HA R R I SON CL A R K R ICKE R BY S HOW YOUR BUSINESS CAN SURVIVE YOUR DIVORCE


Your marriage is coming to an end, but you still have a thriving business; can it survive the fall-out and what part does it play when it comes to working out your financial settlement?


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If your soon-to-be-ex partner is also your business partner, the first step is to value each of your interests in the business because they will affect the final financial settlement when you divorce.


VALUATION Realising that value to come to a fair settlement without destroying the company is important and also open to negotiation.


If you already have a pre-nuptial or post-nuptial agreement, a court is likely to give great weight to a properly drafted and considered agreement when dividing assets on divorce, especially if it relates to a specific issue. This will protect the business and shareholders and could save both stress and legal costs.


If business assets form part of a financial settlement, the courts have two key roles: • To establish the value of the parties' interests in the business. • To decide how that value should be reflected (if at all) in the final financial distribution.


The business can be valued with the agreement of both partners in the divorce, or by order of a court – the valuation used will be the most recent open-market valuation. Older valuations might be important where one partner wants some of the value ring-fenced or discounted because it existed before the marriage or was set up after the marriage broke down.


NET ASSET OR EARNINGS? A net asset valuation is the most common when dealing with a business which has significant assets on its balance sheet, such


LIVE24-SEVEN.COM


as a property investment company. But for an on-going trading company, an earnings basis valuation is most common – this is based on a level of earnings comparable to similar businesses with a known market value, alongside other financial measure- ments. In either case, a number of factors will affect the valuation.


FAIR SETTLEMENT Although both parties usually have a strong claim to share (equally) in all matrimonial property built up during the marriage (i.e. the product of their joint endeavours), they may have a much less strong claim to share in non-matrimonial property.


If the business comes under the second heading, the court will aim for a fair financial outcome by, for instance, dividing assets or transferring shareholdings.


Most people do not want ongoing business ties post-divorce, but sometimes shareholdings are divided between the two spouses.


More usually, one party retains the business, with the other receiving a lump sum, periodical payments or a combination in lieu of any interest.


It may be complex, and you will certainly need expert advice, but your business can thrive beyond your divorce.


For advice and help, contact Kevin Harris-James on 07825 058 612 or at khjames@hcrlaw.com


BUSINE SS & EDUCATION HCR


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