June 17, 2021


Let'S Talk Law

Grey divorce element two – passing family wealth across generations

In the initially section of the sequence, “Grey Divorce – hidden battles for security and succession of loved ones belongings”, we appeared at the the latest pattern of an escalating divorce rate for more mature couples and, in particular, the case of CSH vs LS or LS previously regarded as CYY (FCMC 12435/2016 [2020] HKFC 143) (the CSH situation). As can be found in the CSH circumstance, in which the spouse collapsed soon following he started off to give proof, Court proceedings can be a supply of severe stress for aged litigants.

The situation of Z v X (C: Intervener) (CACV 166, 251 and 252/2011 [2012] 5 HKLRD 791) also concerned “silver splitters” who were being around 50 a long time aged when the spouse petitioned for a divorce, just after discovering out that her husband had a 2nd family members. The loved ones belongings included intricate shareholdings in BVI and shown firms, Beijing qualities and an MPF account. The Court docket experienced to determine the helpful ownership of the shareholdings as well as worth the shares, in buy to verify the amount of matrimonial assets offered for distribution. The make any difference was further intricate by the husband’s cohabitee currently being joined as Intervener in the proceedings and boasting effective ownership of shares in the BVI firm. The Court docket of Enchantment ultimately dominated that the whole assets of the spouse and wife for distribution amounted to HK$402 million.

The husband and his cohabitee appealed to the Courtroom of Closing Attraction on the obtaining of the husband’s beneficial ownership of the BVI business shares. The appeal was dismissed by the Court docket of Final Appeal as it held that it would not be purposeful to embark on a evaluate of a finding of truth.

Though the divorce petition was filed in 2006, the make any difference was only disposed of in 2014 following a re-demo, cross-enchantment to the Courtroom of Appeal and eventually an charm to the Courtroom of Final Charm.

As a substitute of heading through protracted litigation about spouse and children property in divorce proceedings, the pair, and in fact the family members as a total, may well perfectly have benefited from diligently drafted write-up-nuptial/pre-nuptial agreements or a Deed of Spouse and children Arrangement, beneath which family assets could have been dispersed in a way that very best preserved loved ones harmony.

Submit-nuptial agreements

Beneath area 14 of the Matrimonial House and Proceedings Ordinance (Cap. 192) (MPPO), maintenance agreements (or separation agreements) entered into after relationship amongst partners who have divided or intend to individual are recognised as legitimate contracts. This sort of agreements may contain economical phrases (e.g. creating of payments or disposition/use of property) and govern the respective legal rights and liabilities of the few when dwelling separately from just about every other.

Although article-nuptial agreements that are not routine maintenance agreements are not typically recognised as lawfully binding, they can be taken into account by the courtroom when selecting the result in divorce proceedings below portion 7(1) of the MPPO.

Pre-nuptial agreements

In considering the succession of relatives wealth, it is popular for substantial web-worth mothers and fathers to be worried about their child’s relationship and attainable long run divorce. Appropriately, engaged couples of rich family members are usually asked for by their mothers and fathers to enter into pre-nuptial agreements to safeguard family members assets and pursuits.

In Hong Kong, pre-nuptial agreements are not binding on the Court, but the Court will give decisive pounds to them if it is good to do so. In SPH v SA [2014] 3 HKLRD 497,the Court of Remaining Charm verified that the concepts enunciated in Radmacher v Granatino by the United kingdom Supreme Courtroom, ought to also be regarded as the law in Hong Kong. Pursuant to Radmacher v Granatino, an agreement will have whole bodyweight, only if every single social gathering entered into it of his or her very own free of charge will, with no undue influence or force, possessing all the data substance to his or her final decision to enter into the arrangement and intending that it should be effective to govern the financial effects of the marriage coming to an conclusion. It is also attractive for the functions to obtain sound independent lawful tips which will possible give more weight to the settlement.

Deed of Relatives Arrangement

A Deed of Family members Arrangement entered into between relatives users (like the adult young children) can generally deal with a family’s concerns about how spouse and children belongings are to be dispersed, even where the moms and dads do not intend to different.

In our experience, based on the sort of loved ones belongings, there are unique factors to take into account when making a spouse and children arrangement. Care must be taken in structuring the relatives arrangement, as the Deed by itself may well bring in stamp obligation, payable in situations where by there is a swapping of property (landed homes or shares of organizations in Hong Kong) with or devoid of any equality payment mechanism. There could also be even further stamp duty implications when carrying out or supplying outcome to the conditions of the family members arrangement.

Landed Attributes

It is common for elderly couples to have landed houses, either in their joint names or in the sole name of both the spouse or the husband. Whilst the matrimonial dwelling will likely be saved in the course of the couple’s life time, other investment decision homes can possibly be liquidated and dispersed or transferred into the names of grownup small children. On the other hand, there is the situation of stamp responsibility on the transfer of landed qualities in Hong Kong and the increased stamp duty level for persons presently owning a landed property might complicate the make any difference. If the properties are held by private corporations, the effect of stamp obligation can be minimised, as there only wants to be a modify in the shareholding of the house-keeping business and not the registered possession of the landed property alone. Restructuring the investment decision keeping motor vehicles can be an productive way to transfer possession of landed homes to the up coming technology. Further more, there will be a will need to enter into a shareholders’ arrangement in circumstances exactly where an asset keeping enterprise is set out to be held by grownup youngsters (which is independent from the Deed of Loved ones Arrangement) to stay clear of any foreseeable future disputes among grownup young children who ended up made the beneficiaries of the spouse and children property.

Furthermore, in taking into consideration the keeping of landed houses, there could be concerns if the kids are to be joint house owners, as there may be variations concerning the joint homeowners down the highway on the sale or use of the assets, which can be the result in of family members discord.

Family Company

Where by a family business enterprise is concerned, it is a good idea to contemplate which of the young children are eager and capable of having up the organization as a likely issue. To relieve the transition from a person era to the other, the child(ren) who will be operating the household organization will have to have to be familiar with the procedure of the organization and business culture. The new management has to be appointed to the Board and introduced to the present administration workforce.

Although not all kids will be concerned in the administration of a relatives business enterprise, it is widespread for them to have some desire in it as shareholders. Once again, a shareholders’ agreement governing their romance and the way the Board helps make decisions will offer a practical framework so that everyone included will know what to count on.

Stock/Shares and Dollars

It is fairly typical for aged moms and dads to think about distributing cash (either from personal savings or sale proceeds of stock/ share portfolios) in excess of their demands to their grownup youngsters in the course of their lifetime. This is primarily the scenario where by certain other distributions are produced to the children and dollars distributions are made use of to equalise any differences among people non-money distributions. It is essential to consider into account the tax residence of the children in earning distributions, as distinct jurisdictions may impose tax on the recipients on gifts they get. Quite frequently, an offshore spouse and children trust will be set up to address foreign tax implications.


Achieving an agreement, be it in between the pair only or alongside one another with adult children, is by no means uncomplicated, but a get-acquire answer for both generations is properly really worth the work. To ensure that absolutely everyone is on the similar web site, it is vital to have interaction legal professionals to prepare a penned arrangement environment out the agreed terms and for every party to have their own impartial lawful advisor to recommend them of the authorized implications and influence of the settlement.

With right suggestions, what may have started off off as a relatives disaster can transform into an prospect to strategy for household succession and preserve spouse and children harmony and relationships for decades to appear.