Supreme Court prioritizes cash settlements for unlisted stock in divorces

The Supreme Court said that courts should primarily consider cash settlements rather than direct share transfers when dividing unlisted stock in divorce cases.

In its May 29 decision, the high court stated that judges must account for all circumstances, including each party's contribution to asset formation, when determining the amount and method of property division. While various methods such as physical division or auction are available, the court emphasized that cash compensation should be the preferred approach for unlisted equities unless special circumstances exist.

Unlisted stocks typically trade among insiders rather than on open markets, making it difficult to establish a free and competitive price. The court noted that a spouse receiving a minority stake through physical division faces significant challenges in selling those shares at a fair value or participating in corporate governance. Furthermore, the value of such holdings remains vulnerable to business decisions made by the other spouse who retains majority control.

However, the ruling clarified that rigid adherence to cash payments is not mandatory if doing so would severely harm fairness between the parties. In instances where a pure cash settlement creates significant inequity, judges should actively consider mixing methods, such as combining physical share transfers with debt assumptions or other compensatory measures.