Is it possible to divide dividends after divorce: The Supreme Court put an end to a dispute over 17 million UAH
If a share in a company belonged to one of the spouses before the marriage, then dividends from it, even if received during the marriage, are generally considered the personal private property of that spouse. An exception is possible only if the other spouse proves their participation in maintaining, managing, or increasing such property.
This conclusion was reached by the Supreme Court in a case concerning the division of over 17.2 million UAH in dividends paid to the owner of a private agricultural enterprise.
The Commercial Cassation Court of the Supreme Court emphasized that the mere fact of dividend payment during the marriage does not automatically mean that they fall under the regime of joint marital property. The decisive factor is the legal regime of the corporate rights from which such income is derived.
Circumstances of case No. 277/1353/24
The spouses were married from July 2011 to October 2023. After the divorce, the parties concluded a notarized agreement on the division of joint property, which divided an apartment, parking spaces, and several non-residential premises between them.
Later, the former wife filed a lawsuit stating that after the property division she learned that the former husband had received dividends from the activities of the private agricultural enterprise "Vostok-Zapad" amounting to 17.25 million UAH. She believed these dividends were concealed during the property division agreement and therefore she was entitled to half of the income — 8.6 million UAH.
The disputed dividends were accrued based on the enterprise's 2021 results and paid in October 2022 in kind — in the form of 1,000 tons of corn, 1,000 tons of wheat, and 1,000 tons of soybeans with a total value of over 17.2 million UAH.
The former husband opposed the claim. He stated that he became the owner and founder of "Vostok-Zapad" in 2004, long before the marriage. Accordingly, dividends from such an enterprise are his personal private property and are not subject to division.
Decisions of the courts of first and appellate instances
The first instance court held that the disputed dividends were received from an enterprise that belonged to the defendant as personal private property before the marriage. Under these circumstances, the court denied the former wife's claim and recognized the dividends as the husband's personal private property.
The appellate court reached the opposite conclusion. It noted that in September 2022, during the marriage, 100,000 UAH was contributed to the company's authorized capital, so income from such an enterprise should be considered joint marital property. As a result, the appellate court recognized the dividends as joint marital property and awarded the wife half their value — 8.6 million UAH.
What the Supreme Court stated
In overturning the appellate court's ruling, the Supreme Court emphasized that the key issue in this case is the legal regime of dividends received from a share in a company acquired before the marriage.
The court referred to Article 58 of the Family Code of Ukraine, which states that income from property belongs to the spouse who owns that property. Therefore, if a share in the authorized capital or corporate rights were acquired before the marriage, dividends from such a share also have the regime of personal private property of the spouse who owns them.
The Supreme Court effectively formulated the legal conclusion that, as a general rule, dividends follow the legal regime of the corporate rights from which they arise. Therefore, the mere fact of receiving dividends during the marriage does not convert them into joint marital property.
At the same time, the court stressed that paragraph two of Article 62 of the Family Code of Ukraine provides an exception to this rule. Dividends may be recognized as joint marital property if it is proven that the other spouse participated in maintaining, managing, or caring for the property through their labor or funds. However, in this case, the plaintiff did not claim such circumstances nor provide relevant evidence.
The Supreme Court also noted that the plaintiff herself acknowledged that the disputed dividends were paid based on the enterprise's 2021 results. At the same time, the 100,000 UAH contribution to the authorized capital occurred only on September 30, 2022. Therefore, the appellate court unjustifiably linked the legal regime of the dividends to subsequent changes in the company's authorized capital.
Separate conclusion regarding the method of protection
The court also addressed the claim to recognize the dividends as joint marital property.
The Supreme Court stated that in disputes over the division of marital property, such a claim alone is not a proper and effective method of protection. Establishing whether certain property is joint is only a prerequisite for resolving the issue of its division. Therefore, an effective method of protection is a claim for property division, not a separate recognition of it as joint marital property.
Supreme Court decision
The Supreme Court partially satisfied the defendant's cassation appeal, overturned the Zhytomyr Appellate Court's ruling, and upheld the first instance court's decision to deny the claim for 50% of the dividends and to recognize the disputed dividends as his personal private property. At the same time, the court amended the reasoning part of the decision regarding the denial of the claim to recognize the dividends as joint marital property.
Thus, the Supreme Court confirmed: if corporate rights were acquired before the marriage, dividends from them, even if paid during the marriage, generally belong to the spouse who owns such corporate rights. The other spouse can claim a share of such income only if circumstances provided for in paragraph two of Article 62 of the Family Code of Ukraine are present.
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