A Threat to Run Down the Family Company – What to do?
When a couple separates and there is a family company involved, it is common for one party to assume responsibility for the operation of the business. When this occurs, there is sometimes a risk that that party will misuse their power. This requires urgent action.
The party with control of the company may threaten to sell or otherwise deal with the assets of the company to limit the value of those assets or to reduce the asset pool, with a view of reducing the other spouse’s property settlement entitlements. In those cases, the party at risk should take urgent action.
The spouse who is at risk of losing assets may apply to the court for a restraint over the actions of the party operating the company until the final property settlement can be determined.
It is important to understand that the Family Law Act provides a wide definition of “property” and that extends to cover a family company or trust. The Family Court recently considered an application from a wife to restrain the husband from:
- Changing the Trustee of the Trusts;
- Transferring shares or issuing additional shares in any business entities;
- Deposing of any property greater than $5,000, other than in the usual course of business and only then at market value;
- Winding up, liquidating or otherwise affected the control of business entities; and
- Encumbering the company properties.
In this case, following separation the husband continued to work and control the business entities, although the wife also continued to hold an interest in those entities.
During discussions about property settlement matters, the husband accused the wife of being “greedy” and told her that he would wind up the company, sell assets and lease out company machinery.
Following that discussion, the wife found invoices issued by the company selling equipment for below market value. The wife also alleged that the husband had set up a new Trust to hide assets.
The court granted the injunctions sought by the wife and indicated that the injunctions were simply to preserve the current asset pool, and still allow the husband to operate the business as usual, though with some conditions on notifying the wife of certain transactions.
Be aware of your options
It is important to be prepared for any possible scenario that may occur during separation or divorce based on your individual circumstances. Therefore, it is important to obtain your personalised and professional legal advice early on.
If you are concerned about your ex-partner disposing of assets or rearranging a company, please contact our office on (07) 3221 4300 to arrange your initial fixed-fee consultation with one of our family law specialists.
You’ll feel more secure when you are aware of your options!