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Valuing Family Property in Family Law Cases: Corporate Assets

Valuing Family Property in Family Law Cases: corporate assets

How does the court value companies in family law cases?  In most cases, it is the value of the shares of the companies that the spouse(s) own which may be subject to division of property and not the actual assets of the corporation. The reason this is so is because the corporation has its own distinct legal personality.

Ordinarily, a business a valuator must be appointed so as to value the shares.

What informs the value of the shares? The answer to this question would depend on the nature of the company and the types of assets and liabilities the company owns. A company may own, for example, land, accounts receivables, equipment, inventory, and good will. Each type of asset may require different considerations for valuation. The liabilities and type of liabilities also must be considered by the valuator.

Under the current framework, it is preferable that the parties agree to or have the court appoint a joint expert to value the company shares. In most cases, it can add additional complexity and expense to the legal analysis when there are multiple or competing valuations which the court must assess.

An example of the analysis may be seen in the case of Drinkall v. Drinkall, 2016 BCSC 667 (CanLII).

In this case, the court determined that it was appropriate for one valuator to value multiple companies.

[6]          I agree with claimant’s counsel that “there should be no risks of transactions between the two companies being treated differently by separate valuators.” I also agree, because the books of both companies are done by Carolyn Drinkall and both companies use the same accountants, corporate solicitors, financial advisor and counsel, that it is appropriate that one business valuator be appointed as an expert for both companies.

Further, in this case, the court permitted the valuator to advise if separate land appraisals were required.

[9]          I agree that it is appropriate that the appointed business valuator, Mr. Spence, determine if land appraisals are needed. I have considered previous submissions wherein there is a dispute about the place of trial. The claimant has commenced this action in the Kamloops registry; the respondents have given notice that they may contest holding the trial in Kamloops and will be seeking to have the trial moved to Prince George. One of the proposed experts, Ronald Hume, carries on business approximately an equal distance from those two locations. That is but one factor. From his curriculum vitae he appears knowledgeable in appraising ranches in the area in which Drinkall Ranches Ltd.’s property is situate.
[10]       If Mr. Spence determines that land appraisals are needed, I order that Ronald J. Hume be appointed an expert for the purpose of valuing the land in British Columbia, the value of which is claimed as a family asset.

I intend on addressing the issue of how a party is able to challenge the valuation in future blog posts.

Written by
Mark J. Chiu
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