Commonly asked question I get asked when it comes to Family Businesses and Divorce
Is my business considered by a court during a divorce?
At the time of a divorce, consideration should be given to the appropriate financial settlement for the two spouses. All assets owned by them will be disclosed, and their value will need to be ascertained. In circumstances where there is a business, independent expert accountancy input may be required to confirm the value of the business or the value of that individual’s shareholding in it.
Will I lose my business if I divorce?
The aim of any financial settlement (whether it is negotiated outside of court or decided by the court) is to fairly divide the assets belonging to the spouses in a divorce. This does not mean that a business owned solely by one of the parties must be sold, or that the company itself has to be divided up in some way. Often the appropriate result will leave the business with the owner, whilst some other assets will be given to/ be retained by the other spouse, such as cash, property or pension.
What happens if both myself and my husband/wife are shareholders in a family business?
There are a number of options in terms of how you deal with a jointly owned business when divorcing. It is may be most practical for one spouse to transfer all of their shares to the other as part of the financial settlement. In return for the transfer of shares they may receive cash or other assets.
Sometimes a spouse may retain some shares, even if it is agreed that they will not be part of the day to day running of the company going forward. However, in those circumstances the parties should consider entering into a shareholders’ agreement to regulate the business relationship and govern the way in which the company is run. There may also be occasions where shares can be sold to third parties, although this will be dependent on the nature of the business and the appropriateness of a sale. There also may be some limited circumstances in which it is felt that it is better to dissolve a company rather than continue following a separation.
What is right for a company will depend on the circumstances, the type of business operated, its value, and the kind of involvement each spouse had in it.
If you would like any advice about the position with your family business and a separation or divorce, please contact a member of our Family Team.
