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Does the spouse who owes a debt to a company in Ningbo have to pay it back?

Ningbo Author：LuXu WANG

a client in ningbo consulted: her husband started the company by himself, and he usually took care of it. he didn't participate in the operation. the company's business, accounts and capital transactions were all unclear, even the company's profit and loss were unknown. Now that they are getting divorced, the husband has produced the loan contract and promissory note, demanding that she jointly repay the debt. In this case, does the spouse have to bear the corporate debt? The conclusion begins with the conclusion that the corporate operating debt incurred by one of the spouses in his or her own name during the marriage, which is not used for the joint life or joint production and operation of the spouses, and which is not signed or ratified by the spouses, is generally not a joint debt of the spouses and is not required to be borne by the spouses. The core judgment criteria are three: whether there is a common intention, whether the debt is used for the daily life of the family, whether it is used for the husband and wife to live together or to produce and operate together-and the determination of "joint production and operation" depends on whether the spouse actually participates in the operation and whether he or she shares the operating income.

1. Legal Basis and Element Breakdown

Article 1064 of the Civil Code of the People's Republic of China stipulates: "Debts incurred by both spouses through a joint expression of intent, such as when both sign together or when one spouse subsequently ratifies the debt, as well as debts incurred by one spouse in their own name during the subsistence of the marriage for the daily needs of the family, shall be regarded as joint debts of the spouses." 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."

To dismantle this article, the joint debt of husband and wife is divided into three layers: the first layer, the debt of common intention-signed by both parties together, or ratified by one party afterwards through WeChat, SMS, email, repayment behavior, etc.; the second layer, the family agency debt-one party is responsible for the daily needs of the family in his own name (such as daily consumption, water and electricity, small living expenses), which is presumed to be a common debt; the third level, the creditor's proof-type debt-an individual's nominal debt that exceeds the daily needs of the family, is not a joint debt in principle, unless the creditor can prove that the debt is used for the husband and wife to live together, to produce and operate together, or on the basis of a common meaning. Corporate operating loans are typically of substantial amounts, far exceeding the needs of daily family life; therefore, the burden of proof rests with the creditor. The creditor must demonstrate that the loan was actually used for the couple’s common living expenses or for their joint business operations; otherwise, the creditor may not require the spouse to bear joint and several liability for repayment.

Two kinds of special circumstances should be separately controlled: first, if the loan is used for the company's operation and the company is jointly operated by husband and wife (both parties are shareholders, the joint management decision-making, and the income is used for the family), it belongs to the joint production and operation, and the spouse should be responsible within the corresponding scope; second, if one party provides personal guarantee for the company's debt and the debt guaranteed after the company is unable to repay is converted into personal debt, whether the debt is a joint debt of the husband and wife is still judged according to whether it is used for common life or joint production and operation, and the spouse is not responsible for not signing and not benefiting. In addition, if a party borrows money in his own name and then lends it to the company and receives interest and dividends for the use of the family, the court may find that the loan is related to the interests of the family and must be judged in the light of the flow of funds.

Whether the 2. operating debt is "common"

Whether the business debt of the company belongs to the joint debt of husband and wife, the following dimensions are mainly examined in practice:

  1. Joint expression of intent: Whether the spouse has signed the promissory note, loan agreement, guarantee letter, or shareholders’ resolution, and whether they have subsequently ratified it via WeChat, text messages, or other means. Signed or ratified, generally constitute a joint debt. whether
  2. actually participates in the operation: whether both husband and wife are shareholders, directors, supervisors or executives of the company; if the spouse actually participates in the operation decision-making and management of the company's affairs although he or she has not registered to hold the post, the court may determine that the debt is used for joint production and operation. In the relevant case, the Shanghai Pudong Court found that if one of the husband and wife borrowed money for the operation and family expenses of the husband and wife's joint company, and the other party served as the supervisor of the company, the debt was a joint debt of the husband and wife-the Ningbo court also took whether to actually participate in the operation and whether to share the operating income as the core criterion.
  3. Whether business profits are shared: Are the company’s profits used to cover household living expenses (e.g., funding for home purchases, children’s education, and major expenditures, and the relationship between these expenses and the company’s operating profits)? The sharing of profits is an important basis for determining “joint production and operation.”
  4. The actual destination of debt funds: whether the loan actually enters the company's account and is used for business, or is it diverted by the borrower for personal consumption, gambling, etc. The flow of funds is the key evidence to distinguish between "operating debt" and "personal profligacy.
  5. Marital Status: When a couple is in an unstable phase—such as living apart or experiencing a breakdown in their relationship—and one spouse incurs external debt for the purpose of business operations, even if the other spouse is nominally a shareholder or senior executive, the court may not recognize such debt as joint marital debt on the grounds that the latter did not actually benefit from it.

The distribution of proof in the judgment is further clarified: after the spouse submits the preliminary evidence of not participating in the operation and not sharing the income, the court immediately requires the creditor to bear further evidence on the purpose of the loan and the benefit of the family; if the creditor only has the IOU but no proof of the flow of funds, it is generally difficult to obtain support. Ningbo Intermediate People's Court (2019) Zhejiang 02 People's Final No. 1524 and other cases established the caliber is exactly the same-the company's operating loans usually exceed the daily needs of the family, the first presumption is not a joint debt of husband and wife, by the creditor's evidence to overturn.

