Division of Business Assets in German Divorce Cases

A prenuptial agreement is the safest way to protect business assets in Germany in the event of a divorce. Every married couple should consider concluding a prenuptial agreement, as it offers a high degree of security in the event of a divorce. A prenuptial agreement agreed upon at the right time can prevent costly and time-consuming disputes between the couple. In addition, the prenuptial agreement contains clear provisions on the equalisation of gains during the marriage, the entitlement to spousal maintenance and the implementation of pension equalisation.

The best time to draw up a prenuptial agreement is before the marriage (i.e. during the engagement) or in the early stages of the marriage. Experience has shown that prenuptial agreements that benefit both parties and contain fair provisions are drawn up when the parties have no reason to believe the marriage will end. It is still possible to amend or cancel a prenuptial agreement in Germany even after it has been concluded. In the event of errors within the marriage contract, for example, in the case of immoral agreements, the marriage contract can also be contested. It is, therefore, essential to seek legal advice when concluding a marriage contract to guarantee its legal validity.

Even though it should be considered by all couples in principle, a prenuptial agreement is especially highly recommended for a business marriage or entrepreneurial marriage. In Germany, assets acquired during the marriage are regarded as the spouses’ accrued gains and are therefore divided equally in the event of a divorce. Although assets acquired before the marriage are not considered, they can still lead to considerable losses. The equalisation of accrued gains is regulated in Section 1363 of the German Civil Code (BGB) and states that the legal requirement for this is that no other agreement has been made:

Section 1363
Community of accrued gains

(1) The spouses live under the property regime of community of accrued gains unless they agree otherwise by marriage contract.

(2) The respective assets of the spouses do not become their common assets; the same applies to assets that one spouse acquires after marriage. The accrued gains that the spouses acquire in the marriage, however, are equalised if the community of accrued gains ends.

Without a prenuptial agreement limiting the other spouse’s entitlement in the event of a divorce, the entrepreneur risks significant economic damage and possibly the loss of the company. Our German family lawyers will support you in drafting and reviewing prenuptial agreements to prevent such consequences for you and your company.

A carefully drafted prenuptial agreement is the best way to avoid post-divorce risks regarding the division of business assets. However, the marriage contract also sets limits. Spouses who are significantly better off financially cannot simply pressure the other spouse into signing a disadvantageous agreement. If one spouse tries to avoid paying spousal maintenance altogether, the court in Germany will intervene. This also applies if one spouse attempts to avoid paying child support. By intervening this way, the courts try to ensure that the marriage contract is not exploited.

An out-of-court solution is often in the best interests of all parties involved and should, therefore, be sought whenever possible. Time-consuming and costly legal disputes can otherwise have the opposite effect for clients seeking to protect their business assets in the event of a divorce.

Our German family lawyers will support you in drawing up a prenuptial agreement to protect your business assets in the best possible way. Even though divorce often leads to a separation of private lives, this does not necessarily mean that the business relationship must also end. A marriage contract ensures that your company is protected even if you want to end your business relationship. For this reason, it is advisable to settle a divorce and other essential issues such as spousal maintenance, pension equalisation, and equalisation of gains by mutual agreement (out of court). Advice from our German divorce lawyers ensures that you are clear about your rights and options during such negotiations and discussions.

An agreement to protect your business can also include conditions that cover some of the following points regarding the equalisation of gains:

• Agree that the business and business assets will be excluded from the equalisation of gains.
• Agree that the business will only be valued at book value.
• Set a maximum amount for the equalisation of gains.
• Set aside the equalisation claim to structure your business assets.
• Agree to have the equalisation claim paid in instalments.

These are just some of the recommended measures to minimise the impact of the divorce on your business assets. Should an agreement be reached which is favourable to all parties, ensure a notarised agreement is prepared. An amicable divorce is usually the preferred option for all parties, especially in cases where children are involved. An amicable divorce allows for easier future agreements on child custody and access and makes for a smoother and less time-consuming divorce process. Antagonistic divorce proceedings can otherwise cause more damage and suffering than necessary.

It is not uncommon for both spouses to be involved in a company as shareholders, managing directors, or partners. Therefore, it is advisable to maintain a professional relationship even after the divorce for the good of the company. However, the necessary trust element is often damaged after a divorce. Therefore, a prenuptial agreement that contains favourable aspects for both parties is even more important in such a situation if the divorce is not amicable. Otherwise, divorce proceedings can be time-consuming and expensive.

However, amicable and out-of-court divorces are not always possible. It is, therefore, advisable to conclude a partnership agreement in addition to the marriage contract to prevent private disputes between the partners from affecting the company. A partnership agreement can protect spouses from acting maliciously and recklessly, such as blocking necessary company decisions through their position in the company. Establishing an advisory board in the company is another means of protecting the company, as it acts as an intermediary between the company and the shareholders. Such an advisory board can prevent shareholder disputes from harming the company.

Buying the other spouse’s shares is another protective measure, as is establishing a mechanism whereby the current shareholders have a right of first refusal if another shareholder wishes to sell their shares.

If both spouses are heavily involved in the business, a professional and amicable solution is the best way to ensure its continuity. The lawyers at Schlun & Elseven Rechtsanwälte will provide comprehensive advice on such a procedure and any German divorce law issues.