Minding your own business
Sarah Tompson, family lawyer at Slater & Gordon advises on protecting your business assets during a divorce
Divorce can be tough enough, but if you own a business you will need specialist advice.
Taking stock of your assets Your lawyer will need to consider and value your business assets, whether you have shares in a limited company, are in a partnership or you are a sole trader. Unlike the family home, it is not as simple as getting an estate agent to value the property. An accountant will invariably have to be appointed in order to prepare a report on, amongst other things, the value of your business. A business is often treated as a ‘resource’, considered in terms of how much income it generates, but it can also have a capital value. Tere are many issues that need to be taken into account, including how much the shareholding is likely to raise if it were sold – this can vary enormously depending on the size of the shareholding and whether
the only potential buyers are in fact the other shareholders. Tis is particularly relevant when there are only a very small number of shareholders and you have a minority interest. Te accountant can apply a discount to the value of the individual’s shareholding in these circumstances.
Your lawyer, together with the accountant, also needs to consider the tax implications of either raising capital to buy someone out or actually selling part of the business.
Liquidity can also present a major issue and you will need to consider how best to raise money to buy out one party’s interest. If this is going to raise more problems than it solves, parties can look at giving one party more of the other marital assets, such as savings or property. Tere are often many options to consider, so
For further information on family law issues, contact Slater & Gordon Lawyers on 0808 175 7905 or visit
www.slatergordon.co.uk.
Free initial consultation is available by appointment, at its central Manchester office or its Bramhall meeting rooms.
find a lawyer who is experienced in dealing with businesses on divorce and can take a pragmatic as well as a commercial approach.
Your lawyer will need to consider the following: • Whether there is a market for the shares in the company
• If the shares are to be sold, what strategy should be adopted?
• The appropriate method of valuing the shares • How can cash be raised – liquidity? • What are the tax consequences? • The net effect on the company if cash was to be withdrawn i.e. could it continue to operate?
Petrodel Resources Ltd v Prest Tis case has just been heard in the Supreme Court and judgement is expected to be handed down shortly, but the Court of Appeal has made it quite clear that family law needs to be in line with company law. In this case, the court had ordered the husband to transfer company assets to settle the wife’s financial claim, following a divorce. Te order was successfully appealed on the basis that the family court did not have jurisdiction to make such an order as the assets were owned by the company, not the husband. Te court can only treat an individual as entitled to assets held by a company if there are legitimate grounds for “lifting the corporate veil.”
It is essential that your legal team is familiar with dealing with businesses and divorce. Tey will need to know when to appoint an accountant and what type of methodology for a valuation is required.
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