Do you have to bear the debts of your spouse's company when you divorce in Ningbo?

when ms. zhao divorced, she found that the company run by her husband owed a lot of debts. the creditors claimed that these debts belonged to the joint debts of husband and wife, and asked ms. zhao to repay them together. This is the most worrying question for almost every "business owner spouse" when divorcing: will the debt owed by the company become my debt? The conclusion begins with the conclusion that whether the spouse's corporate debt is borne by the other party depends on whether the debt is used for the husband and wife to live together, to produce and operate together, or to express the common will of both parties. The burden of proof is on the creditor's side, not on the spouse who is being pursued to prove his innocence.

Main Line of 1. Judgment: Three Paths of Article 1064 of the Civil Code

Article 1064 of the the People's Republic of China Civil Code stipulates: "The debts of the husband and wife, such as the joint signature of the husband and wife or the subsequent ratification of the husband and wife, as well as the debts of the husband and wife during the existence of the marriage relationship in their own name for the daily needs of the family, belong to the joint debts of the husband and wife. Debts incurred by one spouse during the subsistence of the marriage, in that spouse’s own name and exceeding the ordinary needs of daily family life, do not constitute joint debts of the spouses; however, this does not apply if the creditor can prove that the debt was used for the common life of the spouses, for their joint production and business operations, or was incurred pursuant to a joint expression of intent by both spouses."

this regulation establishes three ways to identify the joint debt of husband and wife, and the essential elements are disassembled as follows:

1. common meaning path: if both parties sign the loan contract and the debit note together, or one party later recognizes by repayment, commitment, participation in negotiation and so on, the debt is the common debt, which has nothing to do with the actual use of the money.
2. The path of family's daily life needs: As long as the debt borne by one party in the name of an individual belongs to the family's daily life needs (daily consumption, children's education, medical treatment, etc.), it is presumed to be a common debt in principle, and there is no need for creditors to provide additional evidence.
3. A pathway that exceeds everyday needs and requires creditors to verify the intended use.: If the large amount of loans and operating liabilities exceed the needs of the family's daily life, it is presumed that they do not belong to the joint debt; if the creditor claims the joint debt, it must prove that the debt is used for the couple's joint life, joint production and operation or based on the common intention of both parties. If the proof cannot be found as the personal debt of one party.

Most of the debts related to the spouse's company fall on this third path-large amount of money, in the name of the company's operation, whether the spouse is implicated depends on whether the creditor can complete the proof of "for common life or common production and operation.

Independent assumption of 2. corporate debt: the boundary between corporate property and limited liability of shareholders

to answer "do you want to be responsible for the debts of the spouse company", we must first clarify that the company and the individual are two responsible subjects:

1. The company is independently liable for all of its property: The company is an independent legal person. In principle, the company's debts are paid off by the company's property, and the shareholders are only liable to the company within the limit of their subscribed capital contributions (Articles 3 and 4 of the Company Law). Creditors should claim claims against the company, not directly against shareholders or their spouses.
2. Exceptions to the personal liability of shareholders: if shareholders fail to pay their capital contributions, withdraw their capital contributions, abuse the independent status of the company as a legal person and the limited liability of shareholders to evade debts and seriously damage the interests of the creditors of the company, shareholders may be required to bear the responsibility within the scope of the company's debts (Article 23, Article 54 of the Company Law, etc.). At this time, the subject of responsibility is "the shareholder himself at fault", whether the spouse is joint and several, still depends on whether it meets the criteria for determining the joint debt of the husband and wife.
3. The identity of the spouse itself does not produce responsibility: if the spouse is not a shareholder of the company, does not sign on the debt documents, and does not participate in the operation, he will not be liable for the debts of the company. Disputes between creditors and companies cannot bring spouses in just because "they are husband and wife.

In other words, the liquidation chain of the company's debts is "the company's property → shareholders (in the case of capital contribution or abuse) → (if it constitutes a joint debt) spouse", each step forward needs the corresponding facts and legal elements, there is no "automatic transmission".

It is necessary to specially remind the special risks of one-person company and "husband-wife company": for a company with only one shareholder, if the shareholder cannot prove that the company's property is independent of the shareholder's own property, he shall bear joint and several liability for the company's debts (the third paragraph of Article 23 of the Company Law) -- the burden of proof of the shareholders of one-person company is reversed. If the public and private accounts of one-person company operated by one-wife are mixed, his personal property may be pursued by the company's creditors, which in turn affects the common property of the family, and the "husband and wife company" established by the husband and wife, which is recognized as a one-person company in the substantive sense in judicial practice, also faces strict examination of property independence. Therefore, the spouse who runs the business must ensure that the company's accounts are strictly separated from the family's income and expenditure and retain complete financial documents.

Breakdown of four situations in which 3. spouses may be held responsible

Scenario 1: The spouse guarantees the company's debts. If the spouse signs the loan contract or the guarantee letter as a guarantor, he or she shall bear the guarantee liability according to the guarantee agreement, no matter whether he or she knows the purpose of the loan. This is the most common "implicated" path, be sure to see before signing is a "witness" or "guarantor".

