A divorce court can order one spouse to transfer company shares to the other, but that order binds the spouse, not the company. The transfer still has to pass through the company’s articles, which may give other shareholders first refusal or let the directors refuse to register it, so the articles need reading before any order is agreed.

This page covers the company law side in England and Wales. The capital gains tax position is covered in capital gains tax on separation and divorce.

What can the family court order about company shares?

Section 24 of the Matrimonial Causes Act 1973 lets the court, on making a divorce, nullity or judicial separation order or at any time afterwards, order one party to transfer property to which they are entitled to the other party, or to or for the benefit of a child of the family. Shares registered in one spouse’s name are property for this purpose. Section 23 of the same Act gives the alternative of a lump sum order, which leaves the shares where they are and requires the shareholder spouse to pay money instead.

Section 25 sets out what the court must weigh, with first consideration given to the welfare of any child of the family under 18. The listed factors include each party’s income, earning capacity, property and other financial resources, their needs and obligations, the standard of living before the breakdown, their ages and the length of the marriage. A shareholding in a family company usually counts as a financial resource whichever spouse ends up holding it, so the real question is often practical: can the couple, or the other shareholders, live with the former spouse remaining on the register?

Does a court order make the company register the new owner?

Not by itself. Under section 33 of the Companies Act 2006 the company’s constitution binds the company and its members as if each had covenanted to observe it, and section 544 says shares are transferable in accordance with the company’s articles. A property adjustment order is made between the spouses. The company and the other shareholders are not parties to it.

The mechanics of registration are unchanged by the divorce:

  • Section 770 prevents the company registering a transfer unless a proper instrument of transfer, usually a stock transfer form, has been delivered to it.
  • Under article 26 of the model articles for private companies, the transferor remains the holder until the transferee’s name is entered in the register of members, and the directors may refuse to register a transfer.
  • Section 771 requires the company, within two months of a transfer being lodged, either to register it or to give the transferee notice of refusal with its reasons.

So a receiving spouse can hold an order that the other spouse must comply with, yet still not be a member of the company if the directors properly refuse registration under the articles.

What if the shareholder spouse will not sign the transfer?

Section 39 of the Senior Courts Act 1981 deals with that. Where the High Court or the family court has ordered a person to execute a document and that person neglects or refuses to do so, or cannot be found, the court may order that the document be executed by someone it nominates. A stock transfer form signed this way operates as if the original party had signed it. That cures the missing signature. It does not override a power in the articles to refuse registration or a pre emption right held by other shareholders.

How do pre emption rights and transfer restrictions affect a divorce transfer?

The statutory pre emption right in section 561 of the Companies Act 2006 applies to the allotment of new equity securities, not to transfers of existing shares. Any right of first refusal on a transfer therefore comes from the articles or a shareholders’ agreement. Bespoke articles commonly contain some combination of the following, and each needs checking against the proposed order:

  • Permitted transfers. Many articles let a shareholder transfer to a spouse or other family member without first offering the shares to others. Check whether the definition covers a former spouse, because once the final order is made the parties are no longer married.
  • Offer round provisions. A shareholder wanting to transfer must first offer the shares to the other shareholders at a price set by agreement, formula or an independent valuer. See pre emption rights and fair value clauses.
  • Compulsory transfer events. Some articles or shareholders’ agreements treat a court order to transfer shares, or the shares passing to someone who is not an employee or family member, as triggering a deemed offer of those shares to the others.
  • Directors’ discretion. A general power to refuse registration, as in model article 26(5).

If the articles block the transfer, they can be changed by special resolution under section 21. A special resolution needs a majority of not less than 75% under section 283, so a spouse holding less than that cannot change the articles alone. The other shareholders can also simply waive their rights in writing for this transfer.

What are the alternatives to transferring the shares?

Where a transfer is impractical, the settlement is often restructured so the receiving spouse gets value without becoming a member:

  • Lump sum. The shareholder spouse pays a sum under section 23, funded from savings, borrowing or dividends.
  • Company buyback. The company buys shares back, from the shareholder spouse or from the receiving spouse after a transfer, subject to the conditions for a company purchase of own shares, including distributable profits.
  • Sale to the other shareholders. Existing shareholders buy the shares and the proceeds are divided under the order.
  • Holding on trust. The shareholder spouse keeps legal title and holds some shares on trust. Model article 23 says the company is not bound to recognise any interest in a share other than the holder’s absolute ownership, so the trust works only between the spouses: the registered holder still votes and receives dividends, and the beneficiary must rely on the holder to pass them on.

What paperwork is needed if the transfer goes ahead?

  1. Stock transfer form. Signed by the transferring spouse or a court nominee, stating the number and class of shares.
  2. Stamp duty certificate. Section 83 of the Finance Act 1985 removes stamp duty from an instrument transferring property between parties to a marriage under a court order on divorce, or under an agreement made in connection with the divorce. HMRC guidance says to complete certificate 2 on the back of the stock transfer form for an exempt transfer such as one in connection with divorce. With the certificate completed, the form does not usually need to be sent to HMRC.
  3. Lodging and approval. The form and the old share certificate go to the company, and the directors decide whether to register the transfer, applying any pre emption process first.
  4. Register of members. The receiving spouse is entered with the details required by section 113, including the shares held and the date of registration, and the date on which the transferor ceased to be a member if they have transferred everything.
  5. Share certificate. Section 776 requires the new certificate to be ready within two months after the transfer is lodged.
  6. People with significant control. If the transfer takes either spouse above or below the more than 25% threshold for shares or votes, or moves a holding between the 25%, 50% and 75% bands, Companies House guidance requires the change to be notified within 14 days. See notifying PSC changes.

How might this work in practice?

Illustration only. Alia owns 60 of the 100 shares in a trading company and her brother owns 40. Her former husband, Ben, holds none. The draft consent order says Alia will transfer 20 shares to Ben. The articles allow transfers to a spouse without an offer round, but every other transfer must first be offered to the existing shareholders at fair value.

Because the order will be made after the divorce becomes final, Ben will no longer be Alia’s spouse, so the permitted transfer route does not apply. Alia’s brother is entitled to buy the 20 shares at fair value. Alia cannot amend the articles alone, because 60% is short of the 75% needed for a special resolution. The realistic choices are for her brother to sign a waiver before the order is sealed, for the order to provide for a lump sum instead, or for the brother to buy the shares and the proceeds to go to Ben. Settling this before the order is drafted avoids an order that cannot be carried out.

What mistakes come up most often?

  • Agreeing a consent order that requires a share transfer without reading the articles and any shareholders’ agreement.
  • Assuming the court order overrides the company’s constitution or binds the other shareholders.
  • Moving shares to a relative before or during proceedings. Section 37 of the Matrimonial Causes Act 1973 lets the court restrain a disposition, or set one aside, where it was made with the intention of defeating a claim for financial relief.
  • Forgetting the register of members, the new share certificate and the PSC update once the transfer is approved.
  • Paying stamp duty that was not due, or sending the form to HMRC when certificate 2 could have been completed.
  • Looking at the company law steps without checking the capital gains tax timing, which depends on when the couple separated.

Company directors can protect the business against the cost of an HMRC check with tax investigation insurance, which pays up to £100,000 of accountant’s fees with Solar Protect. Read how our cover works or get a quote.

Related Accountapedia entries

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.