Director Rachel Buckley looks at how your business comes into the divorce process.
Will divorce affect my business?
Yes, your business will almost certainly be affected by a divorce. During a divorce, both yourself and your spouse have a duty to give full and frank disclosure of your financial circumstances. If you have a business, you will be required to give full disclosure of its worth and turnover.
Your family will have benefited from the income streamline generated by the business.
Following the landmark case in 2000 of farming couple Mr and Mrs White, where Mrs White was awarded a higher sum on appeal, the Courts use the overarching principle that the family’s assets should be shared equally. The Court does have the power to transfer or sell assets, this includes company shares.
What do I need to know about valuing my business?
It is very important that your business is valued before any offers to settle are made or accepted. It may be that your business may be profitable and successful but not worth the amount that you think it is. Costs of sale, Capital Gains Tax and depreciation costs need to be taken into account.
It might be that without your skill/expertise, your business would be worth very little. Therefore, it is important that a valuation is undertaken at an early stage to ensure that costs do not escalate unnecessarily. The Family Law Company has links with accountants and forensic accountants to ensure that an accurate report is produced to provide you with the best prospects for achieving a fair settlement.
What are the options for my business?
You will need to think carefully about what you want to achieve in relation to your business. For example, can the business operate without the involvement of both you and your spouse? If one party stays involved in the business, will that person act in an open and honest way? How will the staff react to the divorce – will morale be affected adversely?
In every case, you should take legal, business and accountancy advice. There may be tax and capital gains tax implications in any decisions that you make.
How will the Court make a decision?
The Court’s decision will primarily be guided by the principle of fairness. In particular, attention will be paid to Section 25 Matrimonial Causes Act.
There is no longer an assumption that the family business will automatically be protected upon divorce. Each case will turn on its own facts. Where a business is producing an income stream for the family, the court will be reluctant to force a sale as this will cut off that income stream.
There are a variety of practical solutions available to minimise the impact of divorce upon the family business which can be explored.
Rachel Buckley is a Director of The Family Law Company and heads up the Divorce and Finance team. Rachel can be contacted on 01392 457155 or [email protected]