Disposing of Assets Before Divorce in Malaysia: Is This Legal?
Quick summary
When a marriage is falling apart, it is not uncommon for one spouse to suddenly “go broke” and start selling off property or moving money around. Usually the goal is to leave nothing on the table for the other spouse to claim. In Malaysia, the court does not simply allow this. If you are going through a divorce and you suspect your spouse is quietly getting rid of assets, you may talk to our divorce lawyer in Malaysia and apply to set aside the disposal or ask the court for an injunction to stop any further disposals. Below, we explain how this works and what you can do to protect your share.
(This applies to non-Muslim divorce under the Law Reform (Marriage and Divorce) Act 1976.)
A story you may find familiar
Here is a quick story. You may be facing the same issue or have heard of the same issue happening to people around you.
The story goes like this.
During the course of marriage, both the husband and wife are enjoying a comfortable lifestyle (with children) from their substantial wealth accumulated throughout their marriage.
Marriage seems to be fine until it is not anymore. The relationship hits the rock bottom due to the fact that the husband has committed an extra-marital affair.
Then imagine that both parties are going through a divorce now in Malaysia. The wife intends to claim for alimony for herself and maintenance for her children after the divorce. This is to ensure that they can still maintain the current lifestyle without being affected by the breakdown of the marriage.
Out of the sudden, the husband seems to be broke. He is trying to sell off his assets and properties to defeat the claim of the wife in the divorce proceedings.
Is it legal to dispose of assets before divorce in Malaysia?
Here comes the question.
Is it legal to dispose of assets before divorce in Malaysia?
This act may be against the law under the Section 102 of the Law Reform (Marriage & Divorce) Act 1976.
In this circumstances, it is clear that the husband is trying to hide or sell off the matrimonial assets in order to prevent any claim from the wife.
This act is also clearly preventing the Court from making any order for division of matrimonial properties between parties. At this point, you may be wondering if the husband can act in such a way without any repercussion.
What can the affected spouse do?
The provision that deals with this situation is Section 102 of the Law Reform (Marriage and Divorce) Act 1976, titled “Power for court to set aside and prevent dispositions intended to defeat claims to maintenance.”
In actual practice, if both parties are in the course of a divorce proceedings, the wife may consider the following:
- Apply to the court to ‘un-do’ or set aside the disposal of assets; and/or
- Apply to the Court for an injunction to stop the husband from disposing any valuable assets before the divorce since the Court shall have the power to order for division of matrimonial assets.
Essentially, it is important to understand that the reason for this is protect the interest of parties since the matrimonial properties are supposed to be enjoyed by both parties, had the divorce not occurred.
Therefore, if you are encountering such an issue during the course of a divorce, it is best to speak to a divorce lawyer in order to get informed on the next course of action that you can take to protect your interest.
Frequently asked questions
1. Can my spouse legally sell our house before the divorce is finalised?
Selling property is not automatically illegal, but if it is done to defeat your claim in the divorce, the court can step in. You may be able to apply for an injunction to stop the sale, or to set the sale aside if it has already happened. What matters is the intention behind it and the timing.
2. What is an injunction to freeze assets, and how does it help me?
It is a court order that stops your spouse from selling, transferring, or dealing with certain assets while the divorce is ongoing. It essentially “locks” the assets in place so they are still available when the court decides how to divide the matrimonial property. This is often used when there is a real risk that assets will disappear.
3. What happens if the assets were already sold to someone else?
The court can, in some cases, set aside a disposal that was made to defeat a spouse’s claim. A lot depends on who the asset was sold to and whether that person knew the reason behind the sale. Otherwise, the next course of action is to claim for the proceeds of sale.
