Shares in a limited liability company in the context of the divorce of a partner and division of property

This article will answer the following questions:

• What is community property and what is the personal property of spouses?
• Can shares in a limited liability company go to a former spouse after a divorce, even though they are not listed in the National Court Register?
• How is community property divided after divorce? 
• How to protect your business against the negative effects of divorce?

Issues related to the family life of limited liability company partners only seemingly have nothing to do with the functioning of the company. When unpleasant events occur in the life of a partner – such as divorce and division of community property – it may turn out that the shares in the company belong not only to the partner who has them, but also to the person who was his or her spouse – and this is even if such a person has never been a partner of the entity in question before. How can such a situation occur and what rights to the shares does the spouse of a limited liability company partner have? What can be done to ensure that marital relations do not threaten the stability of the company after separation?

What is community property and what is the personal property of spouses?

If the spouses have not concluded a marital property contract (have not signed a pre-nuptial agreement), then, at the moment of entering into the marriage, community of property arises between the spouses by operation of law (in this case, it is the so-called statutory community of property).

In the community property system, there are three types of property: community property, the husband's personal property and the wife's personal property¹. Personal property includes only: 

1. property items acquired before the statutory community of property was established (i.e. before marriage);
2. property items acquired by inheritance, bequest or donation (unless the testator or donor clearly indicates that the inheritance or donation is transferred to both spouses);
3. property items acquired with funds obtained in exchange for the items listed in points 1 and 2;
4. property items used exclusively to satisfy the personal needs of one of the spouses;
5. property items used for the performance of a profession, if they were acquired with funds belonging to the separate property of the spouse practicing this profession (however, this does not apply to items used for running a farm or enterprise);
6. inalienable rights;
7. items obtained as compensation for bodily injury or health disorder, or as compensation for harm suffered²;
8. claims for remuneration for work or other services provided personally by one of the spouses;
9. property items obtained as a reward for the personal achievements of one of the spouses;
10. copyright of the creator, as well as the rights of the creator of the invention, model or improvement project.

All other assets are part of the community property of the spouses. 

Importantly, the marital community is of a non-share nature, i.e. the spouses' shares in the property are not defined by a fraction³. This means – in simple terms – that as long as the marriage lasts, each asset is the indivisible property of both spouses and in the light of the law, we are not dealing with a situation in which each spouse owns 50% of a given car, apartment or computer.

After a divorce, can a partner's shares in a company go to their spouse even if they are not listed in the National Court Register?

Contributions to cover the share capital in a limited liability company may be made from various sources: personal property and community property of spouses. 

While making contributions from personal property does not raise any doubts, making them from community property may be controversial⁴. The prevailing view in the jurisprudence is that shares in a limited liability company that were acquired with funds from the spouses' community property are included in the community property – even if the shares were acquired by only one of the spouses and only one of the persons was listed in the register of entrepreneurs as a shareholder of the company⁵.

However, the status of a partner and the rights and obligations related to membership in the company are only available to the spouse who was a party to the transaction with the company⁶. The issue of membership is covered by the organisational sphere of companies⁷ and the fact of taking up shares is of key importance in this case. The spouse of a partner is therefore not a decision-maker in matters related to running the company.

The situation changes when the community of property between spouses ends (e.g. due to divorce or separation) and the division of community property. 

In the case of division of the marital property, what was previously the community of property of a non-share nature is transformed into co-ownership in fractional parts. This means that there is no longer any community property, and only the personal property of each spouse remains. This property includes fractionally determined shares in all of the property components (including shares in a limited liability company!) that previously formed the marital community property⁸. 

Shares in a limited liability company may therefore be awarded by the court also to a spouse who has not previously had the status of a shareholder of the company – unless the spouse does not consent to this. 

How is community property divided after divorce? 

The division of community property of former spouses may occur in two ways: 

• by way of an agreement to which the former spouses are parties, or 
• in court proceedings in a case concerning the division of community property. 

