Financial Disclosure: Are options to acquire shares considered money in the bank?

In the case of Reid v. Reid, the issue of whether options to acquire further shares should be calculated in a party’s assets, was the turning point of a case that saw the court rule in favor of the husband.

The Reid case featured a wife attempting to set aside a separation agreement due to the fact that it was contrary to objectives as set out in the Family Law Act and the Family Relations Act; specifically, that the husband’s financial disclosure was intentionally inadequate. The wife claimed that the husband’s major asset, his company, was undervalued based on the sale of the company, some years later, for a price higher than what was disclosed at the time of the separation.

The wife asserted that, despite a Pryce Waterhouse Cooper report disclosing the worth of the company at the time of the separation, the husband did not disclose the fact that he had an option to acquire more shares in the company at that time, and therefore financial disclosure was inadequate and misleading.

The Trial Judge disagreed with the wife and would not set aside the separation agreement. He ruled that an option to acquire more shares in a company is not “in the money,” and thus have no value.

Essentially, the Judge ruled that the agreement was not contrary to section 65 of the Family Relations Act, which states:

(1) If the provisions for division of property between spouses under section 56, Part 6 or their marriage agreement, as the case may be, would be unfair having regard to,

(a) The duration of the marriage;

(b) The duration of the period during which the spouses have lived separate and apart;

(c) The date when property was acquired or disposed of;

(d) The extent to which property was acquired by one spouse through inheritance or gift;

(e) The needs of each spouse to become or remain economically independent and self-sufficient; or,

(f) Any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse. The Supreme Court, on application, may order that the property covered by section 56, Part 6 or the marriage agreement, be divided into shares fixed by the court.

(2) Additionally or alternatively, the court may order that other property not covered by section 56, Part 6 or the marriage agreement, as the case may be, if one spouse be vested in the other spouse.

(3) If the division of a pension under Part 6 would be unfair having regard to the exclusion from division of the portion of a pension earned before the marriage and it is inconvenient to adjust the division by reapportioning entitlement to another asset, the Supreme Court, on application, may divide the excluded portion between the spouse and member into shares fixed by the court.

To learn more about financial disclosure as well as the services provided by Krol & Krol, call 905.707.3370 today.