Many of us may find ourselves involved in a divorce or civil partnership dissolution at some point in our lives, and for business owners this will certainly have an impact on their commercial activities. The law regards a family business as an asset or indeed a financial resource, alongside the matrimonial home, investments, and pensions.
Can I protect my business?
There may be measures you can take to reduce the impact on your business depending upon whether it was started before or during your marriage or civil partnership. It may depend on who started the business, whether your spouse/civil partner was active in the business and if they want to remain so. In an ideal world, this is something that would have been considered much earlier and prepared for as a possible eventuality, but this is not often the case.
Tips on measures you can take to protect your business
Liquid assets such as savings, and/or property in the case of farming or property development companies, which can be transferred could be separated from the business and used to offset against the other party’s interest as part of the divorce settlement. A lump sum payment to the other party could also be paid in instalments, which is useful if the intention is to increase income from the business to generate sufficient borrowings for this purpose.
Will I need to get the business valued?
As part of the process of reaching a divorce or civil partnership dissolution settlement, you will be required to obtain valuations of your assets. It is in your interests to arrive at a fair and meaningful value for the business as soon as you can, otherwise costs can quickly mount up.
Sometimes, the valuation may seem too high or low based on the evidence you have submitted. While it is important to remember that the value is not the only factor the court takes into consideration, if you think it is inaccurate you may apply to the court for permission to instruct separate accountants to do a valuation. This situation is fairly unusual, and the court will only agree if the costs are proportionate to the value of the business and size of the overall assets within the marriage.
The court will consider the valuation together with all the other family assets. If you have children, the court will evaluate the best possible outcome for long-term financial stability. It is important to bear in mind that the business is generally the only source of income to provide for the family (particularly) and so it is important to preserve that.
In all cases, you should take legal, business and accountancy advice. There may be tax implications in any decisions that you make. This is particularly relevant on the restructuring of shares if your spouse owns a substantial proportion of the business. If your spouse is also an employee, you may also wish to take employment law advice at an early stage to ensure that any possible situations arising from their position in the business are dealt with.
For further advice on any of the above, please do get in touch with Jackie Jessiman at Fraser Dawbarns on 01353 383483.
This article aims to supply general information, but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek advice specific to your own circumstances. Fraser Dawbarns LLP are always happy to provide such advice.
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