Discovering that a former partner has drained a joint account, or moved money out of the business, is a common and unsettling moment early in a separation. For a business owner it can also raise real questions about cash flow and control, especially where funds are needed to keep the business running. The good news is that the family law system has clear ways to deal with it, so acting calmly and quickly usually protects your position.
Is it legal?
Where an account is held jointly, either party is usually entitled to access the funds, so a withdrawal is not necessarily unlawful. That does not mean it has no consequences. What happens to the money is relevant to the property settlement, and the person who took it will need to account for where it went. Money spent on ordinary living costs is treated differently from money moved to put it beyond reach.
Add-backs
Where one party has spent or moved money to reduce the pool or defeat the other party’s claim, the court can add that amount back into the asset pool and treat it as though the person who took it has already received it. This is often called an add-back, and it means draining an account rarely achieves what the person hoped, because the figure simply comes off their share of the settlement.
Freezing assets
Where there is a real risk that assets will be moved or dissipated, the court can make an injunction to freeze accounts or prevent dealings with property. For a business owner worried about funds being taken from a company account or a joint facility, this can be an important protective step, and it needs to be sought promptly and with evidence of the risk.
Disclosure keeps everyone honest
Both parties have a duty to disclose their finances fully, which includes bank statements and any significant withdrawals or transfers. That duty makes it difficult to hide a movement of money, and unexplained transactions tend to work against the person responsible when the court considers the settlement. For an owner, the same applies to company accounts and drawings, which must be disclosed accurately.
Act quickly and keep records
If money has been taken, or you are worried it might be, act quickly. Keep records of accounts and balances, avoid matching the behaviour yourself, and get advice on whether an injunction or a formal request for disclosure is warranted. A measured, documented response is far more effective than a reaction in kind.
Protecting business accounts
For an owner the risk is not only the joint personal account. Money can also be drawn from a company account, a loan facility or a trust, and those movements are just as relevant to the settlement and just as subject to disclosure. If you are a director or trustee, keep an eye on drawings, transfers and any new liabilities, and raise concerns with your lawyer early. Where the business itself could be affected, an injunction can be framed to protect it without freezing the funds it needs to keep trading, because the aim is to preserve the position rather than paralyse a working business. Keeping clean records of who authorised what also makes it far easier to explain the accounts when the settlement is worked out. In practice, the calmer, better-documented party tends to be the more persuasive one once the numbers are reviewed.
As the largest team of specialist family lawyers in WA, Leach Legal helps business owners protect cash and assets during a separation. Contact us if you are concerned about money being moved.
