The business in the event of divorce with a prenuptial agreement including a periodic set-off clause that has not been implemented

Following on from my previous blog ‘The business in the event of divorce in a (limited) community of property: how do reimbursement rights work?’. In this blog I will discuss the situation where one of the spouses owns a business and the parties are married under a prenuptial agreement containing a periodic settlement clause that has not been implemented. In some cases, the other spouse may be entitled to a share of the value of the business upon divorce. The various situations are discussed below.

Periodic settlement clause

Prenuptial agreements often include a periodic settlement clause. This clause means that, in principle, the surplus income (overgespaard inkomen) must be divided between the spouses annually. Surplus income usually refers to the income remaining after regular expenses have been paid. The aim is to prevent one spouse from accumulating more wealth than the other during the marriage.

In practice, periodic settlement almost never takes place during the marriage. Spouses tend to forget about this, and it can lead to a great deal of hassle. If, upon divorce, it transpires that no periodic settlement has taken place, the law (Article 1:141 of the Dutch Civil Code) presumes that all assets present at the end of the marriage are deemed to have been formed from the assets that should have been settled. In practice, this means that despite the prenuptial agreement, the assets must in principle be divided equally.

In the situations below, as mentioned, the assumption is that there is a prenuptial agreement containing a periodic settlement clause that has not been implemented.

Business prior to the marriage

When one of the spouses already owned a business prior to the marriage, the question is whether surplus income generated during the marriage was used to invest in the business and/or to repay the business’s debts. If this is not the case, the other spouse is not entitled to a proportional share of the business’s value of the business. If surplus income was used for this purpose, the non-business-owning spouse is entitled to a proportional share of the business’s value in the value of the business upon divorce.

Business established during the marriage

If the business was established during the marriage, the non-entrepreneurial spouse is entitled to an equitable settlement of the value of the business upon divorce if the business was financed, in whole or in part, with savings income subject to division. However, it should also be borne in mind that the concept of “income” under the settlement clause may be broader and may also include business profits. In that case, it is not only relevant whether savings income was directly invested in the business, but also whether profits were retained within the business and must still be treated as assets to be divided under Article 1:141 of the Dutch Civil Code. If that is not the case, the spouse will in principle not be entitled to settlement of the business value, although this may be different where business profits still have to be taken into account in the division.

More information

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