Yes, the shares in a corporation generally form part of a spouse’s net family property. In order to satisfy equalization or support obligations, a court could order a spouse to transfer shares in a corporation to the other spouse. This could inevitably result in unwanted business consequences and/or cause friction with the existing shareholders who may object to the forced intrusion of a new shareholder who has no connection to the operations of the corporation.
In order to protect itself in the event of a spouse applying for shares pursuant to equalization of net family property under the Family Law Act, a corporation can have a shareholder agreement that includes certain provisions. This might include requiring spouses of shareholders to provide a waiver to any claims to actual shares and the right to information respecting the corporation, together with independent legal advice. More commonly, however, the Shareholders Agreement should stipulate that the shares of any shareholder will be sold, redeemed or transferred to another shareholder at fair market value in the event of an application or proceeding brought by or against that shareholder under the Family Law Act. This will ensure that the spouse receives the value of the shares in monetary form, but not the shares themselves. In other words, the spouse is paid out its equivalent value and the remaining shareholders of the corporation are not forced to be in business with their partne’rs ex-spouse.
