by Susan Paige
Divorcing your spouse can be challenging in the most straightforward of circumstances. It can be especially difficult if, after decades of marriage, your spouse suddenly wants a divorce seemingly out of the blue. Furthermore, if you have been running a business together the financial element of divorce proceedings can become protracted. Here are some of the key considerations when it comes to divorce with your business partner.
Are businesses included in financial settlements?
First of all, it can be a common misconception that businesses are exempt from divorce proceedings, even if it is a Limited Company. All businesses, including sole traders and partnership organisations, are considered a matrimonial asset by the courts, and therefore will be included in the financial marital pot when you go through the financial settlement procedure.
Dividing a company in a divorce
If you and your married business partner are 50/50 shareholders in the company, it doesn’t necessarily mean that you will get 50/50 in a divorce settlement. The business will be considered as part of a wider entity when looking at how to divide things. If you can agree on how you will split the business, this is often the best, and less expensive and time-consuming route to take. For example, you may decide to keep the company for yourself, buy the shares off your former spouse and compensate them with a larger proportion of another asset e.g., the family property or part of your pension.
Larger businesses and divorce
When you and your spouse/business partner run a large enterprise, matters can become a little more complex. Although in most financial settlements with businesses involved, courts prefer to keep companies with their owners and divide other assets, they do have the power to order a transfer of shares. If it’s decided that one partner exits the business, the remaining partner may need to pay instalments to the other or pay a lump sum to balance matters. It’s worth remembering also that in some cases there may be Capital Gains Tax implications to consider.
Getting your business valued
If your business has a large turnover with property or stock linked to it, it will need to be valued by an accredited valuation expert or business transfer agent. To achieve an accurate valuation, they will look at the value of the assets connected to the company, assess company cash flow and use comparable data from the sales of similar businesses to yours. It is usually advisable to appoint and pay for a valuer jointly, especially if there is the suspicion that one partner could undervalue the business.
If you believe your ex-spouse has undervalued the business, it’s worth speaking to your solicitor about gaining access to the company books, and looking in more detail at the financials. Or, if you cannot agree on a joint financial valuation, you can each appoint an expert of your own choosing, although this can be a costly route. Failing these courses of action, you may want to consider mediation to help you reach a mutually beneficial agreement.
Finding the best family-business lawyer
In divorces with businesses involved, finding a legal team with cross-functional experience in family law and business can make all the difference to the outcome of financial settlement, the future of your company, and your own long-term position.
It can be impossible in some situations, but if you can, try to work with your former spouse on finding an agreeable outcome. Drawn out legal processes due to ongoing conflict will prolong the process and will likely result in a more hefty legal bill.