Compensation in Divorce for Director-Major Shareholders in Rotterdam
A divorce where one or both partners are director-major shareholders (DGA) brings specific legal and financial challenges. In Rotterdam, where many entrepreneurs and DGA's are active, it is important to understand the rules regarding pension rights and business assets well. This guide provides insight into compensation in DGA divorces, based on the Act on Equalization of Pension Rights upon Divorce (Wet VPS) and relevant provisions from the Civil Code.
What Makes a DGA Divorce So Complex?
A DGA is both director and owner of a significant part (at least 5%) of a private limited company (BV). In a divorce in Rotterdam, three important asset components must be divided:
- The value of the shares in the BV
- The DGA pension, often accrued within the own BV
- Other assets such as real estate or savings
The complexity lies in the combination of tax and legal rules that differ from standard situations for salaried employees.
Legal Framework for DGA Divorces
Wet VPS: Pension Division
According to the Wet VPS, pension rights accrued during the marriage must be divided. For DGA's, article 2 of this act stipulates that the old-age pension accrued during the marriage is in principle split 50/50, unless otherwise agreed.
Civil Code (BW): Asset Division
Article 1:141 BW regulates the division of marital property. In the case of matrimonial property arrangements with a settlement clause, the value increase of the BV during the marriage may need to be divided.
Tax Rules
Tax consequences are determined by the Income Tax Act 2001 and the Corporate Income Tax Act 1969. Distributions or buy-outs from the BV may have tax implications for both ex-partners.
Compensation Options in Divorce
1. Pension Division in Accordance with Wet VPS
The DGA pension accrued during the marriage is divided. This can be done via:
- Standard division: The ex-partner receives his/her share upon the DGA's retirement.
- Conversion: The rights are converted into an independent pension with an external insurer.
2. Buy-out of Pension Rights
Parties can opt for a one-time buy-out, where the DGA pays an amount to the ex-partner as compensation. However, this entails tax consequences and requires careful coordination.
3. Settlement of Business Assets
If the value of the BV has increased during the marriage, this growth can be divided, depending on the matrimonial property arrangements or a community of property.
Practical Steps for Compensation Calculation
Step 1: Valuation of DGA Pension
An actuary determines the value of the pension based on:
- The old-age provision in the BV
- Tax reserves (FOR/VPV)
- Life expectancy and retirement age
- Expected returns
Step 2: Determining Marriage Years
Only the pension accrued during the marriage is divided. This is calculated as: number of marriage years / total number of accrual years.
Step 3: Determining Compensation
The compensation is based on the actuarial value of half of the rights accrued during the marriage.
Overview of Compensation Options in Rotterdam
For DGA's in Rotterdam, there are various options for compensation in divorce. For legal support, you can go to the District Court of Rotterdam (Wilhelminaplein 100-125) or the Legal Counter Rotterdam (Westblaak 180).