Can my husband also be my business partner?

“My husband and I are married out of community of property and without the accrual. For the last ten years we have both worked together in our family business. Due to health reasons, my involvement in the business is becoming less. Our marriage is also upon difficult times, and I am concerned that should we end up in a divorce, whether I would be entitled to share in the profits of the business which we have built up together.”

South African law has recognised the existence of universal partnerships between spouses married out of community of property since as early as 1945. A universal partnership can be defined as a partnership where each of the parties contribute something towards the partnership – either money, skills or labour – and where the partnership is carried on for the benefit of both parties with the object of making a profit.

Our courts have recently been faced with the peculiar situation, similar to yours, where spouses who were married out of community of property without the accrual system, brought claims as to the existence of a universal partnership between the spouses. When spouses choose to marry out of community of property without the accrual, they essentially contract by way of an ante nuptial contract to each retain their own separate estate and no joint estate is formed. The peculiarity thus arises when, after the conclusion of such ante-nuptial contract, a spouse seeks to share in the profits of a partnership formed between the spouses, thereby contradicting the terms of the ante-nuptial contract.

Our law provides for two types of universal partnerships: 1) where the parties agree to share all their present and future property; and 2) where the parties agree to share all the property obtained from a commercial undertaking. The difference between these two partnerships is clear. In the former instance, the parties agree that they will share all their property that they have acquired and will acquire in the future – this can be termed a “non-commercial” partnership. In the latter instance, only the property acquired as a result of a commercial undertaking is shared – termed a “commercial” partnership.

Our courts have had no difficulty in concluding that “commercial” partnerships are valid in the law, even where spouses who are partners are married out of community of property without accrual. In a recent case the court held that spouses who concluded a partnership agreement for the establishment of a fish farm, was found to be a separate legal entity from their marriage, and that they could share in the profits, which would accrue to their separate estates, just as it would if they were normal business partners.

Where spouses did not sign a partnership agreement, our courts have held that in the case of a “commercial” partnership, a partnership can come into existence tacitly, and to determine if a tacit agreement exists, the courts will look at the words and conduct of the parties to determine whether such a partnership existed. Where the conduct of the parties is capable of more than one inference, the test for the existence of a tacit universal partnership is whether it is more probable than not that a tacit agreement had been reached. From this, it becomes clear that our courts are developing their own approach regarding the recognition of universal partnerships. 

In your case, in the absence of a clear partnership agreement confirming or denying the existence of a partnership, there is a strong possibility that your involvement with your husband in the family business provides grounds for being recognised as a tacit universal partnership, and that you would be able to have a claim for your share of the family business in the event of divorce. It is however recommended that you seek the assistance of a family law specialist to help you establish your position as well as to consider concluding a clear partnership agreement to avoid any future uncertainty.

September 12, 2016
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