberta's Family Property Act. The business records help identify the interest and the questions to put to legal and valuation advisers.
What Has to Be Established
Questions about a business interest include ownership, value, exempt value and how a division could be implemented:
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What the interest actually is. Shares in a corporation, a partnership share and a sole proprietorship are different things in law, and the answer changes what has to be produced and who else has an interest in the outcome.
- 2
When it was acquired, and whether any part of it is exempt. A business one party started beforehand, or built with money from a source that may be exempt, raises an exemption question that is answered from records rather than from assertion.
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What it is worth, and at what date. Valuation is normally expert work. The date is not left open in the same way: unless the parties have a written agreement that meets the Act's requirements, the property being divided is valued at the date of the trial, so what is argued is the value on that date rather than which date to use.
- 4
Whether it produces income already being counted for support. Money drawn from a business can appear in two exercises at once, and the figures used for support are not automatically the figures used for division.
How an Interest Can Be Divided Without Destroying the Business
A Buy-Out Over Time
One party keeps the interest and pays the other in instalments. The constraint is funding, because the instalments have to come from somewhere, and the terms are set out in an agreement.
An Offset Against Other Property
One party keeps the business and the other takes value from elsewhere in the property. The constraint is whether there is enough other property to offset against.
A Sale
The business is sold and the proceeds are dealt with as part of the division. The constraint is the effect on the people who work in it, and on whatever the business was built to do.
Each route carries tax consequences. Which one is workable depends on what the interest is, who runs the business and what else there is to divide.
If Only One of You Runs the Business
Both parties are entitled to the financial information the exercise needs, whoever runs the company.
The party who runs the business usually holds the records, and the other party usually does not. That asymmetry is ordinary and it is not, by itself, evidence of anything.
Where records are incomplete, or where access is refused, that is a step for a lawyer rather than self-help. A request made through counsel is recorded, is framed in the terms the exercise actually needs, and can be relied on later.
The party who runs the business has the same interest in getting this right. Disclosure that arrives late or in pieces tends to turn a question about value into a question about candour.
Getting the information in order early keeps the exercise about the business rather than about access to it.
The Records That Matter
Ask your legal and valuation advisers which of the following records are relevant to the business and the issues in dispute:
- 1
Corporate records and share registers, showing who holds what, in what class, and since when.
- 2
Financial statements for several years, so that a pattern is visible rather than a single year taken on its own.
- 3
Tax returns for the business and for the individuals, which have to sit consistently alongside the statements.
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Shareholder, partnership or unanimous agreements, which set out what may be transferred, to whom, and on what terms.
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Loan and shareholder-loan records, which show what the business owes and what is owed to it, including amounts owed to a party.
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Records of what was contributed and when, including anything claimed as exempt and what it was worth when it came in.
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Records of what each party drew from the business, in what form, and over what period.
Keep records you lawfully hold and ask your advisers what else is needed and when it must be provided.
Support and a Business
Income drawn from a business may matter for child support and spousal support as well as for division, and the two exercises use the figures differently.
Family property division in Alberta covers the wider question of dividing what a couple owns and owes when the relationship ends.
Exempt property in Alberta is value that is not shared because of where it came from, which is the question behind any claim that part of a business is exempt.
Gray divorce is separation later in life, where a business built over many years can be part of the same exercise.
When to Talk to a Lawyer
A Calgary family lawyer advises on what has to be established, on what information can be asked for, and on how a business interest is dealt with in an agreement or a consent order.
Circumstances in which to get advice:
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A spouse or partner who is a shareholder in the business, or employed by it.
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A business one party started beforehand.
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Drawings from the business that the parties disagree about.
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An urgent step needed to preserve records.
Talk to a Calgary Family Lawyer
Bringing the question to a lawyer early means the information can be requested in the right form the first time, and the route the parties are considering shapes what has to be established.