Shares: equity or part of the marital community? The 'titre et finance' arrangement
by Simon Boon
Are you married under the community property system and set up a corporation? Or do you invest in shares during your marriage? Then it is important to consider the legal qualification of those shares. Since the reform of matrimonial property law in 2018, the so-called "titre et finance" rule applies in certain situations. This ensures that shares can have both an own and a joint character at the same time. For entrepreneurs, this can have important consequences, both during the marriage and in the event of divorce or death.
When are your shares equity?
Your shares are considered equity when:
you established the company before your marriage;
you founded the company during your marriage with your own funds;
you acquired the shares by gift or inheritance.
In these cases, both the membership rights (titre) and the equity value (finance) belong in principle to your equity.
When do your shares belong to the marital community?
Another scenario is that spouses, married under the community of property system, establish a company with joint funds and register the shares 50/50 in both of their names. The shares then belong to the matrimonial community of property.
What exactly is the "titre et finance" arrangement?
The complex situation arises when:
one of the spouses establishes a company in their own name,
but uses joint funds for this purpose.
Since September 1, 2018, the "titre et finance" rule applies here. This implies that the membership rights (titre) on the shares remain their own, but the equity value (finance) does belong to the marital community.
What does this mean concretely?
Concretely, it means that only the spouse in whose name the shares are registered (titre) will be able to exercise the voting rights at the general meeting. In addition to the voting rights, this spouse will also have exclusive possession of these shares and could sell them without the consent of the marriage partner.
The asset value (finance) will then belong to the marital community, with the result that, for example, the proceeds of a sale of the shares, will accrue to the community.
When does the titre et finance rule apply?
The regulation only applies if all of the following conditions are met:
It concerns shares of a limited liability company (with legal/statutory restrictions on the free transfer of the shares, e.g. a private limited company) or a company in which only one of the spouses is a director and exercises his/her professional activity there.
The company was at least half financed with joint funds.
The shares are registered in the name of one spouse individually. Even if each spouse is a shareholder of separate shares (each in his/her name), the titre-finance rule may apply.
Important: this arrangement only applies when you are married under the community of property system.
Are these conditions not met? Then the shares belong entirely to your own assets or entirely to the matrimonial community of property, depending on the specific situation.
Therefore, to avoid unwanted or complex scenarios, it is advisable to always keep the titre-finance regulation in mind when creating a company and registering the shares. Would you like to have your situation analyzed? Contact your account manager or schedule a meeting with one of our experts in tax & legal.
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Simon Boon
Senior Advisor Legal simon.boon@vdl.be
Disclaimer
In our opinions, we rely on current legislation, interpretations and legal doctrine. This does not prevent the administration from disputing them or from changing existing interpretations.
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