Protect your business upon divorce

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Protect your business upon divorce

In the unfortunate event of marriage breakdown, there comes a time when the couple must deal with the division of their assets.  Resolving the financial implications of divorce is often a complex issue, and cases where one or both parties have an interest in a business can be even more intricate.  If the couple cannot agree a way forward, the decision on how to deal with the assets will fall at the mercy of the court.


Where a business was established before the marriage, or has grown significantly post-separation as a result of one party’s efforts, the idea that it may be divided within divorce proceedings will often result in bitterness.  And it doesn’t get easier when a business has been built up equally by both spouses.


In either case, the court will decide how the value of the business should be incorporated into the overall division of the matrimonial assets.  The court’s powers in this regard are far-reaching and can involve orders for shares to be transferred or sold, or for lump sum payments to be made. 


The result of the court’s decision on the business can be significant.  For example, if one party is required to walk away from a fundamental role in the day-to-day operations of the business, will it continue to run as efficiently?  Or, if a person is ordered to sell some of their shares, will this impact on their ability to influence the direction of the business (i.e. the loss of majority shareholder status)?


Most business owners think that the existence of shareholder agreements will be sufficient to protect the business in the event of divorce proceedings but this is not the case. 


A nuptial agreement which sets out how the couple wish their personal and business assets to be divided if they later divorce can, however, provide a business owner with the security they need to protect their business assets. These legal agreements can be entered into either before or after the wedding. 


Gail BrooksFor more information about how to protect your business in the event of a divorce or separation, please contact Gail Brooks, Associate, Private Client - Family. 

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Published: 4 Nov 2016

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