The business in the event of divorce in a (limited) community of property: how do reimbursement rights work?

Is the business private property or part of the community property?

The first step is to determine whether the business is the private property of one of the spouses or whether it falls within the community of property.

• If the spouses married before 1 January 2018 without a prenuptial agreement, the business is part of the community.
• For spouses who married after 1 January 2018, the business falls within the community if it was established during the marriage.
• A business founded before the marriage, or during the marriage using only private funds of the founding spouse, is private property.
• If the business is part of the community, it must be divided upon divorce. Each spouse is then entitled to half of the business’s value.

The business as private property

If it is determined that the business is private property of one spouse, that spouse retains the business after the divorce. However, the other spouse may still be entitled to a payment if the community has a reimbursement claim (vergoedingsrecht) against the business.

To determine whether a reimbursement claim exists, it must be established whether community funds were invested in the business or used to pay off business debts during the marriage. If that is the case, the community has a reimbursement right against the business. In practice, this means the other spouse is entitled to half of that amount at the time of divorce (plus any potential gains).

Retained profits and reasonable compensation

Another situation in which a reimbursement right may arise is more complex but certainly relevant. In a community of property, income earned during the marriage forms part of the community. However, entrepreneurs often do not pay out all available profits. Instead, profits are retained within the business. And less salary and/or dividend is paid out.

The business is private property, while salary and dividends are community property. This issue is addressed in Article 1:95a of the Dutch Civil Code, which provides that a reasonable compensation must be paid during the marriage for the labour, knowledge, and skills of the entrepreneurial spouse.

At divorce, it is therefore important to assess whether a reasonable salary or dividend was actually paid. If it is determined that the salary and/or dividend paid during the marriage was too low, an additional amount may be withdrawn from the business retroactively. The other spouse would then receive 50% of this amount.

More information

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