(a) What orders can the court make in relation to the division of assets on divorce or judicial separation?
For divisible assets such as cash, liquid stock, bonds or fund units, the court may award a specific percentage thereof to each spouse in the absence of any agreement between them. For real estate, in the absence of any agreement between the parties, ownership is generally awarded to one party through bidding between them or division based on evaluation, while the other party is compensated by the first-mentioned party. If neither party wants the property, the court may order the sale of the property upon request by the parties and the division of the sale proceeds. We have also seen courts order ownership in the form of tenancy in common by the parties where both parties want to keep their property and neither party can afford to buy out the other party.
The situation is more complicated in the case of dividing corporate equity interests/shares in non-public companies, as this involves the interests of other shareholders. The spouse holding title to the corporate shares may, upon the agreement of the other spouse, pay the corresponding value to the latter, unless the latter is allowed to hold part of the shares in question as a result of the operation of corporate laws.
(b) What general principles apply to the division of assets? What specific factors will the court consider in deciding which orders to make in this regard?
China adopts the community property regime as the default matrimonial property regime. Unless a pre- or postnuptial agreement stipulates otherwise, the Chinese courts tend to divide matrimonial properties (howsoever acquired after marriage) in equal shares or in slightly skewed percentages in favour of the wife.
As mentioned in question 7.3(a), the courts will take into account the type of assets when making orders for the division of marital assets.
(c) How does the court treat unreasonable conduct during the marriage in relation to financial matters (eg, reckless spending, gambling, dissipation of assets) when determining on capital division in divorce?
The Civil Code provides that:
Where one spouse conceals, transfers, sells off, destructed or damages, or squanders the community property, or creates a false community debt in an attempt to unlawfully seize the property of the other spouse, the said spouse may receive less or no property upon partition of the community property in the case of divorce. Where one of the aforementioned acts committed by one spouse is found after divorce, the other party may file a lawsuit with the courts for re-partition of the community property.
(d) Is it common for expert evidence to be adduced and used in court (eg, forensic accountants, valuations of companies/properties)?
Yes, this is fairly common where the parties cannot agree on the value of real property or corporate shares of non-public companies.
(e) Is the family home treated differently compared to other family assets on divorce or judicial separation? If so, how?
There are no special rules on dividing the family home and the general rules described in question 7.3 will apply. In practice, courts often favour the female party who is awarded physical custody of the child.
(f) Are trusts recognised in your jurisdiction? How are they treated on divorce or judicial separation?
While trusts are recognised in China, cases seldom involve private family trusts in practice. It is the author’s personal opinion that upon divorce, a trust settled on matrimonial community property by one spouse without the consent of the other spouse may well be disregarded. On the other hand, if such trusts are created with the mutual consent of the couple, they should be regarded as separate from the pool of matrimonial property that is subject to division by the courts.
(g) What are the main enforcement methods to ensure compliance with financial orders issued on divorce or judicial separation? What are the typical consequences of breach?
See question 7.2(i).
(h) If the parties are in agreement on financial matters, is non-judicial resolution of these possible? What requirements and restrictions apply in this regard and how does the process typically unfold?
This is a similar question to question 6.5. Yes, a non-judicial resolution is possible if the parties are agreeable on the overall divorce terms, including financial matters and child custody and maintenance.
(i) Can the courts make financial orders in relation to a foreign divorce? What requirements and restrictions apply in this regard and who can apply for such orders?
Since the Chinese courts do not recognise decisions on financial matters and child custody and maintenance in foreign court divorce judgments, they will not make any order on financial matters in relation to foreign divorces.