3. the boundary between corporate debt and shareholder's personal responsibility

also need to clarify a pre-problem: the so-called "corporate debt", in the end is the debt owed by the company, or the debt owed by the individual shareholders. The company is an independent legal person, and the debts owed by the company's own operation shall be borne by the company's property. Shareholders shall be liable to the extent of their subscribed capital contributions (Articles 3 and 4 of the Company Law). In principle, it has nothing to do with their spouses. Only when shareholders abuse their independent status as legal persons and their corporate personality is denied due to property confusion can shareholders bear joint and several liability for the company's debts-whether the spouse is held at this time depends on whether the shareholder's liability. The spouse is usually faced with another situation: the husband borrows money in the "personal name" to invest in the company's operation (e. g. signing a personal loan contract, personal account collection and re-investment into the company), the main body of the loan is the husband's individual, at this time to enter the joint debt of the husband and wife review. The two should not be confused: corporate debts are the responsibility of the company, while only personal debts may involve spousal liability.

If the company is a one-person limited liability company and the husband is the sole shareholder, the company's debt may be converted into the husband's personal debt according to the third paragraph of Article 23 of the company law (the burden of proof is on the shareholder). At this time, whether the wife is responsible still returns to the framework of joint debt of husband and wife: whether the company's operating income is used for family living together and whether the wife participates in the operation or shares the income is the core. In practice, creditors often sue the company, husband and wife together, the wife should be divided into two levels of defense: the first level, whether the company's debt can penetrate into the husband's personal.

4. Boundary conditions and high-risk scenarios

  1. The loan is actually used for family life: even if it is borrowed in the name of one party, if the money is used to pay for the mortgage, children's education, family daily consumption, etc., it may still be regarded as the joint debt of husband and wife;
  2. The spouse is a shareholder or legal representative of the company but does not actually participate in it for a long time.: Nominal employment is not equal to actual participation in operation. If it can be proved that they did not participate in decision-making and did not share the benefits, they are generally not held responsible;
  3. The spouses have agreed that their property shall be owned separately, and the creditor is aware of this.: According to Article 1,065 of the Civil Code, where a system of separate property has been agreed upon and the creditor is aware of such agreement, the debt shall be borne by the party incurring the debt.
  4. High-risk actions of signature and ratification: Signing on the IOU, the guarantee, the resolution of the shareholders' meeting, or replying "I know and return together" in WeChat, etc., may constitute common intention expression or ratification;
  5. The exception of co-signing of joint debt within marriage: even if it is not signed, if the loan occurs during the joint operation period of the husband and wife, and the spouses have long-term cooperative management and mixed accounts, it may still be recognized as joint debt.

Coping steps and evidence list for 5. spouse

  1. Do not sign at will: avoid signing on documents such as the spouse's debit note, guarantee letter, resolution of shareholders' meeting, etc., and do not make repayment commitment or ratification expression in WeChat and SMS;
  2. Evidence of non-involvement in business operations: one’s employment certificate, social security records, and bank statements showing salary payments; obtain the company’s business registration information through the National Enterprise Credit Information Publicity System (Zhejiang) or the “Zheli Ban” app to prove that one is not registered as a shareholder, director, supervisor, or senior executive.
  3. Evidence of fixed unshared income: the main source of household expenses (payroll card flow, household account), which proves that the household life does not depend on the operating income of the company;
  4. Distinguish family accounts from company accounts: avoid the mixing of company funds with individual family funds, and do not collect or pay company funds;
  5. Actively defended the lawsuit: explained to the court that the defendant was not involved in the business operations, did not share in the profits, and that the debt was not incurred for family living expenses; argued that the creditor bears the burden of proving that the debt was used for “common marital life, joint business operations, or a joint expression of intent.”
  6. Application to the court for investigation into the use of borrowed funds: By examining bank statements, contracts, and other relevant documents to ascertain the actual destination of the funds, you may apply to the court for an investigative order to obtain the transaction records of both corporate and personal accounts.

From the perspective of litigation strategy, the most common risk of losing a lawsuit after a spouse is sued is negative response: not appearing in court, not defending, the court making a judgment in default according to the IOU and transfer record submitted by the creditor, and claiming non-joint debt afterwards, which leads to extremely high relief cost. The correct approach is to submit the defense and evidence on time, and if necessary, apply for additional actual payees or companies to find out where the funds are going.

