Why your business interests will be key if you divorce
Any business in which either party to a marriage breakdown has an interest will form part of the assets to be considered and will be relevant to the financial negotiations or court proceedings which may issue on divorce. Because of this, it would be expected that any business, whether a trading firm, company or partnership, would be valued as part of the exchange of financial information between the parties known as the process of 'financial disclosure'.
When embarking on a separation involving a business, both parties will need to consider their future means and objectives. If you are the owner of the business, you will no doubt want to look at how best to protect it. If you are the spouse, you may wish to know how you go about claiming your fair share.
Every case will turn on its own facts, but it will always be important to ascertain some key information, such as what income the business produces, whether it supports a high standard of living in real terms, rather than merely the income derived or dividend stream produced, whether there are assets attached to the business which are of value, whether there is a company pension, whether capital can be extracted, whether it is possible to borrow against the business and whether ownership of the business is shared with other parties.
Usually an expert accountant, who specialises in this field, would be instructed to carry out an appropriate valuation, but this should be discussed with an experienced family lawyer before any steps are taken to do so.
Once the relevant information has been obtained and shared, it will be up to the parties' legal representatives to assist in negotiating an agreement as to what should happen to the business and all other relevant assets.
It will be essential for both parties to think about how best the benefits from the business can be shared. If no agreement can be reached, a court can decide what should happen, but this can be an expensive and time consuming process.
It is unusual for courts to order businesses to be sold, unless this is the only way in which a fair result can be achieved. It is more likely that a court would grant the non-business owing spouse a larger percentage of the other assets, or maintenance to be paid from the income it generates, rather than enforcing an unwanted sale.
It is advisable to take specialist advice as soon as practicable. Some business owners panic if they view divorce on the horizon and make changes to the business, but this can damage your position on divorce if such changes are designed to be obstructive, or are an attempt to reduce the pot of assets to be divided.
If you are the non-business owning spouse you may be concerned that a business may be in peril, it may carry a large amount of debt, or changes are being made to limit your involvement. In this sort of scenario, it is important to act quickly to take appropriate preventative measures to avoid any detrimental changes being made. It is possible to ask a court to set aside arrangements which were done with a view to limit your claims, but it can be trickier to resolve such issues after the event. Prevention is better than cure, as they say.
If you are affected by any of the issues raised in this article, seek specialist independent matrimonial advice. If both parties are willing, these issues can be resolved constructively, without huge legal costs being incurred and without years of acrimonious litigation. The right legal advice should save you money, time and assist you in achieving your objectives for you and your family.
- Clare Curran is a specialist family law advisor at Worthingtons and can be contacted on firstname.lastname@example.org or telephone 028 91811538.