The Company Is in My Name but My Husband Runs It — Whose Is It in Divorce? Toronto Chinese-Speaking Divorce Lawyer: Registration Counts First

A client came to see me. The situation: she has a company in her name, originally set up to partner with others in a business. But all these years, she’s never looked at the books — her husband runs the business, which actually operates through another company in his name. She asked me: in a divorce, whose company is this?

Short answer: registration counts first. Corporate shares are “property” in the broad sense under the Family Law Act. Registered in her name, they go into her net family property first — and they have to be valued and divided on divorce.

But your husband can fight it — courts look at substance, not just registration

He can argue: I put up the money, I run the business — the company may be in your name, but it’s really mine. That’s a resulting trust / constructive trust claim: whoever paid and whoever did the work holds the beneficial interest. In Pecore v. Pecore, 2007 SCC 17, the Supreme Court set the rule: property given for free to an adult child or spouse is presumed to be held in trust, not gifted.

So “whose name it’s in” is the starting point, not the finish line. The court will dig deeper: who funded the company at the start? Who’s been running it all these years? Who took the dividends? Registration is paper; substance is what the court ultimately recognizes.

The real danger isn’t “whose it is” — it’s “you don’t know”

Many nominal shareholders think: I don’t run it, so it’s nothing to do with me. Wrong — it has everything to do with you.

First, liability doesn’t disappear. If you’re also a director, the company owes the tax authorities money — unremitted payroll deductions, GST — the CRA can come after directors personally (director’s liability under s. 227.1 of the Income Tax Act). Never having looked at the books doesn’t exempt you. When things go wrong, the name on the register is the first person they find.

Second, murky books hurt you at valuation. On divorce, corporate shares must be valued — by a business valuator or forensic accountant who examines assets, liabilities, retained earnings, receivables, and goodwill. If you’ve never seen the books, whatever he says goes, and you have nothing to push back with.

His income can’t hide: reporting $3,000 a month doesn’t end the inquiry

In this case, the husband reports $3,000 a month on paper but runs a cash business. Many assume support is calculated on whatever’s reported for tax. It’s not.

Section 19 of the Child Support Guidelines gives courts the power to impute income. In Bak v. Dobell, 2007 ONCA 304, the Court of Appeal for Ontario said imputation exists to set support fairly, based on each parent’s real means. Courts can impute where income has been diverted (s. 19(1)(d)) or where a spouse fails to provide income information when legally required to (s. 19(1)(f)).

Bousfield v. Bousfield, 2016 ONSC 3145 is the example: excessive retained earnings, corporate funds routinely paying personal expenses — the court attributed the business income to the husband. Same in Thompson v. Thompson, 2013 ONSC 5500: profits left sitting in the company undistributed got imputed.

More directly: if he won’t produce the books, the judge can draw an adverse inference — you won’t show me, so I’ll assume what you’re hiding hurts your case. An unexplained expense gets treated as personal spending and added back to income. The Court of Appeal did draw a line in Drygala v. Pauli (2002, ONCA): imputation needs an evidentiary basis — the court can’t just pick a number out of thin air.

Put plainly: a cash business with messy books isn’t a shield in court — it’s a liability. The less disclosed, the higher the imputed figure.

Don’t rush to transfer it — registration is your only leverage

Many people’s first instinct: I don’t run this company, transfer it to him and be done with it. Don’t.

Registration in your name is your only leverage right now. As a shareholder you have the right to inspect the books, demand financial statements, and get tax records — rights that come from being on the register. Transfer it out and the door shuts. Later, when you want to know how much the company made or how taxes were filed, one sentence shuts you out: “You’re not a shareholder anymore — why should I show you?”

Divorce runs on evidence. Books, statements, tax records — all evidence. Transferring now hands over the keys to the evidence cabinet. So the order is: inspect the books first, secure the evidence, then talk about transferring. Before any transfer, ask your lawyer.

What to do now

First, look at the books immediately. Get the financial statements and tax records from the accountant. That’s your statutory right as a shareholder — no one’s permission needed.

Second, find out whether you’re a director. If you are, the company’s tax position must be sorted out now — deal with what’s owed before the CRA comes knocking.

Third, get a lawyer — and be ready to retain a valuator. Valuing a company is technical work. Forensic accountants see more than you’d expect: related-party transactions, personal expenses run through the company, retained earnings — every line can affect valuation and support.

Whose name the company is in decides where the counting starts in a divorce. But that’s only the start — valuation, income imputation, and director’s liability follow, and every step is money. Understand the books before the divorce, not after. Book an initial consultation (30 minutes, $220+HST). Call 647-930-6688.

This article is general legal information, not legal advice, and does not create a lawyer-client relationship.