Rishi Chopra runs a successful family-owned pharmaceutical company, while Tara Sarabhai is the head of human resources at a software firm. Both of them are in their late 30s and are doing well in their respective fields. They have been dating for two years and have now decided to tie the knot. However, before doing so, they want to take a decision on the fate of their finances in case the marriage does not last. How should they do it correctly, yet discretely?
Most people do not think of divorce at the time of solemnising a marriage. However, if Chopra and Sarabhai want to have control over their finances after an ‘unlikely’ divorce, it is critical that they discuss a prenuptial agreement before planning their wedding.
A prenuptial agreement is a contract between two individuals who are about to get married, outlining the state of finances and personal liabilities in case the marriage fails. Though it is not popular in India, the instrument helps avoid financial disputes and trauma at the time of separation.
In India, prenuptial agreements are neither legal, nor valid under the marriage laws because they do not consider marriage as a contract. A marriage is treated as a religious bond between husband and wife and prenuptial agreements don’t find social acceptance. However, these are governed by the Indian Contract Act and have as much sanctity as any other contract, oral or written.
The Indian courts take cognisance of a prenuptial agreement if both the parties mutually agree to it and sign it voluntarily, without any undue influence, force or threat. Besides, the agreement should be fair, clearly stating the division of property, personal possessions and financial assets of the parties, and should be certified by a separate lawyer for each.
A big advantage of having a prenuptial agreement is that it forces couples to have a financial discussion before marriage. The issues that can be efficiently dealt with through such a contract include protecting both the parties from each other’s debts, preventing a division of the family businesses and disputes regarding separate and shared assets, as well as dealing with the issue of children’s custody after the dissolution of a marriage. So, essentially, the agreement helps decide who gets what at the time of divorce.
For a prenuptial agreement to be successful, both parties have to be willing to participate in it and have to be completely honest about their individual assets and liabilities. The contract also has to be in place before the wedding takes place.
(Courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta)
Source: The Economic Times