When your marriage falls apart, should this automatically signal the breakdown of a business that you both so painstakingly struggled together to build before? Our Firm recently worked on an on-point matter and facilitated an amicable resolution where although a marriage had indeed broken down, the desire to continue a business established during the marriage remained evidently present, strong, and commercially viable.
In typical divorce cases, “matrimonial assets” are pooled to be divided among the two parties, where these refer to (a) assets acquired before the marriage by one or both parties ordinarily used or enjoyed by both parties or their children or has been substantially improved during the marriage by one or both parties; and (b) any other asset acquired during marriage by one or both parties.[1] They are then duly divided, taking into account what the Singapore Court deem as “just and equitable in the circumstances of each case.”[2]
Sometimes, partnership between spouses may extend beyond marriage into business. When the marital relationship comes to an end, the Court orders either (a) the shares of the business owned by one party to be bought over by the other, or (b) for the business to be sold to a third party, and if not, to be liquidated. This can be seen in cases such as Neil John Ryan v Exploration Png (S) Pte Ltd and Another, where a stay of winding up was ordered.[3] Similarly, in TZG v TZH, the Court considered both options (i.e. buying over the other’s share or selling the business) in the Order following the delayed proposal by the Husband to buy over the Wife’s shares.[4] Like division arrangements for other assets, these arrangements are advantageous to both parties as they facilitate a final and clean break to the relationship on all fronts.[5]
Our recent case painted a similar scenario where marriage had extended into business. Our Firm’s family and divorce practice group partner, Tan Hui Qing, and corporate and financial services regulation practice group partner, Kennedy Chen, jointly acted for the Wife where both spouses co-owned a business as shareholders which they concurrently managed and operated performing different but necessary functions. Beyond usual Court orders, we came up with a solution that allowed the parties to settle amicably out of Court: (amongst others) a shareholders’ agreement (the “Shareholders’ Agreement”) which within detailed the shareholding, division of powers and dividends between the parties moving forward. This is unlike typical divorces in Singapore, because the parties’ relationship would, more often than not, have turned acrimonious by the end of the proceedings,[6] and the chances of an amicable working relationship would be next to impossible. Additionally, it is not within the Court’s powers to make orders in respect of commercial matters, and may appear to somewhat run contrary to the “clean-break principle” that is a common thread for such cases.
This solution allowed parties a clean break in their marriage, avoided any additional embitterment between parties whilst facilitating their continuation of the business together and a provision for future exit of the business collaboration in a mutually acceptable manner.[7]
For our client, this not only secured her position as co-owner of the business, but also ensured financial security beyond the end of the marriage, providing our client with a sustainable source of income. As an added layer of protection, the Court Order awarded provides our client with rights to maintenance in the event where her dividends or salary remains unpaid. The Court Order also provides her with the right to hold her ex-husband personally liable should he fail to abide by payment arrangements set out in the Shareholders Agreement. Our client may avail herself to enforcement mechanisms for spousal maintenance should her ex-husband default on his financial obligations under the Shareholders’ Agreement.
The above approach is very much aligned with the Family Courts’ Therapeutic Justice (“TJ”) Model, fulfilling a key objective which encourages parties to “resolve their family disputes amicably, as far as possible… out of Court”, and[8] to ensure that parties can move forward and resolve future matters, if any, amicably outside the Court.[9] Whilst it did require much more effort to formulate various options for parties to consider and to adopt various negotiation methodologies during mediation sessions and settlement discussions, we continue to be willing and able to take extra steps to deliver a positive outcome to our client.
[1] Women’s Charter 1961 s 112(10).
[2] ANJ v ANK [2015] 4 SLR 1043 at [17].
[3] Neil John Ryan v Exploration Png (S) Pte Ltd and Another [2000] SGHC 242 at [7].
[4] TZG v TZH [2017] SGHCF 9 at [4].
[5] Lee Puey Hwa v Tay Cheow Seng [1991] 2 SLR(R) 196 at [9], citing Minton v Minton [1979] AC 593.
[6] TZG v TZH [2017] SGHCF 9 at [49]; Neil John Ryan v Exploration Png (S) Pte Ltd and Another [2000] SGHC 242 at [8].
[7] TZG v TZH [2017] SGHCF 9 at [50].
[8] Part 7I, Family Justice Courts Practice Directions 2024 at para 90B (2)(a).
[9] Part 7I, Family Justice Courts Practice Directions 2024 at para 90B (2)(f).