Warning not to let a post-Christmas divorce become a business matter as well as a legal one

January 12, 2017
By

Business owners who fear their marriages are heading for the post-Christmas rocks are being urged to tread carefully as their assets and income will be two of the main negotiating points in any impending divorce.

Lawyers traditionally receive around twice the number of divorce inquiries in the first weeks of January compared with other times of the year.

But for those owning businesses, the fallout can impact on it harder than they may imagine.

The family team at regional law firm Royds Withy King has seen companies put at risk because one or both parties have not considered the effect their divorce may have on their businesses.

Sharon MacDonald, pictured, a partner at Royds Withy King in Bath who has extensive experience helping people with their divorce and relationship issues, has the following tips for business owners looking to protect their interests at a time of year notorious for marriage breakdowns. 

1.      Be realistic

It’s unlikely that you’ll be able to exclude your business interests from the financial discussions arising out of your divorce. Any business interests and their value can usually be brought into the ‘pot’ of matrimonial assets on divorce.

2.      Don’t panic!

Courts try to avoid a sale of a business unless it’s impossible to achieve a fair outcome without doing so, particularly if the business isn’t only owned by you. If the reality is that the business is a means of you generating income rather than a capital asset, then the courts recognise that selling the business would achieve nothing positive and would cut off your income.

3.      Take advice from a specialist

How businesses are dealt with on divorce can be a complex area.  While self-help may seem attractive, if it goes wrong the legal costs involved in sorting out a muddle are likely to be far more than they would have been to get it done properly in the first place. Make sure you’re working with an experienced specialist family lawyer used to working with clients who are business owners. Try and ensure that your family lawyer is part of a firm with strong corporate and commercial teams – their involvement and support may well be a key part of the work needed. 

4.      Talk to your business partners

If you’re not the sole owner, then your business partners or co-owners need to know that you’re going to be involved in financial discussions which will inevitably involve the business. Make sure that the company accountants also know the position, as you will almost certainly need them to produce information as part of the discussions. 

5.      Be prepared

Your solicitor will need to know a great deal of detailed information about the business. The more you can put together in advance the less time and money you’ll spend while your solicitor gets the detailed picture of your business interests. When was the business set up and by whom? Who else is involved? What benefits do you (and any other business owners) get from the business? What are the strengths and weaknesses of the business? Does it have a capital value or is it, in reality, simply a vehicle for generating income? What are your plans for the business? Is it something you’re developing to sell, is it a venture that you would propose to sell when you retire or is there a succession plan amongst the business owners or other family members?

6.      Be honest

We all know that the best of businesses can have bad times as well as good. However, if a business has been extremely profitable for many years even in tough economic times, it’s unlikely that anyone is going to take seriously a suggestion that it has gone rapidly downhill at exactly the same time as you have become involved in a divorce. If you try and paint a picture that clearly isn’t realistic, all you’re going to do is arouse suspicion and you may end up incurring the substantial costs of a business valuation that might otherwise have been avoided.

 

 

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