Divorce and the Family Business – FAQs

Divorce and the Family Business – Frequently Asked Questions

Matt Clemence, Partner in the Family Team at Kerseys Solicitors explains frequently asked questions with regard to Divorce and the Family Business.

Often I am asked by clients how they can get “their hands on” their spouse’s business or there are those worried that their other half will seek to make a claim on the business in the pursuit to “ruin them” and they want guidance to ensure this does not happen.

How will the business be treated in divorce?

Most business have a capital value, as well as provide an income for the owner. Courts will not as a default position look to sell the business and will look at other assets such as equity in the home, savings, ISAs or pensions to offset against the business.

Valuing a business within divorce.

Crucially, it is important to obtain financial disclosure relating to the Business and often it is sensible to take advice from an accountant. Not all businesses can be valued the same way, so understanding the how the company is set up, its shareholding, class of shares, its balance sheet, its annual accounts, order book, previous performance and the company’s goodwill will all have a material effect on its value. If within court proceedings, the instruction of a single joint expert to value the company is a common place where the parties cannot agree the value.

How do you use a business value in a settlement?

Again, this is not a one size fits all answer. Considerations such as the liquidity of the company, the amount owed, shares owned and the effect on any sale would have on income are all factors. The business is however a marital asset and will be factored into the overall settlement.

Are there any other issues to consider?

Often in family businesses a spouse will have a direct role in the company, either defined as an employee or shareholder or a director. Advice will be needed to assess the value of a “minority shareholding” or how the existence of a “Shareholders Agreement” effects the value of a spouses shares and if an employee how those rights are protected or removed having regard to Employment Law statutory provisions.

Are there steps you can take to prevent putting your business at risk?

If you have or are considering starting up a family business take advice from your bank manager, accountant or corporate lawyer are a prerequisite but you should also consider advice from a family lawyer who can advise on the consideration of a pre/post-nuptial agreement and who can also assist in flagging up how to draft a “Shareholders Agreement” from the perspective of what should happen to those shares if you separate or divorce.

There are also other issues to consider which are detailed here on our Divorce page.

For detailed tailored advice or to review your current arrangements, please contact Matt Clemence at Kerseys on 01473 407181 or email [email protected] who will be more than happy to assist you.

Contact Matt Clemence

Matt Clemence, is a qualified Solicitor with vast experience in family law.

Matt is also a collaborative lawyer and a qualified mediator and joins Kerseys as a Partner in the family team.