6. Common Misunderstandings and Positive Solutions

  1. Misunderstanding 1: Marital debts are joint debts of husband and wife. The nominal debt of one party that exceeds the daily needs of the family must be proved by the creditor to be used for common life or common production and operation. If the proof cannot be proved, it does not constitute a common debt.
  2. Misunderstanding 2: If you start a company and earn money, you have to pay it back together. The key lies in whether the spouse actually participates in the operation and whether he or she shares the operating income, rather than whether the company is profitable and whether the family benefits from the company.
  3. Misconception 3: If you don’t know, just ignore it. If the spouse is registered as a shareholder or executive of the company, even if he or she is said to be "unaware", he or she may be required to prove that he or she did not actually participate in the operation and did not share the proceeds.
  4. Misconception 4: A divorce agreement stipulating that “debts shall be borne by the other party” absolves one party of liability. The agreement is only valid within the husband and wife, and cannot oppose the creditor; the creditor can still claim to both parties according to the common debt rules.

class case reference: the bank revolving mortgage loan incurred by the joint operation of the family within marriage is identified as the joint debt of husband and wife, and the divorce judgment is not dealt with; if one party pays off the debt on his own after divorce, he can recover half of the paid off debt from the other party. Explain whether the operating liability implicates the spouse, the key is whether it is used for joint operations and evidence. Trial Court: People’s Court of Cixi City, Zhejiang Province Case No.: (2019) Zhe 0282 Min Chu 7518 Source: Ningbo Local Marriage Case Database.

7. Frequently Asked Questions

Does the wife have to pay back the money the husband borrowed for the operation of the company?

Not necessarily. See whether it constitutes a joint debt of the husband and wife: the wife has not signed, has not ratified, the loan has not been used for the daily life of the family, and the creditor cannot prove that it is used for the joint life or joint production and operation of the husband and wife, the wife does not bear it.

Is the wife a registered shareholder of the company, a joint operation?

We need to look at the substance. Where an individual is only nominally registered but does not actually participate in business decision-making or share in the profits, they are generally not deemed to be a joint operator; however, if they serve as a senior executive or supervisor and actively participate in management, or receive substantial dividends from the company, the associated risks significantly increase.

The creditor has filed a lawsuit—what should the wife do?

actively responded to the lawsuit, claiming that the creditor should bear the burden of proof for "the loan is used for the couple's common life, joint production and operation or based on the common intention"; submit the evidence of not participating in the operation and not sharing the income, and apply to the court to investigate the whereabouts of the loan if necessary.

During a period of separation, does the wife have to repay debts incurred by her husband?

During a period of separation or when the marital relationship has broken down, if one spouse incurs debt without using it for the common needs of the family and the other spouse does not benefit from it, such debt is generally not recognized as joint marital debt; however, this does not apply if the creditor can prove that the debt was used for joint business operations.

The company has gone bankrupt—will the spouse be held liable for repayment?

The company shall pay off its debts with all its property, and the shareholders shall bear the responsibility within the limit of subscribed capital contribution; if the wife is not a shareholder and has not participated in the operation and has not benefited from it, she shall not bear personal responsibility for the bankruptcy of the company. However, if the husband borrows money into the company in his own name and the debt constitutes a joint debt of the husband and wife, the wife shall be liable within the scope of the joint debt.

Practical experience of 8. lawyers

Whether a spouse is liable for the other’s corporate debts does not depend on whether the debt was incurred during the marriage, but rather on whether there is a genuine connection between the debt and the family: Was there mutual consent evidenced by joint signatures? Was the debt used for the family’s daily living expenses? Or was it used for the couple’s shared life or joint business operations? The amount of money borrowed by the company usually exceeds the daily household affairs, and the burden of proof falls on the creditor-he has to prove that the money was indeed spent on the family. Therefore, before the debt collection party is anxious, the matter of "I did not participate and did not benefit" should be turned into a material that can be obtained.

We must even more firmly uphold the principle of not signing and not endorsing.. Many spouses are implicated without knowing it: signing the debit note and guarantee for the other party, or promising me to repay the money in WeChat, or even transferring the account for the company several times with their own account, which may be understood as a common meaning. What has already happened should be restored to the context and facts at that time. What hasn't happened yet must be controlled. At the same time, sorting out the evidence of one's own source of income, where the family's daily expenses come from, and the complete isolation of the company's accounts from oneself, these are precisely the keys to proving that it has not been beneficial.

When it comes to the divorce negotiation table, the ownership of the debt should be discussed together with the division of the property. You can't just exchange the property for a verbal statement that you don't have to pay the debt. The agreement should specify which are common debts and which are to be borne by whom. It should be implemented internally and a basis should be left externally. When it comes to the execution stage, if the creditors seize the common property, the spouse can claim his share by analyzing the property and raising objections, and do not wait passively. In a word, first make solid factual evidence, and then talk about concessions. If the order is reversed, it will be easy to suffer losses.

One party's company debt, whether the spouse should pay it back, is essentially a "whether it constitutes a joint debt of husband and wife. The law puts the burden of proof on creditors for large debts that exceed the daily needs of the family, and the spouse's initiative lies in not signing, not recognizing, not mixing with the company's account, and fixing the evidence of "not participating in the operation and not sharing the proceeds. If you have been sued by creditors, you should actively respond to the lawsuit and claim the creditor's evidence, if the nature of the debt is disputed at the time of divorce, you can deal with it together in the divorce proceedings or confirm it in another case, do not use a "don't know" negative response, miss the window of proof and defense.