Guest Article: Companies and Divorce

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 may require legal representation. However ‘control’ over an as set or an entity which holds or owns assets is a critical issue when the Family Court decides if it has power to divide those as set s between a separating couple.

If a company is completely controlled by you, your former partner or both of you, the company may be deemed not to have separate interests and the court s 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 instruct ions from you about how the company operated on a daily basis and how key decisions were made about as set s owned by the
company, in order to establish who control s the company.

If the company is partly or completely controlled by other people, the company’s assets may or may not form par t of the pool of as set s to be divided between you and your former partner. However, if the others associated with the company are family member s or have another relationship with you, it may be that the company holds certain as set s ‘on trust ’ for you or your former partner. This depends on the facts of each case.

For example, you may purchase a property to live in, but transfer part or all of your entitlement in the property into the name of a company of which your sibling i s the sole director and shareholder. Although you do not control that company, there may be an implied, resulting or ‘ constructive’ trust in existence. At law your sibling’s company holds 50% of the property ‘on trust’ for you.

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.

The information above does not constitute legal advice. You should seek advice specific to your situation.