In a divorce, financial issues often play an important role. One of the crucial aspects is the determination of alimony. Particularly when one of the spouses is a director and major shareholder (in Dutch: DGA) of a company, this is often a complex matter that can lead to a lot of discussion. In this article, we will address the specific considerations and challenges in calculating alimony in the case where one spouse is a director and major shareholder.

It is important to understand that each situation is unique. Consulting a specialised family law lawyer with experience in alimony cases for directors and major shareholders and other entrepreneurs is therefore essential to get the right legal guidance.

Income of a director and major shareholder

A director and major shareholder is a person who is employed as a director by a private limited company (in Dutch: besloten vennootschap or BV) and who is usually also co-owner, holding a large number of the shares in the company. The income of a director and major shareholder can be determined in various ways, for instance by considering salary and/or dividend (profit) payments.

The salary a director and major shareholder awards himself or herself is often influenced by tax considerations and may be lower than the salary on market terms for a similar position. This may affect the calculation of alimony.

Alimony calculation in the case of a director and major shareholder

When calculating alimony, the total income of the director and major shareholder is considered, including salary, dividend payments and other benefits. Thus, pay slips alone are not enough. It is important to note that the court has a degree of discretion in determining the income used for the alimony calculation. For example, the judge can look at the director’s historical income, the company’s financial situation and the possibilities of artificially reducing the income to influence the alimony. The court will examine whether there is room in the company to increase the salary the director pays himself or whether there is room for, for example, a dividend payment.

Starting points when determining alimony in the case of a director and major shareholder/entrepreneur

In this context, the Dutch Supreme Court ruled that when determining the financial capacity of a director and major shareholder, not only the income the entrepreneur actually earns should be taken into account, but also the income the entrepreneur could reasonably earn. Not only past profits and expected profits are taken into account, but also the company's cash flows.

In addition, a director's income may vary from year to year, depending on the financial performance of the company. It is crucial to provide the most recent financial data of the company and, if necessary, engage a financial expert to make an accurate estimate of the director’s income for the alimony calculation.

The Supreme Court ruling can be found here.

Additional points of interest

When calculating alimony for a director and major shareholder, there are some specific points of interest:

1. Business risks: the income of the director and major shareholder can be affected by business risks and uncertainties. It is important to consider these factors when determining a fair and reasonable alimony contribution.
2. Assets in the company: In addition to income, a director and major shareholder may also have assets in the company, such as reserves or other assets. The company’s assets may affect the director's financial capacity thus the alimony calculation.
3. Unreasonable impoverishment: The alimony calculation should take into account that the company should not be unreasonably impoverished by the payment of alimony. This could include the obligation to keep sufficient money in the company for business operations and investments. The continuity of the business is always central.

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Conclusion

Calculating alimony in case of the income of the director and major shareholder is a complex process. It requires sound knowledge of family law, business structures and financial analysis. Consulting an experienced family law lawyer with expertise in this area is essential to ensure that the alimony calculation is done properly. In this way, a settlement can be reached that takes into account the specific circumstances of the director and major shareholder and his or her ex-partner. In case a settlement is not possible, it is important that your best interests are represented in court proceedings. For more questions on this subject, please contact Mrs Angelique van den Eshoff, specialised vFAS family lawyer at SPEE advocaten & mediation She is a highly experienced lawyer and mediator, with expertise in complex divorces and divisions, including in the case of divorcing entrepreneurs.