Have a question? Call us on 0800 1979 345
Have a question? Call us on 0800 1979 345
This article was published on January 23rd, 2024
Navigating the landscape of divorce is emotional, complex and often made even more intricate when your business assets are involved. The safeguarding of your business assets becomes paramount during such a challenging time. At Thorneycroft Solicitors, we understand the challenges that come with the dissolution of a marriage, especially when it involves the protection of your business assets. In this blog, we’ve taken a look at the complexities and considerations involved in divorce and your business…
The process of reaching a final settlement in a divorce involves the division of marital assets, which are those acquired by either party during the marriage. These assets are typically fairly distributed between the two parties unless there is a legal document, such as a prenuptial agreement, that states otherwise. The complexity of coming to this agreement highlights the importance of obtaining legal advice from an experienced family solicitor.
Marital property can encompass several different assets, including:
When protecting your business assets, several considerations come into play during the final settlement negotiations. These include the value of the business, the type of ownership (whether joint or sole), and any contribution your spouse may have had to the business’ success. The date of establishment will also be considered – if the business predates the marriage, it could be argued to be non-matrimonial property and potentially exempt from sharing unless deemed necessary to meet specific needs.
Navigating the complexities of a business during divorce proceedings can be complex. However, the process typically focuses on the ownership held in the business and involves a comprehensive valuation that accounts for the involvement of other parties and shareholders.
The ownership structure of the business will determine how it is shared in the final agreement – if one or both spouses own the business outright, it will be treated as divisible matrimonial property. The valuation will involve appointing an expert, such as an independent accountant, to value the business. They may be appointed by the Court to assess the business structure, income and assets tied into it, and its growth potential. It will also consider any contributions made by the non-owning spouse.
In cases where the business or shares are jointly owned, the valuation will extend to the day-to-day business operations. As a result, the findings may deem it necessary to transfer the shares to one party or the other when reaching a final agreement. Alternatively, there might be instances where the income or shares are equitably divided between both parties. Ideally, the court aims to preserve the business with its primary owner and, in turn, may compensate the other party with a larger share of other matrimonial assets. The goal is to achieve a fair and just distribution that considers the intricacies of the business’s ownership structure and daily operations.
If you’re facing the possibility of divorce and wish to safeguard your business assets, several proactive steps can significantly contribute to navigating the process and protecting your interests.
Protecting your business assets can begin with a pre or postnuptial agreement. Whilst it can feel pessimistic to have these discussions with your partner, these agreements can be essential. They not only help to protect the business in case of divorce but also limit future claims. Additionally, in the event of a relationship breakdown, these agreements extend protection to other stakeholders in the business, including employees, clients and investors.
These agreements are written contracts that safeguard assets brought into the marriage, listing all property and business assets owned by the parties involved and what should happen to them in the event of a divorce. While these agreements are not automatically legally binding in the UK, they can hold significant weight in divorce proceedings and be upheld by the Court if certain criteria are met, including the requirement that they be fair and freely entered. Consequently, specialist legal advice is paramount in drafting these agreements.
Maintaining separate accounts for your business can be especially helpful in protecting your business assets. While not a guarantee of business asset protection, separate accounts establish a clear distinction between business and family funds. This clarity aids the valuation process, expedites legal proceedings, and minimises stress during an already challenging period. This separation is particularly beneficial as it mitigates complications arising from family or personal use, or marital debt, enhancing your credibility in the final agreement.
Detailed record-keeping of business assets, activities, contributions, and investments might not guarantee absolute protection, but it enhances transparency throughout divorce proceedings. These records can support valuation efforts, enabling accountants and valuers to accurately assess the business’ worth, and leading to a fairer settlement.
Obtaining expert legal advice from family law solicitors can be crucial in protecting your business assets. At Thorneycroft Solicitors, our friendly team is on hand to provide personalised guidance based on your specific situation in a way that is fair and respectful to both parties.
As trusted divorce solicitors in the North West, Thorneycroft Solicitors is here to guide you through every stage of the divorce process, including safeguarding your business assets. Our team of specialist divorce lawyers provides thorough guidance and unwavering support to help you navigate the process. If you would like further advice on protecting your business during a divorce or any other family law matter, contact us today. Call 0800 1979 345 or fill out our simple online enquiry form, and one of our expert solicitors will be in touch.
