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It is incredibly important for parties to make sure that they make proper financial disclosure for their family law matters. Disclosure is very important for determining a party’s income and assets, which are important for resolving many family law issues such as child support, spousal support, and property division. If parties do not properly make full and accurate financial disclosures, the court can make adverse inferences against you during your application or at trial. This raises the question, however, of what types of documents need to be disclosed in a family law case. If the parties also own a corporation, they will have further disclosure obligations. While parties are not expected to spend extreme efforts providing financial disclosure, the disclosure must be accurate and fulsome. 

This post will discuss a party’s disclosure obligations for a family law matter. We will also examine the types of documents that a party may be required to disclose to ensure they meet their financial disclosure obligations. In addition, we will cover some documents that a party may need to disclose if they have ownership or control over a corporation, which can include more complex documents to be provided. For this, we will go through a case example, Sheen v Sheen, 2024 ABCA 227, in which the court found that additional corporate documents needed to be provided, including corporate expense receipts. This post will provide key takeaways for parties seeking to understand their disclosure obligations, including if a corporation is involved. 

What are your disclosure obligations in a family law case?

In a family law case, parties often must address child support, spousal support, and property division. To decide on these issues, the court requires information about each of the parties’ finances. As a result, parties to a family law case have a duty to make full financial disclosure. This is so that an accurate account of their income can be used to determine support and to reveal any assets that may be subject to property division. 

Even beyond the courts, if the parties have a separation agreement, for example, disclosure obligations may be set out in the agreement. Even before the agreement is finalized, parties must provide full and accurate financial disclosure so that the parties can make an informed decision on the agreement terms. If there is inadequate disclosure during the negotiations of a separation agreement, the terms may be overturned later if it is revealed that there was insufficient disclosure or the disclosure was misleading. 

Parties must also ensure that they provide up-to-date financial information, including disclosing any changes to their income. It is each party’s responsibility to provide financial information actively. They cannot simply wait for a party to seek further disclosure. The court can also order further disclosure if the existing disclosure is insufficient. Parties can also request further information and must comply with these requests to fulfill their disclosure requirements. If not, the court can facilitate disclosure by making further orders. 

Due to the many negative consequences of failing to fulfill one’s duty of full and accurate disclosure, parties need to clarify what documents to disclose during a divorce. 

What documents do you need to disclose during a divorce?

To provide financial disclosure, parties must provide a sworn financial statement. This statement describes their income sources and financial circumstances, including any debts. All supporting documents must be attached to this financial statement, including:

  • income tax returns, 
  • notices of assessments, 
  • recent pay stubs, 
  • bank and credit card statements, 
  • statements for lines of credit, 
  • RRSP statements, 
  • property appraisals if the parties own any property,
  • pension valuations if applicable

The required disclosure can be even more extensive if a party’s primary source of income is from a corporation. In particular, they must provide explanations about the following payment categories:

  1. The nature of the payment or expense;
  2. How the payment or expense was calculated; 
  3. Why the expense was a reasonable corporate expenditure; 
  4. Whether any of the amounts provided or resulted in a personal benefit to the shareholder or a related party, for instance, payments for a vehicle, travel, promotion, phone, etc.

For personal benefits, a party would need to explain what part of the expense was a personal benefit and how it was calculated. If the benefit were to a related party, then there would need to be an explanation of the services performed by that party and whether the salary paid was at market rate.

Supporting documents, such as related invoices, receipts, and the corporation’s general ledgers, would also need to be provided for these explanations. 

To determine a party’s income, there may be an expert valuation, especially in cases where a party’s primary source of income comes from a corporation. Disclosure can then be provided to the expert for their report, which will be available as evidence before the court. 

Disclosure of Corporate Expense Receipts and Account Statements Required in Recent Alberta Family Case

In the Sheen case, the parties were married for 17 years and had one child together. The child was an adult by the time of trial. The parties equally owned a consulting business together 2 years into their relationship and just before they were married. The husband was mainly responsible for operating the business, while the mother provided bookkeeping services to the company. After the parties separated, the husband’s girlfriend was hired as the bookkeeper. Afterward, the wife claimed she was being excluded from the company and alleged that money was withdrawn from the corporation after separation without her consent. 

A couple of years after separation, the husband incorporated another company to continue his consulting services. He is the sole director and shareholder of the new company. 

The wife claimed that after the separation, the expenses had increased dramatically. She also noted that the company’s financial statements were unaudited. The husband countered that further disclosure she sought would increase the cost of the jointly retained expert valuation of his income and that he already provided full disclosure

The court found that the husband needed full financial disclosure, as he did not provide corporate expense receipts. The court found that this would not be an additional cost or effort, as the husband would be providing already available receipts. Even though the husband claimed that he had already provided a lot of disclosure, the court noted gaps in the corporate documents and his bank account statement for certain months. The husband was ordered to provide the missing information. 

Mincher Koeman Lawyers Can Assist with Your Disclosure Obligations

Parties to a family law proceeding must make full and accurate ongoing disclosure. There can be significant consequences for failing to comply with disclosure obligations, so it is important to understand them from the outset. If you are seeking outstanding financial disclosure or require assistance with your disclosure obligations, you should speak with one of our family law lawyers at Mincher Koeman, who are experienced in assisting business professionals and entrepreneurs with disclosure issues in family law proceedings. Our Calgary family law lawyers are dedicated to finding the best resolution for you after your divorce.

To book a consultation, please contact us online, or by phone at 403-910-3000.

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