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3 min read - May 16, 2024

Navigating the Legal Separation Process While Managing Your Business

If you are in business with your spouse or de-facto partner, you may have already formed some assumptions regarding which assets are relationship or company property. While these distinctions might not seem important now, they could become critical in the event of a separation. This is particularly true if you are a director – as you must consider how can you best protect yourself while still ensuring your duties and obligations to your company are fulfilled. A proper understanding of this distinction can help safeguard both your personal assets and ensure your continued business success.

These issues were recently considered by the High Court in Martin v Martin, summarised below.

The Martin case

In Martin v Martin, Mr and Mrs Martin were married for 50 years before deciding to separate.  They each held shares in two companies, but the businesses themselves were company-owned, not personal assets. On separation, Mrs Martin made unauthorised withdrawals of $620,000 from one of the companies. Mr Martin successfully obtained interim relief, which resulted in Mrs Martin having to return these funds to the company.

Mr Martin then applied to the High Court for relief under the Companies Act, claiming he was a prejudiced shareholder, and that Mrs Martin breached her director’s duties in making the withdrawals and in frustrating the trading and business of the jointly owned companies. He therefore sought orders that he be permitted to purchase the businesses.

Mrs Martin objected to the application, submitting that the High Court did not have jurisdiction to determine the issue because the property subject to the applications was relationship property. Therefore, only the Family Court had the jurisdiction to deal with the issues.  

Why was this not a relationship property matter?

The High Court considered that the position was plain. Mr martin was seeking that the businesses – not just their shares - be transferred to him. This was a matter involving company property, governed by the Companies Act, not a matter for the Property (Relationship) Act 1976. Whilst the respective shares owned by the Martins could be held to be relationship property the business’ themselves could not. The High Court accordingly held the application was within the High Court’s jurisdiction.

What does this mean for you?

This case highlights the complexities of owning business shares with a spouse, particularly in the context of a separation or divorce. If you're in a similar situation, you may want to consider obtaining legal advice to clarify the ownership and control of business-related assets and shareholdings should a separation occur. Ensuring you have solid legal advice, like that offered by K3’s family and commercial law teams, is essential in navigating these intricate legal waters effectively. 


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