Marriage Contracts and Mediation for Family Businesses in Ontario

One of the best ways to protect a family business from the impact of divorce is for the shareholders to have marriage contracts.  Without one, an owner can have the value of his or her shares included in the division of property, and support payments could be very high. If he/she cannot pay, will shares have to be sold, will business assets need to be sold, and how will the company be affected?  In the uncertainty, how will the emotional spillover affect the children, the managers, employees, customers, and extended family?

But a hastily, poorly executed marriage contract may be worse.  It will create a false sense of security, plus a sense of injustice.

Two cases that illustrate this.  In both LeVan v. LeVan (2008, ON) and McCain v. McCain (2012, ON), the court set aside marriage contracts because they were improperly done.  
Here are the problems to watch out for:

• Pressure to sign:  Don't ask a spouse to sign a contract a few days or even weeks before the wedding.  Sometimes the parents or other owners do not appreciate how their requirements create such pressure, as was found in the McCain case.

• Unfair terms:  Don't create a totally one-sided contract, with no provision for a long-term marriage, as occurred in the LeVan case.

• Don't hide assets:  In both those cases, the husbands did not disclose their true net worth at the time of the contract.

• Don't impede independent legal advice:  For instance, in LeVan the wife's lawyer was fired when he advised her not to sign, and the husband's family assigned a lawyer with connections to their corporate lawyers to advise her to sign.  

In both those cases, judges awarded millions of dollars in equalization payments and spousal support to the women who had stayed in the marriage for many years.

So what should you do?  Start addressing the issue months before the wedding, or do it soon after the wedding (or a combination of both).  Cooperate with the requirements of full financial disclosure.  Use a family mediator to have the discussion - after all, it's a sensitive one - and each should get an independent lawyer to offer advice and assist with the final drafting of the contract.  The mediator can help cut the costs and ensure that the negotiation does not undercut the love and wedding bliss.   

Contact Daryl Landau for your marriage and cohab contracts.  www.common-ground.ca