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Family law: How a business can be on the hook for spousal payment

When a couple divorces, both individuals have a lot to think about. Under family law rules in British Columbia, one spouse usually pays the support to the other based on individual circumstances, but when the payor is also a business owner, he or she has some added considerations. If the company is incorporated, it is generally protected from shareholders' personal responsibilities; however, that is not always the case, especially when the soon-to-be divorced couple are the only shareholders.

In one divorce case in the country, a couple was in exactly this situation. The man was court ordered to make payments on the mortgage of the family home amounting to more than $110,000. But the man said he could not meet the payments. As per the agreement in this instance, it was then ordered to be paid in full in one lump sum. His former wife took action, and she went after the business in which they both had shares to recoup the payment.

Legislation in Canada allows a court to make an order that suggests a corporation is liable for support obligations of its shareholders. In other words, the corporation was served with a notice of seizure for the amount owed by the payor. The judge in this case ruled that all legal conditions were met for the corporation to assume the liability of paying the payee – in his case, the man's former wife. 

There are many family law rules of which some British Columbia residents may be unaware. A lawyer experienced in these laws would be able to advise a client on the ramifications of issues which may be tied into the divorce process, such as business ownership. It may help a client come to an agreement with a former spouse when he or she knows what could be on the line.  

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