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Family Law Blog

Comment on divorce & family law 

Family, business and divorce

People involved in their own business can spend too much time worrying about losing it all in the event of a divorce. Undoubtedly, a going concern is an asset that needs to be taken into account when reaching a financial settlement between the two parties. However, this can be approached in a number of ways. These days, it is less likely that a court would want to break up a business to settle a divorce. It could, after all, be the source of income that allows for ongoing financial support for any children and, possibly, spousal maintenance. It might be a bad move to insist part of it is sold to finance a “pay off” and that might then leave it in a poor state or, worse, not able to continue at all.

The biggest difficulty we seem to come across these days is agreeing a value for the business. The perceived value is often very different from the actual value, particularly in these difficult economic times. It might be that, on the face of it, a business looks to be doing OK, but that may belie a poor performance and things could be just a month away from a big crunch. Remember, Woolworths still had scores of high street properties right up until the day they closed their doors!

It is vital that a divorce lawyer experienced in dealing with family businesses is engaged to give the best advice and look at different ways a business can be valued. It may be that it does have significant liquid assets and so a one-off payment is best. It could be that instalments may work for all concerned, or it may be that taking a “chunk” of the value of the business it can be offset, say against taking a bigger share of the house sale.

Another option is share transfers. These can ensure one party (most often the wife) is divorced from the day to day running of the business but the ongoing, or even new, share ownership means that there is still a share of any future proceeds of sale or dividends, for example.

There are even occasions when both parties are heavily involved in the day-to-day running of the firm, get on fine and so are happy to leave the company as it is and carry on working. This would not be the most common outcome though!

Kate Brooks
Family solicitor, Leicestershire


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