PART TWO: WHEN SOME OF YOUR ASSETS ARE OWNED BY A COMPANY
Caroline Counsel Family Lawyers frequently advises clients who have placed some of their assets or a share of an asset into a company rather than owning these assets in their names. Disputes arise between separating couples about whether such assets should be included in the pool of assets to be divided between them. It might be that one person has control over the company but their former spouse does not.
Some clients might also need advice about how to reverse a transaction which saw one party transferring assets into a company structure to try and avoid the asset being found or divided as a result of a separation.
A company is generally treated as a ‘legal person’ in Australian law. Companies can become a ‘third party’ involved in a family law dispute and require legal representation. However ‘control’ over an asset or an entity which holds or owns assets is a critical issue when the Family Court decides if it has power to divide those assets between a separating couple.
For example, if a company is completely controlled by you or your former partner or both of you, the company may be deemed not to have separate interests and the courts will not deal with it as a separate party. In short, the courts will regard the company in that situation as being the ‘alter ego’ of you or your former partner. We may need to conduct company searches, review the Constitution of the company, obtain detailed instructions from you about how the company operated on a daily basis and how key decisions were made about assets owned by the company, in order to establish who controls the company.
If the company is partly or completely controlled by other people, the company’s assets may or may not form part of the pool of assets to be divided between you and your former partner. However, if the others associated with the company are family members or have another relationship with you, it may be that the company holds certain assets ‘on trust’ for you or your former partner. This depends on the facts of each case.
For example, if you purchased a property to live in, but put a share or all of the property title in the name of a company of which your sibling is the sole director and shareholder, although you do not control that company, there may be a ‘constructive’ trust created so that your sibling’s company holds 50% of the property ‘on trust’ for you. This can occur without any trust deed or other document expressly indicating your intention to create such an arrangement. In short, it will be the facts that dictate what the legal ramifications may be.
In other cases, an asset may simply belong to other people and therefore be excluded from the division of assets between you. This may be a vehicle that you drive that is not registered in your name, a house that you live in with or without paying rent to the legal owner, or such other asset.
If you or your former partner have entered into these or similar arrangements, we can work with you to identify what you are legally required to disclose, and how the Court may regard the assets of third parties. You should contact our office to make an appointment on 9320 3900 or email [email protected].
The information in this blog does not constitute legal or financial planning advice and cannot be relied upon by you. If you require advice specific to your situation you must contact Counsel Family Lawyers for legal advice. The contents of this blog are relevant as at 17 October 2017. We recommend you obtain specific advice relevant to you and your family’s situation.
Caroline Counsel Accredited Family Law Specialist and James Moore Senior Associate.
