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DEBUNKING THE BUSINESS OF DIVORCE Experts from FM Family Law focus on what happens to the family business during divorce W e answer key questions on what to do if you own a business and are getting divorced. IS MY SPOUSE ENTITLED TO HALF MY BUSINESS IF WE DIVORCE? WILL I HAVE TO SELL MY BUSINESS IF I DIVORCE? The court has the power to order a sale of assets such as company shares, but will generally try to keep a business as a going concern if affordable and feasible to do so.
any event, the court also has the power to overturn such a transfer. SHOULD I RINGFENCE MY BUSINESS WITH A PRENUPTIAL AGREEMENT? The best protection is to act early, before the shareholder(s) marry by entering into a prenuptial agreement – or while they are married by entering into a post-nuptial agreement. These can make conditions on how shares should be treated on divorce. This is effective in protecting the company. MY BUSINESS PARTNER IS GETTING DIVORCED – HOW DO WE PROTECT OUR COMPANY? Assess the shareholders agreement, consider value, liquidity and tax. Take professional advice. Staying in business together after divorce can work for some families too. In this case, it is important to properly document your agreement to avoid future disputes, such as in a financial order from the family court, an employment contract and/or a shareholders agreement. DO WE HAVE TO CHANGE ANYTHING? FM Family Law are specialists in all matters relating to divorce and complex finances. For advice tailored to your specific situation, contact FM Family Law on 01223 355333. The information contained in this article is for general informational purposes only and should not be considered legal advice Staying in business after divorce can work for some
Each case is fact-specific and depends on the business’ nature, liquidity, effect on the business as a going concern, effect on income generation, tax implications and whether the entitlement can be offset with other available capital assets. The business is, however, generally considered a marital asset for inclusion with all other assets. The family court’s powers are vast and many outcomes are possible. It depends on the overall assets, the nature of the business and its trading status. The court can order a sale or transfer of shares in a business, or for payment of a lump sum to your spouse in return for you keeping your business. HMRC clearance is needed for a company buyback of shares if your spouse owns shares in the business. WHAT WILL HAPPEN TO MY BUSINESS?
HOW IS THE BUSINESS VALUED ON DIVORCE? The experts best-suited to analyse this may be a forensic accountant or business valuer with experience in dealing with tax implications and divorce cases. There are different ways to value the business depending on its nature as well as the shareholding stake. It is not unusual to argue that a minority shareholding should be discounted in value. SHOULD I TRANSFER MY SHARES TO SOMEONE ELSE TO PROTECT THEM? This is unlikely to achieve the objective – potentially making the divorce more complex. It is also predictable that the court will draw adverse inferences to the timing of the transfer of the shares. In
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