Compensation in Divorce of a DGA in The Hague
A divorce where one or both partners are director-major shareholders (DGA) involves specific legal and financial challenges. In particular, the division of pension rights and business assets requires careful considerations, as the DGA pension and the value of shares in a BV often form part of the marital property. This guide provides an overview of the compensation rules in a DGA divorce, based on the Pension Equalisation upon Divorce Act (Wet VPS) and relevant provisions from the Civil Code, with specific attention to the situation in The Hague.
What Makes a DGA Divorce So Complicated?
A DGA is a person who is both a director of a private limited company (BV) and holds a substantial interest (at least 5%) in that BV. In a divorce, the following asset components must be divided:
- The value of the shares in the BV
- The DGA pension, often accrued within the BV itself
- Other assets such as real estate or savings
The complexity lies in the different fiscal and legal rules that apply to these asset components, as opposed to standard pensions or employment income.
Legal Frameworks: Pension Equalisation upon Divorce Act and Civil Code
Pension Equalisation upon Divorce Act (Wet VPS)
The Wet VPS regulates the division of pension rights accrued during the marriage. For DGAs, Article 2 of this Act provides that the old-age pension accrued during the marriage must be divided fairly, standardly in a 50/50 ratio, 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 a periodic settlement clause, the increase in value of the business assets during the marriage must be included in the settlement.
Fiscal Rules
The Income Tax Act 2001 and the Corporate Income Tax Act 1969 play a role in the fiscal handling of distributions from the BV, which can impact both ex-partners.
Compensation Options in DGA Divorce
1. Division of Pension via Wet VPS
The DGA pension accrued during the marriage is divided in accordance with the Wet VPS. The non-DGA partner is entitled to half of these claims. This can be done in two ways:
- Regular equalisation: The ex-partner receives his/her share of the pension payment upon the DGA's retirement
- Conversion: The rights are converted into an independent pension provision with another provider
2. Buy-out as an Alternative
Instead of division, a buy-out can be chosen, whereby the DGA pays a lump sum to the ex-partner as compensation for the pension rights. However, this entails fiscal consequences that must be carefully assessed.
3. Settlement of Business Value
If the value of the BV has increased during the marriage, this increase may be settleable, depending on the matrimonial property arrangements. In the case of community of property, the value increase falls standardly into the estate to be divided.
Practical Steps for Compensation Calculation
Step 1: Valuation of the DGA Pension
An actuary must determine the value of the DGA pension, taking into account:
- The old-age provision in the BV
- Fiscal reserves such as FOR/VPV
- The expected retirement age and life expectancy
- The expected return
Step 2: Establishing the Marriage Period
Only the pension accrued during the marriage is divided. The break is calculated as: number of marriage years divided by total accrual years.
Step 3: Determining the Compensation Amount
The final amount is determined based on the actuarial value of half of the rights accrued during the marriage.
Assistance in The Hague
For legal support in a DGA divorce in The Hague, you can go to the District Court of The Hague (Prins Clauslaan 60) for legal proceedings. In addition, the Legal Aid Office The Hague (Lutherse Burgwal 10) offers free advice and guidance on divorce matters.