Reviewing a company in divorce does not mean that all of the company’s assets are divided between the spouses. The spouse’s share, the spouse’s claim against the company and personal income are separated from the assets of the company as a legal entity. The date of acquisition of the share, its financing, profit distribution and capital movements steer the result.
Which Four Items Should Be Separated in a Company File?
| Item | Basic review |
|---|---|
| Company share | Date of acquisition, ratio, price and current economic value |
| Profit share | Distribution resolution, accrual, collection and present value |
| Salary and management payment | Compensation for actual work and the relevant period |
| Shareholder current account | The spouse’s debt to the company or claim against the company; the genuine transaction |
That an asset appears on the company’s balance sheet does not show that the spouse is the direct owner of that asset. Adding, as the spouse’s personal property, an immovable property that has already been taken into account in the value of the company share can lead to duplication. [1]
How Should the Sample Decision Be Used?
In the decision of the 2nd Civil Chamber of the Court of Cassation (Yargıtay 2. Hukuk Dairesi) dated September 12, 2024, E. 2023/5579, K. 2024/5737, a review based on share value, instead of an independent liquidation of immovable properties registered in the company’s name apart from the company, was accepted. The earlier reversal in the file and the procedural acquired rights are also influential. It is therefore not correct to carry the updating method in the decision over to all companies as an unchanging valuation formula. [2]
Which Questions Should the Valuation Report Answer?
The report should explain why the chosen method suits the company’s activity. Book value and market value may differ. Trade debts, receivables with low collectability, related-party transactions, undistributed earnings and capital increases should be shown separately. For the plaintiff, investigating transactions that reduce value matters; for the defendant, documenting the actual business need and the debts matters.
Initial Document List
The trade registry history, share ledger, share transfer documents, financial statements, general assembly resolutions, capital payment records and shareholder accounts should be requested together. The need for company information does not give rise to a right of unlimited access to private data. The period of the records requested from the court and their connection with the dispute should be explained.
How Are Company Shares, Businesses and Professional Earnings Divided?
Is a Company Share from Before the Marriage Personal Property?
The share itself is, as a rule, personal property. However, income arising from the share during the period of the property regime, distributed profit, the shareholder’s claim, salary, attendance fees and the value of the share that has increased through personal labor or an acquired source should be separated from one another.
Is Undistributed Company Profit Directly Acquired Property?
Because of the company’s separate legal personality, it cannot be said that “all the profit on the balance sheet belongs to the spouse.” The profit distribution resolution, the articles of association, reserves, the shareholder current account, withdrawals from the company, the comparable salary and the allegation that profit was left in the company in order to reduce the liquidation should be examined by expert witnesses.
How Is the Value of a Company Determined?
Book value alone may not be sufficient. Depending on the type of activity, net asset value, discounted cash flow, market multiples, past profitability, the brand and other intangible values may be assessed together. The valuation date and the date on which the characteristics of the property are to be taken as the basis should not be confused with each other.
Can the Veil of Legal Personality Be Lifted if Personal Assets Are Transferred to the Company?
The company and the shareholder are separate legal persons. For this reason, a home, vehicle, security or bank account belonging to the company cannot be regarded as the directly acquired property of the debtor spouse merely because he or she is a shareholder of the company. By contrast, a spouse’s transfer of his or her property to the company without genuine consideration before the divorce dispute, use of the company account like a personal cash box, or exclusively family/personal use of property owned by the company requires detailed examination.
Lifting the veil of legal personality is not an automatic sanction specific to the property regime in the law; it is a doctrinal and judicial tool discussed in exceptional files where the separateness of legal personality is used contrary to the rule of good faith. In practice, the following routes should be kept apart:
| Problem | Correct legal review |
|---|---|
| A spouse’s transfer of his or her own property to the company without consideration/by simulation | Validity of the transfer, the value to be added back under Article 229 of the Turkish Civil Code, simulation and, if necessary, a separate claim against the third party |
| Personal use of company property by the spouse | Benefit provided to the shareholder, disguised profit, the shareholder current account and the effect on company value |
| A worthless/value-reducing transaction between group companies | Related party, genuine consideration, commercial rationale, transfer chain and effect on share value |
| A request to treat company property directly as the spouse’s property | Only with highly exceptional facts that justify setting aside the separate legal personality; while protecting the defense rights of the company and third parties |
Do a Simulated Capital Increase, Demerger or Change of Company Type Reduce the Claim?
