Is My Wife Entitled To Half My Business If We Divorce In South Africa?

Is My Wife Entitled To Half My Business If We Divorce In South Africa?

Many business owners are not aware that their spouses might be entitled to up to 50% of their businesses if they divorce. This is particularly true in marriages in a community of property, the standard marital property arrangement in South Africa. In this setup, all assets acquired before and during the marriage are combined into a joint estate shared equally between spouses.

This means that business interests are also part of that joint estate. Each spouse’s shareholding in the business is considered when calculating the joint estate. However, the actual assets and liabilities of the business (like a company or partnership) belong to the business itself and are not included in the joint estate.

Can My Wife Claim Half of My Business in a Divorce in South Africa?

In South Africa, whether your wife can claim half of your business in a divorce depends on how your marriage is structured:

In the community of property:

• If you are married this way, everything you own, including your business, is shared equally. This means your wife would be entitled to half.

Out of community of property:

• Without accrual: Your assets stay separate, so your wife wouldn’t have a claim on your business.
• With accrual: The growth in the value of your business during the marriage is shared, but if your antenuptial contract excludes the business from the accrual, your wife wouldn’t have a claim on it.

Note that If you did not sign an antenuptial contract, you are automatically married in a community of property, meaning all assets are shared.

How to Protect Your Business Before/After Getting Married In South Africa

You can protect your business from being shared by your divorced partner by considering the following;

• The use of An antenuptial contract (ANC):

An antenuptial contract (ANC) is a pre-marital agreement designed to protect assets, like a business, in the event of a divorce or death. It ensures that each spouse’s estate remains separate, unlike a marriage in a community of property where assets are shared. There are two options with an ANC:

• Out of community of property: Each spouse’s assets remain entirely separate, with no claims on each other’s property or businesses.
• Out of community with accrual: While estates are separate, any growth in value during the marriage is shared. However, a business can be excluded from this growth if explicitly stated in the contract.

If an ANC is not signed before marriage, the default will be community of property, meaning assets, including the business, are shared equally.

• Through A postnuptial agreement

A postnuptial agreement can be made after a couple is already married, especially if a business is acquired or started during the marriage. It essentially shifts the marriage from “in community of property” to “out of community of property,” similar to an antenuptial contract (ANC).

However, this option is less ideal since it requires court approval. Changing the marital property regime involves a High Court application, which can be expensive and time-consuming, with several legal requirements that must be met for the application to be successful.

• By Trust

A trust can be set up to buy a business, keeping it separate from your assets. As a trustee, you would still have some control over the business, but it would not be considered a marital asset if you divorce. In South Africa, a trustee does not own the trust’s property, they manage it for the beneficiaries.

It is better to create trust before buying or starting a business because transferring assets later can lead to tax issues.

However, if a trust is used to hide assets from a spouse during a divorce, the court may declare it invalid. If the trust is seen as just an extension of the person, the court might include its assets in the divorce settlement.

• Seek the guidance of an expert divorce attorney

A family law attorney can give you advice based on your situation, guide you through the legal process, and protect your business. If you are getting married, the attorney can explain the different marriage property options and help you create an antenuptial contract if needed.

In South Africa, whether your wife can claim half of your business in a divorce depends on the type of marriage agreement you have. I hope the provided information is helpful, share your thoughts below in the comment section.