Case 2: The husband and wife jointly run the company. If the spouse is registered as a shareholder, acts as a legal representative, participates in the daily decision-making or actual management of the company, and the company's operating loan is identified as being used for joint production and operation, it may be identified as the joint debt of the husband and wife. Note that the determination of “joint operation” hinges on substantive participation, not on the nominal title or position.

Case 3: The company's operating income is used for family living together. Although the spouse is not involved in the business, the company's profits continue to be used for family purchases, car purchases, children's education, daily expenses, etc., and the company's operating debts may be identified as "used for husband and wife living together" and constitute joint debts. This is the most controversial category, and the court will judge the correspondence between the flow of funds, the size of household consumption and the company's dividends.

Case 4: Signature of spouse or subsequent ratification. Spouses sign on the debit note, statement, repayment plan, or afterwards express through WeChat that "we will repay", "the money has been received" and so on, which constitute a common meaning, and the nature of the debt is determined.

The typical situation of not taking responsibility: the spouse is only a nominal shareholder or a registered legal representative, does not participate in the operation, does not benefit, the company borrows money into the company account for the operation, and there is no evidence that the money is used for the family-the spouse does not bear the debt.

4. Boundary Conditions: Three Confusing Problems

1. holding shares is not equal to taking responsibility: the spouse is a shareholder or legal representative of the company, but as long as he does not participate in the operation and does not benefit, he is not naturally responsible for the company's debts; the shareholder's responsibility and the joint debt responsibility of husband and wife are two different problems.
2. Strictly distinguish between corporate debt and personal debt: The debts in the name of the company shall be borne by the company; the debts in the name of individuals and actually financed by the company shall depend on whether the spouses sign together and whether they are used for joint production and operation, which cannot be generalized.
3. The divorce settlement is not against creditors, but is internally recoverable: If the divorce agreement stipulates that the company's debt is borne by one party, it is only valid within the husband and wife, and cannot fight against bona fide creditors, and the creditor can still claim from both parties; after the spouse actually compensates, he can recover from the other party according to the divorce agreement.

Common 5. Mistakes

Misunderstanding 1: If your spouse is a shareholder of the company, you have to repay the company's debts. Positive explanation: It depends on whether the spouse participates in the operation and benefits. If it is only a nominal shareholder, does not participate in the operation and does not benefit, it shall not bear the debts of the company.

Myth 2: Corporate debts are joint debts of husband and wife. Positive explanation: the company is an independent legal person, and the company's debts are borne by the company with its own property in principle. Only the three situations that conform to Article 1064 of the Civil Code can be transmitted to the joint debts of husband and wife.

Misunderstanding 3: The divorce agreement stipulates that the company debt belongs to the other party, so I don't have to pay it back. Positive solution: if the internal agreement cannot oppose the bona fide creditor, the creditor can still claim from both parties; but after the spouse actually compensates, he can recover from the other party according to the divorce agreement.

Misunderstanding 4: If the creditor sues, the spouse can only respond passively. Positive solution: being sued is an opportunity to claim rights. The spouse may organize a defense around "not co-signed, not involved in the operation, not used for the family" and apply to the court to obtain the company's accounts, bank flow to prove the whereabouts of the funds, the burden of proof is on the creditor.

Response list and operation steps when the 6. is subject to debt collection

1. distinguish between corporate debt and personal debt: first look at whether the subject of the debt is the company or the spouse, and then look at whether the spouse himself signs the guarantee.
2. Identify the spouse's role and involvement in the company: Inquire the ownership structure, employment and annual report information of the enterprise through the national enterprise credit information publicity system, and judge whether it is the actual controller, ordinary shareholder or registered; if necessary, apply to the market supervision department for consulting the company's registration files and articles of association.
3. Determine whether the operating income is used for family life: Sort out the correspondence between the sources of household expenses (wages, dividends, loans), large consumption and the flow of corporate funds.
4. actively respond to suit after being sued: submit reply opinions to the accepting court within the time limit of proof, claiming that the debt does not belong to the joint debt of husband and wife, and apply to the court to obtain the company's account books, bank records, audit reports and other information to prove that the money is used for company operation rather than family.
5. Fixed evidence: keep the unsigned loan documents, the family expenses and the company's funds unrelated to the flow of water, the spouse is not involved in the business (such as social security, labor contract, attendance), etc., to form a complete defense evidence chain.

7. deduction case

Example 1: The creditor cannot provide evidence, and the spouse is not responsible. The husband borrowed 3 million yuan from others in his own name to invest in his own sole proprietorship trading company. The wife did not sign or know about it. The loan was transferred to the company after entering her husband's personal account, and the company suffered operating losses. The creditor sued the husband and wife for joint repayment. The court found that the loan clearly exceeded the daily needs of the family, that the creditor failed to prove that the money was used for the couple's common life or joint production and operation, and that the wife did not benefit from it, and that the husband personally repaid the judgment. The example shows that the burden of proof is on the creditor for the determination of a common debt that exceeds the usual large amount of borrowing.