A capital increase is not itself unlawful. However, issuing new shares to related persons without genuine consideration in order to reduce the other spouse’s economic share, restricting the pre-emptive right for an improper purpose, eroding profit through expenses contrary to reality, or transferring assets to an affiliated company may be examined. The trade registry history, general assembly and board of directors resolutions, capital payment receipts, valuation reports and related-party accounts should be read together.
A merger, demerger or change of company type under Articles 134–194 of the Turkish Commercial Code (TTK) does not by itself cut off the legal and economic continuity of the old share. If the old share is personal property, the character of the substitute share, the source of capital added during the regime, the share exchange ratio and any withdrawal compensation received are tracked separately. Cancelling a company law transaction and determining the true economic value of the share in the liquidation balance sheet are not the same request.
What Happens if Income from Personal Property Is Reinvested in the Company?
Under Article 219/4 of the Turkish Civil Code, the income of personal property is acquired property unless the spouses have agreed otherwise by a property regime contract. However, the “balance sheet profit of a personal company” and a profit share that has passed into the shareholder’s assets are not the same. Leaving distributable profit within the company is examined together with the share value, actual accumulation, commercial necessity and the intent to reduce the liquidation.
If fixtures/capital were added to the personal property group with acquired income in an ordinary business or a business directly owned by the spouse, equalization under Article 230 of the Turkish Civil Code may come onto the agenda. In a capital company, the calculation is made over the share value and the shareholder’s claims, while the separation between the company’s assets and the shareholder’s assets is preserved.
How Are Company Shares, Businesses and Professional Earnings Divided?
The decision of the Civil General Assembly of the Court of Cassation (Yargıtay Hukuk Genel Kurulu) dated July 1, 2021, E. 2020/8-458, K. 2021/889, while accepting a company share acquired before the marriage as personal property, stated that the existing company income attributable to the share during the period of the property regime must be investigated as acquired property.
Special Evidence Protocol in Files with Companies and High-Value Assets
In files involving a company share, not only the latest balance sheet but also changes of shares throughout the regime period, capital increases, related-party transactions, shareholder current accounts, profit distribution resolutions, immovable property and vehicle movements, group companies, salary/attendance fees and company payments of a personal-expense nature should be examined. Where necessary, a panel report prepared jointly by family law, commercial law, tax and company valuation experts should be requested.
The importance of the decision of the Civil General Assembly of the Court of Cassation, E. 2020/8-458, K. 2021/889, is that it refuses to treat the whole of the company as the spouse’s personal property and thereby close the review. The decision rests not on disregarding the company’s legal personality but on the correct investigation of the existing income attributable to the share and of the value made the subject of the action.
Frequently Asked Questions
How Are My Spouse’s Company Shares and Earnings from the Company Examined?
First, it is determined when and from what source the spouse acquired the company share. The company’s building or bank account is separate from the spouse’s personal assets. Distributed profit, earnings left in the company, a capital increase and the shareholder’s claim against the company are separate items. The same profit or asset should not be counted a second time in the share value; the financial statements and the trade registry should be examined together.
How Are My Spouse’s Claims Against Others Included in the Liquidation Calculation?
Claims that exist on the date the regime ended and belong to the acquired property group may enter the liquidation calculation. That collection takes place later does not necessarily take the claim outside the regime. The genuineness of the claim, its date of origin, its debtor and its collectability are investigated. The shareholder’s claim against the company and the value of the company share are separated; the same economic value is not counted twice.
Related Articles
- How Is Property Divided in Divorce? Guide to Property Regime Actions
- How Is a Participation Claim Calculated? Debts, Equalization and Residual Value
- How Can Asset Diversion Be Prevented in Divorce? Interim Injunction and Transfer to a Third Party
- How Are Assets Investigated in a Property Division Action? Bank, Land Registry and Other Evidence
This article is for general legal information. In a specific dispute, the dates of the events, the documents, the type of claim and the time limits are assessed together.