Prenuptial Agreements for Entrepreneurs: Protecting Your Assets and Business

A divorce can quickly become an existential threat for entrepreneurs. Without a prenuptial agreement, the vast majority of married couples in Germany live under the statutory matrimonial property regime of the community of accrued gains (Zugewinngemeinschaft). This means that the increase in assets accumulated during the marriage is shared equally upon divorce. For entrepreneurs, this can result in the value of their company being included in the equalisation calculation, leading to substantial payment obligations that may only be met through the sale or encumbrance of the business. A tailored prenuptial agreement can effectively limit this risk.

The Risk of the Statutory Community of Accrued Gains

Under the statutory property regime of the community of accrued gains pursuant to §§ 1363 ff. BGB, the assets of both spouses remain fundamentally separate. However, upon termination of the marriage, the accrued gains of each spouse are calculated and the spouse with the higher gain must pay half the difference to the other (equalisation of accrued gains, § 1378 BGB).

For entrepreneurs, this is problematic for several reasons:

The value of the company is fully included in the accrued gains calculation. If the company was founded during the marriage or has increased in value during the marriage, this increase is treated as accrued gains.
The valuation of a company is complex and prone to dispute. Courts regularly engage expert valuers, whose reports are costly and can take years.
The equalisation claim is a monetary claim that becomes immediately due. It cannot be satisfied through instalment payments or payments in kind unless the other spouse agrees.
In the worst case, the entrepreneur must partially sell or mortgage the company to satisfy the equalisation claim.

Company Valuation in Divorce Proceedings

For the valuation of a company in the equalisation of accrued gains, the capitalised earnings method is predominantly used in practice. The company's value is determined on the basis of expected future earnings, discounted to the reference date (service of the divorce petition).

Key valuation parameters include:

Sustainable earnings: The adjusted results of the previous three to five years are used, eliminating special effects (e.g., extraordinary income, inappropriate managing director remuneration).
Notional entrepreneur's salary: The shareholder-managing director is treated as if receiving a market-rate salary. The difference from the actual salary is factored into the valuation.
Capitalisation rate: The risk-free base rate and a sector-specific risk premium are taken into account.

Practical tip: The prenuptial agreement can stipulate that, in the event of a divorce, a specific valuation method is to be applied or a specific expert is to be appointed. This substantially reduces the scope for dispute.

Modified Community of Accrued Gains: The Middle Ground

The modified community of accrued gains is the most frequently chosen arrangement for entrepreneurs in practice. It retains the basic structure of the community of accrued gains but modifies specific aspects:

Exclusion of the Company from Accrued Gains

The most common modification consists of excluding the value of the company (including shares in companies) from the accrued gains calculation. The equalisation is then applied only to the remaining assets (real estate, savings accounts, securities).

Sample wording: "When calculating the accrued gains, interests in partnerships and corporations held by either spouse, including the hidden reserves and goodwill attributable to such interests, shall be disregarded."

Capping the Equalisation

Alternatively, the equalisation can be limited to a maximum amount or a percentage of the accrued gains. This protects the entrepreneur against existentially threatening claims while still granting the other spouse a share in the economic success.

Valuation Methodology and Reference Date

The prenuptial agreement may specify which valuation method is to be applied in the event of a dispute (e.g., capitalised earnings method, simplified capitalised earnings method pursuant to § 199 ff. BewG) and the reference date for the valuation.

Separation of Property: Maximum Protection but Drawbacks

Separation of property (§ 1414 BGB) completely excludes the equalisation of accrued gains. Each spouse retains their assets regardless of the duration of the marriage and the respective increase in wealth.

Advantages:

Complete protection of the company against equalisation claims
Clear arrangements upon separation and divorce
No complex company valuation required

Disadvantages:

Disadvantageous for inheritance tax: The increased allowances for the notional equalisation of accrued gains upon inheritance (§ 5 ErbStG) are forfeited. For wealthy couples, this can result in a significantly higher inheritance tax burden.
Fairness concerns: Particularly where one spouse has forgone their own career for the benefit of the family, complete separation of property may be perceived as inequitable and challenged through judicial review.
Stigmatisation: Some perceive separation of property as a declaration of distrust.

