If a married couple runs a German company, the liquidity of the company may be at risk in the event of a divorce. The division of the joint assets and, thus, of the company shares can possibly lead to the break-up and insolvency of the company. Therefore, efficient preventive measures that protect the company are of enormous importance. The prenuptial agreement is considered one of the most proven means in this regard.
The German law firm Schlun & Elseven Rechtsanwälte offers entrepreneurs comprehensive support in all divorce law matters – especially in connection with the division of joint business assets. Our German family law attorneys have in-depth expertise and many years of experience to enforce your interests quickly and effectively and to protect your business from damage in the best possible way.
In addition, as a preventive measure, we offer expert drafting and preparation of prenuptial and partnership agreements.
The Importance of the Prenuptial Agreement in Germany
The prenuptial agreement is the surest way of protecting business assets following a divorce in Germany. The marriage contract (prenuptial agreement) is provided for under German law by § 1408 BGB. All married couples should consider it as it allows for certainty in the event of a divorce.
A prenuptial agreement designed and agreed upon at the right time can prevent bitter disputes between the pair from arising. In addition, the contract will provide clear guidance on gains made during the marriage, spousal maintenance and pension equalisation rights. It is the best time to draft the prenuptial agreement before the marriage (during the engagement) and in the early stages of the marriage. The best arrangements are prepared when the parties do not have a reason to believe the marriage will end soon.
Although a marriage contract should be considered by all couples, for entrepreneurial partners, it is vital. In Germany, the assets obtained during the course of a marriage are seen as the accrued gains of the spouses and thus will be divided equally in the event of a marriage ending. Although assets gained pre-marriage are not counted, this leaves you open to significant losses.
This statutory requirement for accrued gains is provided for under § 1363 BGB and states that this is the statutory requirement if there has not been an agreement:
(§ 1363 BGB) Community of accrued gains
- The spouses live under the property regime of community of accrued gains if they do not by marriage contract agree otherwise.
- The property of the husband and the property of the wife do not become the common property of the spouses; the same applies to property 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 the prenuptial agreement limiting what the other spouse is entitled to in the event of a divorce, the entrepreneur leaves themselves open to significant disruption, potentially losing their business. Working alongside an expert family lawyer is crucial in drafting and assessing the prenuptial agreement.
Finally, it is noteworthy that the parties can alter prenuptial agreements in the future. It is advisable to consult with legal experts when making such changes to ensure that they remain in line with the requirements of German law. Improper actions can leave the individual open to legal conflicts in the future.
Limitations of the Prenuptial Agreement in Germany
The prenuptial agreement is the best means of reducing the risks involved with the division of business assets post-divorce. However, the prenuptial agreement also has limitations.
Spouses in a significantly better financial position than the other cannot simply pressure the other spouse into signing a detrimental agreement. Courts will intervene in cases where a spouse seeks to completely avoid paying spousal maintenance when the other spouse would appear to require it. They will also likely intervene when one spouse avoids paying child support. Essentially, if there are children in the marriage, it is likely that one spouse may have reduced their earning potential to take a child-caring role. Courts want to ensure that this is not exploited in the prenuptial agreement.
Trying to resolve such disputes out of court in an amicable fashion is usually in the parties’ best interests. Where it is in our client’s interests, our lawyers seek such resolutions to disputes. Time-consuming and costly legal disputes may cause significant complications for clients seeking to protect their business assets in the event of a divorce case.
Amicable Divorce Proceedings and the Division of Business Assets
If the marriage contract has not been drawn up, and you have reason to fear that this may damage your business assets, our German family lawyers will support you. The divorce does not prevent you from being a shareholder in a company, and it does necessarily mean that you need to lose business assets; however, without a pre-agreed marriage contract, it may mean that you need to negotiate carefully.
An amicable divorce, where critical matters such as spousal maintenance, pension equalisation and gains equalisation are resolved outside of court, is strongly advisable. Consulting with experienced divorce lawyers ensures you receive expert advice concerning such negotiations and discussions.
Reaching an agreement that protects your business may involve negotiating terms that include some of the following points. These points refer to the equalisation of gains.
- Reach an agreement to exclude the company and business assets from the equalisation of gains,
- Agree to only value the company at book value,
- Agree to set a maximum amount for the equalisation of gains,
- Defer the equalisation claim to allow you to get the business assets in order,
- Agree to have the equalisation claim paid in instalments.
These are just some of the recommended steps to take to reduce the impact of the divorce on your business assets. Should an agreement be reached which is favourable to all sides, prepare a notarially-designed legal agreement. Remember, an amicable divorce is usually the preferred option for all parties, especially in cases with children involved. An amicable divorce allows for more accessible future arrangements concerning child custody and access and a smoother and less time-consuming divorce process.