When it becomes known that a spouse in a property settlement has been granted interests under an employee share scheme, quickly ensuing is the usual debate as to whether those interests are property or a financial resource for the purposes of the Family Law Act.
The importance of this distinction being that property to the relationship can be subject to an alteration of property order by the Family Court. Whereas a financial resource can only be taken into account by the Family Court when considering if the division of assets is just and equitable. In short, if the share scheme interest is considered property it will be included in the relationship’s balance sheet, if it’s considered a financial resource it will be excluded.
In this respect, the following principles regarding employee share schemes have been formed by the Family Court:
- vested shares scheme interests are usually viewed as property to the relationship, this is also the case if vesting occurs post separation.
- options that have vested but have not been exercised are also viewed as property, but will only have an intrinsic value if they are “in the money”; and,
- granted but unvested share scheme interests are usually, but not always, viewed as a financial resource, particularly where there are performance hurdles.
One only needs to consider the case of Eakins & Higgins to see how these principles are presently applied by the Family Court.