How to protect a limited liability company against the negative effects of a partner's divorce?

The model solution is to sign a prenuptial agreement, i.e. an agreement that will introduce the separation of property between the future spouses, before the wedding. However, what should a partner of a limited liability company do in a situation where signing a prenuptial agreement is impossible or when it is too late?

The provisions of the Commercial Companies Code allow for the limitation (or exclusion) in the articles of association of the limited liability company of the accession to the company of the spouse of a partner in the event that the shares are covered by the community property of the spouses. 

Properly written articles of association can therefore control the composition of the group of partners and indicate the subjective or objective criteria that the spouse of the partner should meet in order to take up shares, or even definitively exclude the possibility of the spouse joining the company⁹. It is therefore sufficient to ensure appropriate provisions are included in the limited liability company articles of association – which can be done both at the stage of its initial preparation and later, by changing its content.

In a case regarding the division of marital property, the court is bound by the provisions contained in the limited liability company articles of association.

Thus, regardless of the source of financing of the shares (community property or personal property) and whether the court ultimately finds that they are part of the community property or not, in a situation where the limited liability company articles of association contain appropriate clauses, the shares must remain with the spouse-partner. If the financing of the shares was made from community property, the spouse should of course receive an appropriate repayment. However, if the funds came from personal property – and therefore the shares became part of the personal property of one of the spouses – the purchase price of the shares will be treated as an outlay from personal property to community property¹⁰.

In the event of a dispute, it is therefore worth including appropriate provisions in the limited liability company articles of association (or share purchase agreement) regarding the origin of funds allocated for the share capital (payment of the price). At the same time, evidence confirming the described facts should also be collected – when deciding on the division of community property, the court will not limit itself to examining only the statements contained in the agreements. 

Summary 

If there is no prenuptial agreement and an amicable settlement of property matters between the spouses is out of the question, failure to exercise due caution when drafting or amending the limited liability company articles of association may result in considerable disappointment – not only for one of the (former) spouses, but also for the other partners of the company. 

In order to avoid this type of risk, it is worth ensuring in advance that appropriate provisions be included in the relevant agreements to protect the interests of the partner in the event of the need to close some chapters in life.

¹ G. Jędrejek [in:] Kodeks rodzinny i opiekuńczy. Komentarz aktualizowany, LEX/el. 2019, art. 33.
² However, this does not apply to a pension granted due to the total or partial loss of earning capacity of the spouse or received due to the increase in his/her needs or due to reduced prospects for success in the future.
³ B. Kubica, P. Twardoch [in:] Kodeks rodzinny i opiekuńczy. Komentarz aktualizowany, ed. M. Fras, M. Habdas, LEX/el. 2023, art. 31.
⁴ A. Kidyba [in:] M. Dumkiewicz, A. Kidyba, Komentarz aktualizowany do art. 1-300 Kodeksu spółek handlowych, LEX/el. 2024, art. 183(1).
⁵ Supreme Court resolution of 7.07.2016, III CZP 32/16, OSNC 2017, no. 5, item 57.
⁶ Supreme Court resolution of 28.09.1979, III CZP 15/79, OSNC 1980, no. 4, item 63.
⁷ B. Kubica, P. Twardoch [in:] Kodeks rodzinny i opiekuńczy. Komentarz aktualizowany, ed. M. Fras, M. Habdas, LEX/el. 2023, art. 31.
⁸ A. Kidyba [in:] M. Dumkiewicz, A. Kidyba, Komentarz aktualizowany do art. 1-300 Kodeksu spółek handlowych, LEX/el. 2024, art. 183(1).
⁹ A. Kidyba [in:] M. Dumkiewicz, A. Kidyba, Komentarz aktualizowany do art. 1-300 Kodeksu spółek handlowych, LEX/el. 2024, art. 183(1).
¹⁰ J. Bieniak, M. Bieniak, G. Nita-Jagielski, Kodeks spółek handlowych. Komentarz. 9th edition, Warszawa 2024.