Divorce Solicitor Nahanni Simcox explains some of the steps you can take to help safeguard business assets in divorce.
When navigating the complexities of divorce, business assets often present unique challenges. These assets—whether they’re part of a private company, sole trader operations, or shares in a limited company—can be considered part of the ‘matrimonial pot,’ along with other assets like your family home and pension.
Understanding the Value of Your Business
The court will need a clear understanding of your business assets’ value to make fair decisions. As part of the financial proceedings, both parties are required to offer full and frank disclosure of their assets. If you own shares in a business, you’ll need to disclose both the percentage of the shares and their value, substantiated with documentary evidence.
Company accounts often serve as a starting point for valuation, but depending on your case’s specifics, a formal valuation by an expert accountant might be necessary.
Financial Orders the Court Can Make
After the valuation, the court has several options, including:
- Sale of part or the entire business
- Transfer of shares from one spouse to another
- Sale of shares
- Division of the business so each spouse retains part of it
- Lump sum payment from one spouse to another, allowing the paying party to retain their business interests
Proactive Measures to Protect Your Business
If you have substantial business assets, considering a pre-nuptial or post-nuptial agreement to protect these assets is advisable. These agreements can be effective tools to safeguard not just business interests, but also inherited assets. While they aren’t legally binding, courts are likely to uphold them if they’ve been freely entered into, both parties have received independent legal advice, and the agreement is fair and considers each party’s needs.
Involvement of Your Spouse in Your Business
Be cautious when involving your spouse in your business. While there may be tax benefits, such involvement could lead to claims that they have contributed to the business’s success. If you choose this route, ensure that a comprehensive shareholders’ agreement outlines your spouse’s voting rights and that the articles of association contain provisions allowing existing shareholders first dibs on purchasing your spouse’s shares.
Keep Finances Separate
Maintaining clear financial records and avoiding the use of business funds for family expenses can simplify the divorce proceedings and prevent distorted business valuations.
Seek Professional Advice
If you’re going through a separation or contemplating divorce and have business assets, consult with our team of experienced family lawyers. At The Family Law Company, we are committed to offering you the highest quality service, including guidance on any business assets during divorce.
Need some advice? Get in touch today