Divorce and the Family Business – Is it mine or is it Ours?

The greatest shock many of my separating and divorcing couples experience is the reality that under the Family Law Act of Ontario, all property whether it is in your name solely, your spouse’s or in both your names is subject to division on yes –  a 50/50 basis just like the pensions, matrimonial home and the cars. What is mine is also yours and is to be shared equally unless the parties have a pre-existing prenuptial or cohabitation agreement or other domestic contract that states it will be excluded or divided in a different way. In the absence of such an agreement the parties may also mutually consent to an unequal division.

But I Own the shares Not My Spouse!

I hear this often. Just because you own 100% of the common shares of the family business it does not mean your spouse has no entitlement to it. Yes you own it and will continue to own it after divorce but you will be required to share in the “value” of the business as at the valuation date, more commonly referred to as the date of separation.

But I already divided the value of the business!

Why do I have to share my future earnings? What is equally painful to many business owners is that the future business profits which take the form of salaries and dividends to the business owner at the simplest level become the basis of income used to determine future child and spousal support obligations. Further adjustments to this “earned income” are set out in the Child support and Spousal Support Guidelines.

A Divorce within a Divorce

Divorce is already extremely emotional. If spouses have been involved in the business together, often they have to separate their business dealings with only one party continuing to operate the business. It is tantamount to a divorce within a divorce.

The emotional upheaval of divorce clouds the judgment of the parties, breeds mistrust, further deteriorates the communication and impairs good business decisions that can affect the future viability of the business. A bitter battle over the business ownership or its valuation can conceivably and very likely kill the golden goose which to this date had supported the family financially.

Although possible, less than 5% of the parties remain in business together. With so much at stake it is critical that couples who have a business avoid the cost of divorce lawyers and consider mediation as a way to preserve their net worth.

How Can Mediation Save the Family Business?

Our mediators come from a business background who guides clients with the following key steps:
1.    Assessing who stays with the business and who goes
2.    What does it take to operate the business together
3.    How to value the business
4.    Impact on other business owners
5.    Dividing the value and keeping the business afloat

At PRM Mediation we help our clients reach amicable solutions, keep them out of the legal system, the battles between divorce lawyers, and mitigate the effects of their divorce so the family business can be preserved for the next generation.


Mary Krauel, Senior Negotiator/Mediator – PRM Mediation – www.PRMmediation.com

Divorce, Corporate, and Elder Care Issues – Serving Southwestern Ontario from Mississauga and London.