Sridhar Vembu, the billionaire founder of business software giant Zoho, has been accused of unlawfully disposing of assets during his divorce from Pramila Srinivasan, his wife of 30 years.
In 2020, Vembu returned to India after living in California for decades. His stated reason for the move was to explore the opportunities of placing technology companies in rural settings. However, Srinivasan alleges that the actual purpose of the move was to remove the couple’s marital assets from California and the U.S. to avoid a fair division of property in their divorce.
Vembu and Srinivasan married in 1993, five years before he founded Zoho. As such, under California law, Vembu’s share of ownership in the multi-billion-dollar company is considered joint property, and Srinivasan has a right to half of it. However, Vembu allegedly gave 83% of the company’s total ownership to his sister and her husband while in India, leaving Vembu with just 5% ownership. Srinivasan has filed a legal claim in court arguing that Vembu’s actions are an attempt to prevent her from receiving her fair share of the marital property in their high net worth split.
Srinivasan’s claims carry weight. Vembu’s uncle has stated that the transfer of ownership was to prevent Srinivasan from receiving half its value. Additionally, he said that Vembu’s sister and brother-in-law plan to return ownership to him after the divorce is finalized.
If this is true, Sridhar Vembu may be committing a textbook case of unlawful asset disposal during his divorce. While the international aspect of the case muddies the waters slightly, in California, the law is clear: spouses may not give away, dispose of, or hide marital assets to prevent them from being considered during asset division. Doing so is unlawful, and the other party may have the right to take legal action or file contempt of court charges.
If you are preparing for a divorce, it’s crucial to understand how disposing of assets without permission could affect the process. Here’s what you need to know about California’s community property laws, why you cannot dispose of assets during divorce, and what you can do if your spouse does so anyway.
Why Disposing of Assets During Divorce Is Unlawful in California
Vembu’s alleged actions may violate California’s community property laws. All divorces filed in California come with automatic temporary restraining orders, or ATROs, that impose strict rules on what couples may and may not do with their assets. According to these orders, the marital property of divorcing couples cannot be disposed of, given away, sold, or otherwise removed from the couple’s ownership until the divorce is finalized.
The purpose of an ATRO is to keep community property in fundamentally the same condition throughout the divorce process. These orders clearly outline what types of asset transfers and other actions the couple may not take and explain the penalties for violations. This is intended to protect both parties’ rights to fair asset division.
Without these rules, unethical spouses would be significantly more likely to try to hurt their partners during the asset division process. By essentially freezing the community assets, ATROs ensure that neither party can:
- Hide assets or give them to another party to hold to receive more than 50% of the estate
- Dispose of property to reduce the amount given to their spouse
- Transmute assets to make them more difficult to divide fairly
In short, ATROs are designed to prevent exactly the kind of behavior that Vembu has allegedly performed.
Consequences for Hiding or Disposing of Assets During a Divorce
Disposing of assets or otherwise violating an ATRO can have serious consequences. At a minimum, many courts treat the situation as though the gifted or otherwise transferred assets were the dishonest party’s share of the marital estate. For example, the percentage of Zoho that Vembu gifted would likely be treated as his share of the property. If this is the case, Srinivasan could theoretically receive all of Vembu’s remaining assets to compensate for the amount he transferred away.
The penalties can also be more serious. If someone violates an ATRO on purpose, they can face increased spousal support, asset division requirements, or even contempt of court charges. For example, the violator could be ordered to pay the other party’s legal fees and reimburse them for lost profits or other losses caused by their actions. Contempt charges can even lead to jail time if the recipient refuses to abide by the order. Understanding your ATRO and abiding by its terms is crucial to avoid these consequences.
What to Do If Your Spouse Violates an ATRO
If you suspect your spouse is acting like Sridhar Vembu and attempting to hide or dispose of assets during a divorce, you must act immediately. ATROs impart consequences if your spouse tries to hide assets, but they do not help you recover property that has already been sold or given away. The first thing you should do is talk to a skilled divorce lawyer about your concerns.
At Kaspar & Lugay, LLP, we understand the demands of asset division in California. We have decades of experience representing high net worth clients in cases like Sridhar Vembu’s divorce, where questions of ownership and disposal of property are significantly more complex. We can help you determine whether your spouse is unlawfully disposing of your joint property and what you can do to stop them. Don’t stand by while your spouse raids your bank accounts and hurts your financial future. Start protecting your property today by scheduling a consultation with our skilled Marin County divorce law firm. We are proud to offer our clients focused attention and excellent representation, no matter what your family law concerns may be.