High-tech stock options divided by Rabbinical court in divorce appeal

A man will share stock options received as part of his work in high-tech with his ex-partner, according to a recent ruling by the Great Rabbinical Court in Jerusalem, which accepted the woman’s appeal.

The decision of the Great Rabbinical Court overturned the Regional Rabbinical Court's determination that the woman had no rights to the options received by her ex-spouse. The Regional Court had ruled that the options received by the husband should be excluded from the resource balance arrangement (which regulates the division of property between spouses) if they were not deposited into the joint account. However, the Great Rabbinical Court ruled in a majority opinion that the woman is entitled to receive her portion of the options.

In many high-tech companies, it is customary to provide employees with incentives in the form of stock options. These options can be exercised after a specified period (the vesting period), at the end of which the employee is entitled to exercise them and receive shares in return.

In the current case, the couple separated in 2020 and has several children. The Regional Court ruled that an option is considered a gift given to an employee and therefore is excluded from the balance of resources. The woman contested this determination, arguing that the options are part of the salary and were provided as part of a salary agreement regulating the relationship between the employee and employer.

On the other hand, the husband argued that the options and shares he accumulated at work are personal benefits based on human capital inherent in his talent and abilities, and should not be questioned. He also claimed that the parties had not shared a marital relationship for years, living in separate rooms and functioning merely as a "financial parental unit." Thus, he contended that even if there were a basis for balancing the options, the unusual lifestyle of the parties should be taken into account.

The Great Rabbinical Court ruled that the woman is entitled to the balance of the options awarded to the man before the date of their separation. If the vesting period occurs after the date of separation, she is entitled to a proportionate share of the resulting shares. The court also determined that an option granted to an employee is not akin to a gift given to a spouse, and that claims regarding marital relations do not affect the equal distribution in the resource balance.

Therefore, the court accepted the appeal, determining that the wife is entitled to a share of the options and shares that the husband received from his employer. If the vesting date falls after the date of separation, the relevant timeframe for calculating the division must be established between the allocation date and the vesting date.

The judges in the case were Rabbi Shlomo Shapira, Rabbi Zion Luz-Ilouz (who held a minority opinion), and Rabbi Zvi Ben Yaakov. The woman whose appeal was accepted was represented by rabbinic advocates Zvi Geller and Nadav Teichman.

Attorney Daniel Frydenberg of the Hoffman & Frydenberg office, who specializes in inheritance and family matters and did not represent either party in the case, explains that "the High Court overturned the Regional Court's judgment in the name of the principle of equality, determining that both spouses are entitled to enjoy what was accumulated during their marriage."

He emphasizes that this determination is based not only on legal principles but also on a thorough examination conducted by the judges in consultation with external experts knowledgeable about option grants. “The ruling also states that even if the marital relationship was not at its peak during the marriage, this does not undermine the property rights arising from the law and the joint effort in managing the household."

Attorney Dr. Sharon Frieling, who represented the man, stated: "The verdict reflects the complexity of balancing shares and options, including the question of the date at which the value of the rights will be determined for balancing purposes. Should the value be assessed at the time of separation, when the shared relationship between the spouses ended, or at the time of realization, which can sometimes occur years later? In the judgment, the judges' positions were divided, while in the Regional Court, all judges held the minority position. These disputes highlight the need for continued exploration of these complex issues, which seem to lack legal resolution."