The matter in brief
How it went
Situation. On the divorce of a married couple, one spouse claimed a share in an operating business worth a significant part of the family’s total capital, despite a prenuptial agreement concluded in advance.
What we did. We upheld the validity and terms of the prenuptial agreement in court, proved that the business assets had been removed from the joint property regime in accordance with its terms, and prepared a calculation of compensation for the remainder of the property.
Result. The client’s business assets were protected from division in full accordance with the terms of the prenuptial agreement, and the dispute was settled without protracted court proceedings on the merits of the business.
The legal framework for dividing spouses’ property
Joint property of spouses (Article 34 of the Family Code, Article 256 of the Civil Code). Property acquired during the marriage is treated as joint regardless of which spouse it is registered to and which of them actually earned the income. This covers real estate, business interests, securities and deposits, unless a prenuptial agreement provides otherwise.
Procedure and principle of division (Articles 38-39 of the Family Code). Property may be divided during the marriage or after divorce, either by agreement of the parties (notarised since 2015) or through the courts. By default the spouses’ shares are equal, but the court may depart from equality in the interests of minor children or of one of the spouses where there are circumstances worthy of consideration.
Prenuptial agreement (Articles 40-44 of the Family Code). The agreement may establish a different regime: shared or separate ownership of all property or of particular categories of it, including future property. It must be made in notarial form and can be challenged in court on the general grounds for invalidity of transactions, or if it puts one spouse in an extremely unfavourable position.
Limitation period (Article 38(7) of the Family Code). It is three years, but runs not from the date of divorce but from the moment the spouse learned or should have learned of the violation of their right, for example when the other party disposed of joint property without consent.
How a division of property on divorce usually runs
The general sequence for a typical property division dispute, not counting additional expert examinations or appeals, which can extend the timeframes.
Inventory of the property
We determine what counts as jointly acquired and what is each spouse’s personal property, and check the terms of the prenuptial agreement, if there is one. Timeframe: 2-4 weeks.
Valuation of assets
An independent valuation is commissioned for real estate, business interests and other significant assets; the calculation of compensation on an unequal division in kind depends on it. Timeframe: 1-2 months.
Attempt at pre-trial settlement
Negotiations or a notarised property division agreement are a faster and more predictable route than court proceedings, if the parties are willing to reach agreement. Timeframe: case by case, often 1-3 months.
Court proceedings
If agreement cannot be reached: filing the claim, expert examinations and court hearings. The general period for hearing a case at first instance under Article 154 of the Civil Procedure Code is 2 months, but in complex disputes involving expert examinations it is usually longer. Timeframe: from several months, depending on complexity.
Enforcement of the judgment
State registration of the transfer of rights to real estate with Rosreestr, re-registration of business interests and, where necessary, enforcement proceedings. Timeframe: depends on the type of asset.
Common misconceptions about dividing spouses’ property
“What is registered in my name is mine.” This is not so: under Article 34 of the Family Code, property acquired during the marriage is joint regardless of whose name it is registered in and which spouse contributed the money at the time of purchase.
“A business cannot be divided; it is not an apartment.” Interests in an LLC, shares and other assets acquired during the marriage, as a general rule, also form part of the jointly acquired property and are subject to division, unless a prenuptial agreement or the law provides otherwise.
“The limitation period is three years from the divorce.” A widespread misconception: under Article 38(7) of the Family Code the period runs from the moment the spouse learned or should have learned of the violation of their right, not from the date the marriage was dissolved, and these dates can be years apart.
“Spouses’ joint debts are not divided.” Debts incurred in the interests of the family are apportioned between the spouses in proportion to the shares of property awarded to them; they do not automatically stay with the person who took out the loan.
“A prenuptial agreement cannot be challenged.” Under Article 44 of the Family Code the agreement may be declared invalid on the general grounds for invalidity of transactions, including where it puts one spouse in an extremely unfavourable position.
What to watch for in a division of property
Concealment or stripping of assets by the other side. Until the dispute is formally under way, the other spouse may manage to sell property, transfer a business interest to a third party or close accounts. Interim measures applied for in good time reduce this risk.
Challenge to the prenuptial agreement. Even an agreement that looks valid on its face may be challenged in court by the other side, which prolongs the process and requires a separate body of evidence in its defence.
Impact of the dispute on the business’s operations. If interests in a functioning company are caught by the division, the very existence of the dispute can complicate transactions, fundraising and relations with partners until it is over, whatever the final outcome.
Tax consequences of the division. As a general rule, dividing jointly acquired property between spouses does not give rise to taxable income, but nuances arise where a cash payment is made in excess of the value of the share awarded. This should be checked separately in each situation.
Assets abroad. If part of the property is in another jurisdiction, its division there is governed by local procedures and may require recognition of the Russian judgment or separate proceedings where the asset is located.
Division of spouses’ property in numbers
General benchmarks for this practice area, not figures for any specific case.
A similar situation? Let us discuss the details at a consultation.
Frequently asked questions
Can a business be protected from division on divorce if there is no prenuptial agreement yet?+
Once a conflict has begun, it is harder, but not always impossible. It is more effective to sign an agreement in advance, before a dispute arises.
How do you settle an inheritance if the assets are spread across several countries?+
The process is coordinated in parallel in each jurisdiction, and each country applies its own law to the assets located there.
Is this a real case or a generalised example?+
It is a real matter from the firm’s practice. We publish it without company names or the names of the participants, as every client agreement includes a non-disclosure clause.