Compensation in Divorce for DGA's in Westland
In a divorce where one or both partners are directors-major shareholders (DGA), specific legal and financial challenges arise. In Westland, where many entrepreneurs are active, the division of pension rights and business assets is a common issue. This guide provides insight into the compensation rules for DGA's in divorce, based on the Pension Equalisation upon Divorce Act (Wet VPS) and relevant provisions from the Civil Code (BW).
What Makes a DGA Divorce Complex?
A DGA is a director of a BV with a substantial interest (at least 5% of the shares). In a divorce in Westland, three core elements play a role:
- The value of the shares in the BV
- The DGA pension, often accrued within the own BV
- Other asset components such as real estate or savings
The complexity lies in the unique fiscal and legal treatment of these elements, which differ from standard pensions or employment income.
Legal Basis: Wet VPS and BW
Pension Equalisation upon Divorce Act (Wet VPS)
The Wet VPS stipulates that pension rights accrued during the marriage must be divided. For DGA's, article 2 of this act is relevant, whereby the old-age pension is standardly divided 50/50, unless otherwise agreed.
Civil Code (BW)
According to article 1:141 BW, the marital community is divided. In the case of matrimonial property arrangements with offsetting clauses, the value increase of the business assets during the marriage must be taken into account.
Fiscal Regulations
Fiscal rules, as laid down in the Income Tax Act 2001 and the Corporate Income Tax Act 1969, play a role in distributions from the BV and the consequences thereof for both ex-partners.
Options for Compensation in DGA Divorce
1. Pension Division in Accordance with Wet VPS
The DGA pension accrued during the marriage is divided. The non-DGA partner is entitled to 50% of these claims. This can be done in two ways:
- Standard division: The ex-partner receives the allocated portion directly upon retirement.
- Conversion: The rights are converted into an independent pension provision with an external insurer.
2. Buyout as an Alternative
Parties can opt for a one-time buyout, whereby the DGA pays a fixed amount as compensation for the pension rights. However, this entails fiscal consequences that must be carefully weighed.
3. Offsetting of Business Assets
In the event of a value increase of the BV during the marriage, this portion can be offset, depending on the matrimonial property arrangements. In a community of property, this increase standardly falls into the estate to be divided.
Practical Steps for Compensation Calculation
Step 1: Valuation of DGA Pension
An actuary determines the value of the pension, taking into account:
- The old-age provision in the BV
- Fiscal reserves (FOR/VPV)
- Age and expected life expectancy
- Expected returns
Step 2: Establishing Marriage Duration
Only the pension accrued during the marriage is divided. The fraction is calculated as: marriage years / total accrual years.
Step 3: Determining Compensation Amount
The final amount is based on the actuarial value of 50% of the rights accrued during the marriage.
Overview of Compensation Options
In Westland, DGA's and their ex-partners can seek advice on the best options via the Westland Legal Desk. For legal proceedings, one can go to the District Court of The Hague, which serves the Westland district.