In most cases, the member`s spouse knows much more about the business and the likely financial outcome if the approval provision is enforced. Therefore, in most cases, the spouse is not able to successfully assert that the non-member spouse only had to read the agreement to be fully informed. A “Just read the document” defense doesn`t work if the member`s spouse has financial, business, or other essential business information that is not known to the non-member`s spouse. One of the most important points that the spouse must disclose to the non-member spouse is the specific value/amount that the non-member spouse will likely receive from the corporation if the consent provision is triggered at the time of divorce. In this article, we refer to the “non-member spouse” as the spouse against whom the consent provision is applied after the divorce action is filed. The non-member spouse may challenge the enforceability of the consent provision if he or she concludes that the terms of the mandatory buyout are not fair to him or her. For example, if the consent provision requires the non-member spouse to transfer his or her ownership rights to the business at a much lower price (not at fair value), it is likely that the non-member spouse will consider ways to avoid or rescind the consent provision. The need for the spouse to be granted by the non-member spouse on a voluntary basis and without coercion or coercion may seem obvious, but this element must be seen in the context of the spousal permit provisions. In many cases, the provision of the spouse`s permit appears at the end of the contract or in a separate seizure.
As a result, the spouse may ask the other spouse to sign the approval provision simply on the final or separate page, without insisting or proposing that the non-member spouse take the time to actually read the entire agreement. While transforming collective ownership into separate ownership solves the problem, it is not an acceptable choice for many founders. It requires a follow-up agreement which, to be enforceable, may require formal disclosure of all marital property and is advised to the spouse to find their own lawyer to negotiate the agreement. This type of legal complexity is often unpleasant for many married couples who would prefer to avoid a potentially contradictory relationship compared to a refoundation.