Under Australian family law business interests are considered as “property” which forms part of the pool of assets available for distribution upon property settlement. Businesses can include those operated by a party as a sole trader, a partnership, or a business conducted through a company.
If required to do so, the Court will determine the extent of each party’s entitlement to the business. Once those entitlements are quantified, the Court will be able to make orders with respect to how it will be treated in family law proceedings. The Court may order that a party:
- retain their interest as part of the property settlement;
- transfer their interest to the other party; or
- sell the business and share the proceeds between the parties.
The Court’s main goal is to achieve fairness between the parties. As such, the Court may alter rights and interests of a third party to ensure a fair outcome. In respect of a business, the Court can do any of the following:
- stop the company from entering into a transaction that would impact upon its value, for example, issuing more shares to decrease the value of the issued shares;
- make the company register a transfer of shares between parties;
- stop the company from commencing legal proceedings; and
- stop the company from seeking to recover property from parties to the property settlement.
Although the Court’s power to make orders against third parties is wide, it is not unlimited. The Court can make an order against third parties only if it is satisfied that such an order is either reasonably necessary or appropriate to effect a division of property between the parties to the marriage. Similarly, an injunction (that is, an order either stopping something occurring or making something occur) against a third party may only be given when it is proper, just, and convenient in the circumstances of the matter to do so.
The Courts are generally hesitant to exercise their power with respect to third parties. Third parties must be notified when the outcome of proceedings may impact them. In some cases, they must be given the opportunity to be part of those proceedings.
The Court’s power to make orders and injunctions against third parties, including companies, makes property proceedings complex. If any of the issues discussed above relate to you, our Family Law team at Craddock Murray Neumann Lawyers can assist.