Example 2: Guaranteed signature, spouse's responsibility. The wife signed a bank loan for her husband's company as a guarantor, but the company was unable to repay it. The bank sued the wife to assume the guarantee responsibility, which was supported by the court. This example illustrates that guarantee liability is independent of the rules governing marital joint debts; signing constitutes assuming liability.

Example 3: Income into the family, debt implicated. The husband borrowed money to operate the restaurant in his own name, and the operating profit continued to be used for the family's house purchase and the children's study abroad. After the divorce, the creditor sued, and the court determined that the loan was used for the husband and wife's joint production, operation and living together, which constituted a joint debt. This example shows that "benefit" is a key bridge between corporate debt and family responsibilities.

class case reference: the divorce involves the gift of the enterprise but the debt is not clear, the debt amount is confirmed to be 11.85 million yuan by the tripartite agreement, the court ruled that all the assets of the enterprise belong to the defendant, the debt should be borne by the defendant, and the plaintiff should pay the discount. It can be seen that the company (enterprise) debt can be clarified in the divorce together, whether the spouse is responsible still depends on the common debt elements. Trial Court: Case No. of Yinzhou District People's Court of Ningbo City, Zhejiang Province:(2016) No. 10605 of Zhejiang 0212 Minchu; Source: Ningbo Local Marriage Case Bank.

8. FAQ

My spouse is the legal representative of the company. Do I have to pay back the debts owed by the company?

Not necessarily. The identity of the legal representative itself does not create a repayment obligation. It depends on the subject of the debt (company or individual), whether the spouse signs the guarantee, whether it participates in the operation and benefits, and whether the money is used for the family. Corporate debts are first paid by the company and the spouses are only liable if they constitute a joint debt or guarantee liability.

I have never been involved in the operation of the company. Can creditors still sue me?

Creditors can sue, but support depends on the evidence. You should actively respond to the lawsuit, claiming that the debt exceeds the daily needs of the family, is not used for common life or joint production and operation, and apply to the court to obtain access to the company's accounts and bank flow. If the creditor fails to provide sufficient evidence, the court will deem the debt to be your spouse’s personal obligation.

The divorce agreement states that the company's debts belong to the other party. Can the creditor still find me?

Yes. The agreement on debt in the divorce agreement is only valid within the husband and wife and cannot be used against bona fide creditors. After you are recovered, you can recover your share of the divorce agreement from the other party.

My husband borrowed money in the name of the company, and I signed it as a "witness". Should I be responsible?

The key lies in the nature of the signature. If the signature is a "witness", generally do not bear the responsibility for repayment. When the debt is recovered, the signature location, identity statement and true meaning shall be defended, and if necessary, the handwriting and text formation time shall be applied for identification.

Practical experience of 9. lawyers

When a spouse runs a company and owes a debt, the first reaction of many people is "whether to pay it back together", and it is easy to be led by creditors in panic.In practice, the order is exactly the opposite: first distinguish whether it is corporate debt or personal debt, then look at who signed it, where the money is used, and whether the family has benefited. When creditors ask you for money, you don't have to prove your innocence, but you have to fix your "non-participation"-you have never worked in the company, you have not signed the loan documents, and you have not benefited from dividends from the operation., Instead of saying "I don't know anything".

From the experience of handling cases, the spouse who is involved in the company's debts is most likely to suffer from two things: one is that the spouse has signed for the other party, made a guarantee or paid a sum of money during the marriage, and the subsequent ratification will turn the personal debt into a common debt; the other is that the family account and the company's funds are mixed, and the money goes back and forth, which is regarded as a joint operation. Therefore, at ordinary times, it is necessary to separate the family income and expenditure from the company's account, and it is not easy to write down the debit note and guarantee for the other party. If it has already been signed, it is necessary to find out the nature in time. Do not promise repayment to creditors during the negotiation period, and a "we will pay back" may change the characterization in the future.

When negotiating and responding to the lawsuit, the focus is on "the purpose of this money": the party who claims the common debt should be able to prove that the money is used for common life or business, and the risk of insufficient proof should be borne by him. On your side, you have to sort out the facts that the daily expenses of the family are borne by yourself and the other party's operating income has never entered the family. If it is true that some of the money is used for the family, do not deny it altogether, but rather account for the amount that can be recognized as a common part, and argue for the rest, which is more acceptable than saying in general that "it is all his debt.

The commitment of the spouse's corporate debt is centered on three judgments: whether the debt belongs to the company's own debt, whether the spouse participates in and benefits from the operation, and whether the creditor can prove that the money was used for living together or working together. For one spouse: keeping the three lines of "not signing the guarantee, not participating in the repayment statement, and not allowing the company's income to mix with the family's expenses" is the most effective prevention. On the creditor side: getting the husband and wife to sign together, or fixing the money into the family account for household consumption, is the key to locking the company's debt into a common debt. After the Ningbo parties are sued, they should actively respond to the court accepting the lawsuit and provide evidence, and apply to the court for access to the company's financial information if necessary.