Wollen Michelmore Solicitors Devon

mARRIAGE AND BUSINESS

Sorting out financial affairs is a very complex area of a divorce, especially when there is a business involved. whether it is owned by both partners or by one person, any business interests must be considered as part of a financial settlement. 

Financial settlements are dealt with by the Family Court rather than the Commercial Courts, and will ask businesses and business interests to be valued as part of the financial disclosure exercise. Valuing business interests requires expert advice to be carried out effectively.  Wollen Michelmore's expert Family Lawyers provide answers to common questions about divorce where a business is involved. 

 

 

1) What is the first thing I should do? 

It is best to get specialist advice from a Family Lawyer who can guide you through the process from the outset.

It is important to Identify who can do what and who wants what at an early stage.

If at all possible, try to keep things between you amicable. If your business is a partnership with your soon to be ex-spouse, it is even more important to try to maintain the peace, for the benefit of you, your employees and your customers/clients.

If you simply cannot work together any longer, it is preferable to identify which of you will take charge in terms of allowing the ongoing trade of the business. After all, if you damage the business because of an inability to work together, it is only going to damage your pockets too!

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2) How are businesses valued?

Every business is different. It is important to look at: 

  • The income the business produces
  • Does the business support a high standard of living – more in real terms than just the income or dividend stream?
  • Does the business hold property or assets and do they have significant value?
  • Is there a company or business pension?  If so what is it worth?  Is it in savings, property, shares?  Can it be cashed in?
  • Can capital be taken out of the business to provide money for housing?
  • Can the business borrow against its assets?
  • Is the business owned with other people, family members or people outside of the family.  Will they all act together or will they have different aims and interests?

 

In some cases, it is appropriate to seek a formal valuation, from an expert accountant of your business interests.  The courts will use this as a guide but it does not mean that this is the value the courts will place on it.  However, this may be a good starting point for you to begin discussions if one party wants to be bought out of the business following divorce. 

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3) Do all businesses have to be valued?

Some businesses, especially sole traders are merely income streams (the same for some partnerships).  If there is no capital value, there is nothing to sell, it is just the income stream that matters and it won't need to be valued since it can be shared by making a maintenance order in favour of the non-owner. 

If the business is owned outright by one spouse, or has a significant shareholding, then the business will usually be valued.  Valuations are usually carried out by expert accountants. The courts will treat a business' valuation as a guide and not a scientific absolute.

The valuation will be present market value but the courts have stated that business valuations are inherently speculative (like many valuations), past performance won’t guarantee future prosperity – there is a risk/reward factor.

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4) Will my spouse get half of the business?

This is unlikely unless in all the circumstances, yes would be considered fair and reasonable. 

If you can't reach an agreement with one an-other, then the Court will try to aim for a fair and reasonable division of the marital assets.  This will include trying not to leave all the liquid assets with one part and the illiquid assets with the other. 

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5) What will happen to the business? 

The answer to this question will differ in each case. In some cases, it would be reasonable for the business to be sold and in other cases, it would make more sense for the business to be retained by one party whilst the other is compensated with more of the cash assets or perhaps an income stream from the business for a period of time.

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 Can a business be protected in a marriage breakdown?

Yes it is possible both before and after marriage for the parties to agree how specific assets should be dealt with in the event of a divorce - admittedly not the most romantic of topics but extremely important where businesses and high value assets are concerned; especially if they are being brought into the marriage by one party. 

These agreements are known as either pre-nuptial or post-nuptial agreements and prepared in good faith by both parties on the basis that if things go wrong, the document can be relied upon. Expert advice from a qualified family lawyer is required, to prepare documentation that will stand up to scrutiny later on. 

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Matrimonial disputes are complex cases. At Wollen Michelmore, we provide expert opinion which is fully informed relevant to your matter and easily understood.  We have a very experienced team of family lawyers, dealing with cases in Family Courts around England and Wales.  

Wollen Michelmore have offices in TorquayExeter , Newton AbbotDartmouth and Barnstaple. It is our aim to provide relevant and credible advice which is practical to the issue in each case. For expert advice, in the first instance call 01803 213251 or fill out the enquiry form.

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