Petar Petrić, Attorney at Law, Petrić & Kajić Law Firm LLC : Shares in a Company as matrimonial property

What is matrimonial property

It is defined as all the assets that spouses acquired through work or which derive from property acquired through work, provided that it was acquired during the duration of the marital union.

The matrimonial property also includes a business share, i.e. rights from a business share in a company if it was acquired through work or if it originates from that property which was acquired during the duration of the marital union.

What is spouse’s own property

In addition to the marital property to which the legal system of co-ownership applies, the spouse may also have his or her own property. It is the property that the spouse acquired on a basis other than work (inheritance, gift, etc.), original work of authorship, as well as the property they had at the time of marriage. Thus, in addition to marital property, spouses can also have their own property.

What is a share in the company

Share capital of a limited liability company is divided into business shares. The sum of nominal amounts of all business shares must correspond to the amount of share capital. A business share is regarded as the total rights and obligations that belong to a certain member of a company – limited liability company, based on the paid contribution when establishing the company or increasing the share capital. A business share is not an asset but the rights and obligations of a company member. When someone acquires a business share, he does not acquire the company’s assets, but membership rights (voting and property rights).

Voting rights include the right to participate in the general meeting, the right to be informed, the right to vote, etc., and property rights are the right to share in profits, priority when taking roles in increasing the share capital, the right to severance pay for withdrawn business share, the right to return of paid contribution in case of reduction of company’s share capital, the right to payment of balance after the liquidation or at the end of the bankruptcy proceedings.


How to divide marital property – business share

 It is common for business shares acquired in marriage to formally be registered to one of the spouses, although their actual owners are both spouses. Thus, the spouse who acquires a business share in a company (l.l.c.) during marriage has actually acquired 1/2 of that business share, and the other spouse acquired the other half. Marital property can be divided in the following ways: Agreement through negotiations – division of marital property is possible in a way that the spouses agree on the division of marital property, so they can also agree on the business share. An agreement can be reached through mutual negotiations between the spouses and their negotiating advisers.

Agreement through mediation/conciliation – after unsuccessful negotiations, and before the initiation and during court proceedings, the spouses have at their disposal an extremely efficient way of resolving the dispute – conciliation or mediation. It is a procedure in which the parties try to resolve the dispute amicably with the help of one or more mediators who help the parties reach an agreement or settlement, without the authority and ability to impose a binding solution.

The mediation procedure is one of the possibilities for resolving the problem, both before the initiation of the procedure and during the entire civil procedure, and even after the declaration of a legal remedy in the civil procedure. It is completely voluntary and it is this fact, as well as the fact that they are led through talks and negotiations by a mediator who is specially trained and has the necessary knowledge and skills to help resolve the conflict, that guarantees a strong chances for a dispute to be resolved through agreement. In addition, each of the parties in the mediation procedure may have at their disposal a lawyer, which, especially if he also has the necessary knowledge for counseling in mediation, provides an additional opportunity to achieve a positive result in resolving the dispute.

In court proceedings – in the event that an agreement is not reached, the spouse who is not registered as a member of a company is left only with the option of court proceedings before the competent court in order to exercise their rights. In the case of legal proceedings, the plaintiff is a spouse who claims that the business share in the company is the subject of marital property, and the defendant is the other spouse who is registered as the holder of the business share.

The claim in such litigation should contain two basic requests:

(1) determining that a certain business share of a certain nominal amount in a company is a matrimonial property; and

(2) that the plaintiff is the beneficiary of that business share.

In terms of the criteria of efficiency and duration, but also the level of confrontation, judicial proceeding is often very difficult for the parties or opposing parties and very often even after many years, the proceeding does not produce the results expected by the parties when initiating it.

Marriage contract and business shares

Although the term pre-nuptial agreement, which is most commonly used by the Anglo-Saxon legal system, can be heard in everyday speech (premartial agreement, abbreviated pre-nup), our legislation does not know the term prenuptial agreement but uses the term marriage contract.

The conclusion of a marriage contract is an option that modern legislation, including the Croatian legislation since 1998, provides to spouses.

A marriage contract is defined as the legal affair of the bride and groom or spouses intended to regulate property relations on existing or future property, which includes business shares in the company. Spouses are completely autonomous in arranging their property relations.

The marriage contract can be concluded by extramarital partners as well as same-sex partners.

A marriage contract may be concluded before entering the marriage or during the marriage. If it is concluded before the marriage, then the contract has a suspensive effect. This means that a marriage contract concluded before marriage begins to produce legal effects only by concluding a marriage between the contracting parties.

The marriage contract shall be concluded in written form, and signatures of contracting parties must be notarized.

A marriage contract can be changed at any time with the consent of contracting parties, and a new marriage contract can be concluded or the existing one can be amended.

In relation to the business share, the marriage contract has its effect at the moment of its entry in the appropriate court register. For greater legal certainty, it is a good idea for the contracting parties to address an experienced professional, a lawyer, who will draw up a marriage contract according to their agreement.

Accordingly, if the business share was acquired during marriage, it represents a matrimonial property, and therefore both spouses are entitled to the business share, provided that they can exercise the rights from the share only together. However, in order for this to be visible to third parties, the above will require the entry of the other spouse as an authorized person in the court register.

What is the purpose of concluding a marriage contract

There are several reasons for concluding a marriage contract. Those who already went through a divorce know how difficult the divorce procedure can be. Many of those who remarry seek to ensure that property obtained from a previous marriage is protected. In addition, a marriage contract can help protect the financial interests of children from that first marriage.

Similarly, if one or both spouses have children from a previous relationship, then many think it is a good idea to enter into a marriage contract. It can ensure that certain property is protected and set aside as the future inheritance of their children and is not subject to division of property in case of divorce.

Pre-marriage property is generally exempt from division, but in practice it is often difficult to determine what was acquired before marriage, and it is the marriage contract that can help determine which property belongs to the spouse, ensuring that that property does not merge with other property.

Although trust between partners is desirable in all segments of their lives, including property, the advantage of mutual regulation of property relations through a marriage contract is especially evident in moments of termination of marriage or extramarital community in such a way that the existence of a marriage contract can certainly contribute to a more peaceful divorce, i.e. termination of extramarital  or  same-sex union, thus avoiding lengthy litigation and high court costs related to property disputes resulting from such divorces.