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Division of shares and property after divorce in the Republic of Armenia

What is subject to division, when couples divorce in the Republic of Armenia.

At present time in addition to the traditional division of property, divorcing spouses may also discuss the division of shared business and/or jointly owned shares in a business. It should be understood that the term “business” may include stocks and shares within the business of a spouse, as well as the property of the individual entrepreneur. There is no doubt that business contacts cannot be shared, as to the property owned by the company, it is impossible to enforce a division of said property, as a company herein the legal entity owns its’ property by right of ownership and as such the company is not liable to its members.

The only thing that the divorcing spouse will be able to count on according to the legislation of the Republic of Armenia, is the division of property of the individual entrepreneur, jointly owned shares of joint stock companies and co-owned stakes in limited liability companies.

Shares of joint stock companies and stakes in limited liability companies

In the Republic of Armenia, a participation in joint-stock companies is confirmed by owned shares. The RA Civil Code defines shares as legal property, which is subject to division between divorcing spouses, however, there are certain features, associated with the legislative regulation of the membership of the Company and OJSC. The transfer of shares of a public company from one spouse to another, in a divorce taking place in the Republic of Armenia, is based on equal division as per court’s decision/verdict, unless there is a prior agreement in place between spouses in a form of a marriage contract, that establishes the conditions for division of said shares in case of a divorce.

Open Joint Stock Companies are quite complicated structures, therefore the division of shares of a joint stock company will have many issues. Dividing shares of a closed joint stock company will be even more difficult. The decision to transfer ownership of shares held by public subscription is enforceable by the Open Society and its members. The register of shareholders is the body making this decision of transfer, after which a spouse is entitled to ownership of half of the shares which earlier belonged to a former spouse.

As is known, in the Republic of Armenia the number of shareholders of the closed joint stock company is limited to 49 parties. The closed joint stock company is a closed structure, as evidenced by the legal name of the company. As a result of changes of this nature, the transfer of shares will require the consent and agreement of the other shareholders of the company. In practice, this is very difficult, as the statutes of a JSC may include restrictions related to the number of shareholders of the company.

However, even if the divorcing spouse cannot always get their share in the company, this does not mean that he/she is deprived of the right to receive the benefits due to him/her as the new entitlement holder. In situations, such as these, the courts often resort to compromise, giving shareholders complete ownership of all shares, with the obligation of payment of monetary compensation to the divorcing spouse, which equals to half the value of its shares at that time.

The same can be said of the division of shares in a limited liability company. Here the Republic of Armenia courts may recognize the right of a spouse to half the shares in the company. However, this legal entity is also defined as closed and shareholders may oppose to the registration of a new shareholder. The court, in this case, is more likely to award monetary compensation equivalent to the value of half the shares.

Property Section of the individual entrepreneur

The status of an individual entrepreneur determines that all property belongs to him/her, therefore the responsibility applies to all the property of the entrepreneur. In case of a divorce in the Republic of Armenia, the divorcing spouse will qualify for half of the marital property of the entrepreneur.

The marriage contract in the Republic of Armenia

Please note that the above conditions regarding the division of jointly acquired property apply provided that there is no prenuptial agreement signed by the spouses. The marriage contract, in accordance with the legislation of the Republic of Armenia, can only regulate property relations of spouses. The settlement of other issues is not allowed. Instead, the prenuptial contract can establish the standard rules whereby both parties entering into an agreement stipulating that in case of a divorce, the couple will only divide that which they have created together while keeping in ownership that with which they entered into marriage. Although the prenuptial contract is not very popular in the Republic of Armenia, we duly note, that at the present time, this is the best way to protect the interests of both spouses.

There may be a real threat to illegally sell shares in joint or closed stock companies, transfer them to third parties and more during the divorce. This obviously delays the trial and incurs additional costs. Therefore we strongly advise you to be vigilant, take the protection of your property interests very seriously, conduct this with due diligence and to consult a qualified legal representative experienced in family and civil cases in the Republic of Armenia.