Yes, in Ontario, you can secure an equalization judgment against a spouse’s private corporate shares. Most applicants use a preservation order through the Superior Court of Justice or register a security interest under the Personal Property Security Act (PPSA) to prevent the shares from being sold or depleted.
Securing Business Assets During an Ontario Divorce
When a marriage dissolves in Ontario, business owners and their spouses face complex financial hurdles. If your partner owns a private corporation-whether it is a small plumbing business in Sudbury or a massive tech start-up in Toronto-those voting shares are considered property. Under the Ontario Family Law Act, the value of those shares must be factored into the equalization of net family property. However, a common fear is that the business-owning spouse might try to sell the company, transfer shares, or deliberately tank the business value before the settlement is paid.
To protect your financial interests, Ontario law provides mechanisms to secure your equalization claim directly against those corporate shares. You do not necessarily get to take over the company or become a voting shareholder, but you can place a legal hold (similar to a lien) on the shares. This ensures that when the business is sold, or dividends are paid out, your settlement is prioritized. Hiring a skilled family lawyer from our directory who understands both family and commercial law is strongly recommended.
Step-by-Step Process to Secure Corporate Shares in Ontario
Securing an equalization debt against private corporate shares requires navigating both the Family Law Act and commercial statutes like the PPSA. While the exact strategy will depend on the specifics of the business, the general process involves the following steps.
Step 1: Determine the Value of the Corporate Shares
Before you can secure a debt, you must know how much the shares were worth on your date of separation. This usually requires hiring a Chartered Business Valuator (CBV). 📊 The valuator will examine the company’s financial statements, tax returns, and asset registers to assign a fair market value to the shares. This forms the basis of your equalization claim.
Step 2: Apply for a Preservation Order
If you suspect your spouse is actively trying to hide business assets, your lawyer can urgently apply for a Preservation Order (also known as a non-depletion order) at the Superior Court of Justice. This court order legally prevents your spouse from selling, transferring, or encumbering their shares until the divorce is finalized. It acts as a temporary protective shield.
Step 3: Registering a PPSA Security Interest
Once an equalization amount is agreed upon or ordered by a judge, but your spouse cannot pay the lump sum immediately in cash, they may agree to pay it over time. To secure this payment plan, your lawyer can register a security interest against their shares under the Personal Property Security Act (PPSA). This registration is public and acts as a “lien,” meaning if the spouse defaults on payments, you have legal remedies to seize or force the sale of the shares.
Step 4: Executing a Charging Order
If your spouse refuses to pay a court-ordered equalization judgment, you can apply for a Charging Order or a Writ of Seizure and Sale. This directs the local sheriff to seize the shares or redirects any dividends payable on those shares directly to you until the debt is satisfied.
How Much Does it Cost in Ontario?
Securing a claim against corporate shares is complex and involves multiple professionals. You should be prepared for the following estimated costs in Canadian dollars (CAD):
| Service / Legal Action | Estimated Cost (CAD) |
|---|---|
| Chartered Business Valuator (CBV) | $3,000 – $15,000+ (depending on business complexity) |
| PPSA Registration Fee | Approx. $8 to $30 per year of registration |
| Lawyer Fees (Drafting Security Agreements) | $1,500 – $5,000+ |
| Superior Court Filing Fees (Motions) | $0 (Notice of Motion filing is free in family cases) |
While these costs may seem high, failing to secure a multi-million dollar equalization payment can result in total financial devastation if the business goes bankrupt or the spouse flees.
How Long Does the Process Take?
The timeline for securing corporate shares varies widely. Obtaining a temporary preservation order from the court can be done in a matter of days or weeks if the situation is urgent. Registering a PPSA security interest, once an agreement is signed, takes only a few hours online. However, obtaining a comprehensive business valuation and reaching a final equalization agreement can take anywhere from 6 months to 2 years.
Frequently Asked Questions (FAQ)
Can I force my spouse to sell the business to pay me?
Generally, family courts in Ontario prefer not to destroy a viable business. Instead of forcing a sale, the court will usually order your spouse to pay the equalization amount over a period of up to 10 years, or transfer other assets (like the matrimonial home) to offset the value of the corporate shares.
What if my spouse fires me from the family business?
If you are a legally recognized employee of the corporation, you have rights under Ontario employment law and the Ministry of Labour. If you are unjustly terminated, you may be entitled to severance pay, which is handled separately from the family law equalization of property.
Does a PPSA lien make me a shareholder?
No. Registering a security interest under the PPSA makes you a secured creditor, not a shareholder. You do not get voting rights or control over the day-to-day operations of the company. Your interest is strictly limited to securing the monetary debt owed to you.
What if the shares are in a holding company?
The process remains largely the same. A business valuator will assess the holding company and its subsidiary operating companies. You can secure your equalization claim against the spouse’s shares in the holding company.
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