If you own a business, going through a divorce can be far from simple.
Your business and personal life can quickly become mixed up, often making the divorce process much more complicated.
According to the Family Business Research Foundation, England and Wales is home to more than four million family-run businesses.
Many of these will one day face the challenge of separating personal and business assets during divorce.
Whether you built your company from scratch, inherited it through generations, or run it alongside your spouse, the business may be seen as part of the “marital pot” when financial settlements are decided.
Divorce and business – What is at risk?
The family courts will seek to divide assets fairly, which could mean your business interests are placed under scrutiny, regardless of whether your spouse had any active involvement in the company.
The courts generally aim to preserve a viable business wherever possible.
You may, however, still be faced with options such as:
- Buying out your former spouse’s interest in the business
- Selling company assets to release funds
- Agreeing on an ongoing share of dividends
For many, these are unpalatable outcomes that could damage business continuity, cash flow, reputation and investor confidence.
Worse still, in some cases, the forced sale or division of a business can mark the end of the enterprise itself.
Preparing your business before marriage
The best time to protect your business is before you marry.
A well-drafted pre-nuptial agreement can help safeguard your commercial interests in the event of a divorce.
This agreement can clearly outline:
- Whether the business (or your share in it) is to be considered matrimonial property
- What would happen to business shares on divorce
- How to protect the business’s future, its employees, and its reputation
If both spouses are involved in the business, it is equally wise to have a Shareholders Agreement in place, setting out how the business will be run and what will happen if personal relationships break down.
This may also include mechanisms for resolving disputes.
If you are already married
If you are already married and concerned about protecting your business, a post-nuptial agreement can achieve similar protection.
In any case, you should also consider how your company’s Articles of Association, partnership agreements or shareholders’ arrangements could provide an additional layer of protection.
Divorce proceedings: managing business risk
If you are facing divorce, specialist legal advice is essential. An experienced family solicitor can help you negotiate a fair financial settlement whilst being mindful to protect the health of your business.
This may include:
- Valuing your business and distinguishing personal and company assets
- Negotiating buy-outs or offsetting other assets against business shares
- Exploring trusts and restructuring opportunities where appropriate
Protect your wealth, protect your business
Divorce does not have to affect the smooth running of your business. With careful planning and clear legal advice, you can protect your commercial assets and safeguard your financial future.
Our Family and Relationship Team regularly advise business owners, entrepreneurs, and HNW individuals on protecting their wealth during divorce.
Need more advice and support with protecting what you have built? Speak with Consultant Solicitor and Head of our Family & Relationship team, Alison Green, on 020 7240 0521.
