Can I sell my business during a divorce in Ontario?

A common question is whether an owner can sell a business while a divorce is underway. Ontario’s Family Law Act does not contain a rule that forbids it. What the Act does is give a court powers over property in a family dispute, and it limits when a court can force the sale of a business. Family law in Canada is partly federal and partly provincial or territorial, according to the Department of Justice Canada. This page covers only Ontario’s Act.

When a court can order property sold

In an application under section 7, section 9(1)(d) lets the court order, if appropriate to satisfy an obligation imposed by its order, that property be transferred to a spouse or that any property be partitioned or sold. Section 10(1)(c) is separate. It applies when a spouse or former spouse asks the court to decide who owns, or has the right to possess, particular property, other than a question arising out of an equalization of net family properties under section 5, and it lets the court order the property partitioned or sold to realize the interests in it.

Protection for an operating business

Section 11(1) says an order under section 9 or 10 shall not be made so as to require or result in the sale of an operating business or farm, or so as to seriously impair its operation, unless there is no reasonable alternative method of satisfying the award. To comply, section 11(2) allows the court to order that one spouse pay the other a share of the profits from the business or farm and, if the business is incorporated, that one spouse transfer, or have the corporation issue, shares to the other. This limit applies to a sale the court would order. It does not say what happens if the owner chooses to sell.

Time limits and paperwork

Section 5(1) applies when a divorce is granted or a marriage is declared a nullity, or when the spouses are separated and there is no reasonable prospect that they will resume cohabitation. Under section 7(3), an application based on section 5(1) or (2) shall not be brought after the earliest of three dates: two years after the marriage is terminated by divorce or judgment of nullity, six years after the spouses separate with no reasonable prospect of resuming cohabitation, or six months after the first spouse’s death. Section 2(8) lets the court, on motion, extend a time prescribed by the Act if there are apparent grounds for relief, the delay was incurred in good faith and no person will suffer substantial prejudice because of it. Under Rule 13(3.3) of the Family Law Rules, unless the court orders otherwise, a party who must file a financial statement for a claim under Part I of the Act and who had an interest in a sole proprietorship or was self-employed on the valuation date must serve the financial statements of the business or professional practice, other than a partnership, for each of the three years before that date.

What this page does not decide

Whether a particular sale during proceedings is allowed, restrained or counted later is for the court. In an application under section 7 or 10, section 12 lets a court restrain the depletion of a spouse’s property if it considers that necessary to protect the other spouse’s interests under that Part, and how that and the equalization rules treat a sale is covered in what the Family Law Act says about selling before separating. A family lawyer can say how these provisions apply to your facts.