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Going through a divorce is rarely an easy process. Where there are businesses involved this can be even more complicated.

A business owner’s interest in the business would often be considered part of the ‘matrimonial pot’ alongside the family home or pension or any other assets.

The court could decide that the business should be sold in order to fairly distribute the assets, but the court would try to keep the business intact wherever possible. They would try to look at ways to release capital from the business without harming the business itself.  This could be done by selling shares for example or the value of the spouse’s share in the business could be offset against other matrimonial assets. Either way, it’s not the outcome most business owners want, and it can be unsettling for employees involved in the business too.

So, how can I protect my business?

The only way to protect the business from claims would be to seek to protect these interests ahead of the divorce or separation.

Pre- or Post-Nuptial Agreements

If you have a business or a substantial interest in a business, you may need to consider entering into a pre-nuptial or post-nuptial agreement. The law in this country is that whilst prenuptial agreements are not legally binding, there is a presumption they will be upheld if various conditions are met which include (but are not limited to):

  • The agreement is freely entered into
  • There is a full understanding of the implications of the agreement
  • It is fair to the parties
  • There is full financial disclosure

It is important that both parties receive thorough and specialist advice before entering into a pre-nuptial or post-nuptial agreement.

Establish Clear Ownership

Document the ownership structure of your business clearly. If you have partners, ensure that ownership shares are clearly defined in legal agreements.

Where there are two or more shareholders in the business it may be possible to provide the other shareholders with a right of first refusal in the articles of association of the company, to try to keep third parties coming into the business.

If both parties have various roles within the business, then they will need to consider who will stay working within the business following divorce. It is possible for both parties to remain in the business, but this is rarely practical.  If either party is to leave the business, then there may be tax implications to consider and how best to deal with this without jeopardising the business revenue itself.

It is advisable to consider and be clear about how to involve a spouse in any business before doing so in order that you can determine the best way to hold shareholdings to best protect the business in the event of divorce.

It is important to get specialist legal advice if you are going through a divorce and want to protect your business. Please fill in our contact form and our divorce team will get back to you as soon as possible.