Pension Equalisation: Modification Possible

In addition to property law, a comprehensive prenuptial agreement also addresses the equalisation of pension rights, i.e., the equalisation of pension entitlements acquired during the marriage (§§ 1 ff. VersAusglG). For entrepreneurs, this can be relevant where:

they have no or minimal statutory pension entitlements (e.g., where exempted through membership in professional pension schemes or as self-employed individuals),
they have built up substantial entitlements through occupational pension schemes or private provision.

The pension equalisation can be modified or excluded in the prenuptial agreement. However, a complete exclusion is only effective if adequate compensation is provided in return (e.g., higher maintenance provisions or lump-sum payments).

Notarial Authentication and Formal Requirements

The prenuptial agreement requires notarial authentication under § 1410 BGB with both spouses simultaneously present. The notary is obliged to advise both parties comprehensively on the legal consequences and to draw attention to any imbalances. Without notarial authentication, the prenuptial agreement is void.

Judicial Review

A prenuptial agreement is subject to judicial review. The Federal Court of Justice has developed a two-stage test in a series of landmark decisions (in particular BGH, judgment of 11.02.2004, case no. XII ZR 265/02):

Stage 1 -- Validity review (§ 138 BGB): A prenuptial agreement is immoral and void if, at the time of its conclusion, it objectively contains a one-sided allocation of burdens and, subjectively, an unequal bargaining position (e.g., pregnancy, dependency due to residence status, significant power imbalance) was exploited.

Stage 2 -- Exercise review (§ 242 BGB): Even if the prenuptial agreement is valid, relying on it may in individual cases be contrary to good faith if circumstances have fundamentally changed since the agreement was concluded.

The BGH has established a hierarchy of protected areas:

Childcare maintenance (highest protection)
Old-age maintenance and pension equalisation
Illness maintenance
Equalisation of accrued gains (lowest protection, most readily disposable)

For entrepreneurs, this means: modifications to the equalisation of accrued gains are the most legally secure. Restrictions on maintenance and pension equalisation require particularly careful balancing and compensation.

Timing: Before or During the Marriage?

A prenuptial agreement can be concluded both before and during the marriage. However, the timing has practical implications:

Before the marriage: Both parties negotiate on equal footing. The risk of judicial review due to exploitation of a coerced situation is lower. However, there is the psychological hurdle of raising the topic of a prenuptial agreement before the wedding.
During the marriage: Possible at any time in principle. A specific trigger often provides the impetus, such as the founding of a company, the admission of a new shareholder who requires a prenuptial agreement as a condition, or a succession event.

Practical tip: In existing partnership agreements, so-called spousal clauses frequently require partners to conclude a prenuptial agreement excluding business assets from the equalisation of accrued gains. Failure to comply with this obligation can result in sanctions up to and including exclusion from the partnership.

Practical Recommendations for Contract Design

Prefer a modified community of accrued gains over separation of property to preserve inheritance tax advantages
Clearly define business assets and exclude them from accrued gains
Specify the valuation methodology for the event of a dispute
Regulate the pension equalisation appropriately and, where necessary, provide for compensation mechanisms
Do not completely exclude maintenance but modify it according to need
Include a severability clause that preserves the agreement as a whole if individual provisions are invalid
Review the prenuptial agreement regularly (e.g., every five years or upon material changes)

Conclusion

A prenuptial agreement is not a sign of distrust for entrepreneurs but an act of sound business judgment. The right design protects the company from the financial consequences of a divorce without unreasonably disadvantaging the other spouse. The key is a balanced arrangement that withstands judicial review. The notaries and lawyers at compleneo support you in drafting a tailored prenuptial agreement that takes both your entrepreneurial and family interests into account.