11 November 2024
This blog discusses when shares obtained under vesting should and should not be divided in case of divorce.
It frequently happens that when dividing marital assets during a divorce, shares acquired under vesting are involved. Obtaining shares under vesting in principle means that at moment 1) the shares are granted to a party. If certain vesting criteria are met, at moment 2) the shares are actually acquired by the party.
First of all, it is important to establish under which matrimonial property regime the parties are married. Only if there is a community of property by default or if the prenuptial agreement stipulates that assets must be divided upon divorce, the shares must in principle be divided upon divorce. What is relevant here is that the reference date is determined. The reference date is the date on which it is examined what assets are present that have to be divided at divorce. Assets acquired after the reference date do not qualify for division.
If Dutch law applies, the reference date is (in principle) the date on which the petition for divorce is filed with the court.
Next, when considering whether shares under vesting are eligible for distribution or not, the following is relevant. As mentioned above, vesting of shares often involves two dates: 1) the date on which the shares are granted to a party and 2) the date on which the vesting period has expired. In order to determine whether or not the shares are eligible for distribution, both dates must be determined and whether the dates are before or after the reference date.
It follows from a ruling by the Court of Appeal of The Hague on 28 February 2024 (ECLI:NL:GHDHA:2024:441) that if the date on which the vesting period expired is before the reference date, the shares must be divided upon divorce. The first (acquisition) date is not relevant. On that date, the shares are often only conditionally granted to one party. The actual acquisition of the shares depends on whether various conditions are met. The vesting conditions (e.g. remaining employed for a certain period or performance) will, incidentally, differ from case to case. Only when the conditions are met will the party acquire power of disposal over the shares and be able to actually and unconditionally exercise rights over the shares. Being able to exercise rights over the shares may include being able to sell the shares or receive dividends.
In short, the question of whether shares should be divided under vesting in divorce depends on the circumstances of the case. The starting point is that if the vesting period has expired (in other words, there is actual power of disposition over the shares) before the reference date, the shares are eligible for division. If the vesting period has expired after the reference date, the shares do not qualify for division.
Do you have questions regarding this article? Or would you like advice on divorce? Feel free to contact us.
