FAMILY-RUN BUSINESSES UNDER THREAT FROM SOARING DIVORCE RATES
Ansons Solicitors director and head of family law, Mark Buttery looks at how divorce can affect a family business and advises on how to protect assets and find a fair resolution in the event of a marriage breakdown.
threefold once the end of year holidays are out of the way. With a new year ahead, many of us will outline resolutions to help inspire positive lifestyle changes. This focus on the future will cause many couples to consider their marriage and, finally, decide there is nothing left to do; all avenues of reconciliation have been exhausted. Of
T is a highly emotional
course, whilst divorce matter,
experienced family lawyers work hard to understand their client’s perspective, advise them quickly and cost-effectively, helping them avoid ending their marriage in court.
A team approach
Whilst many consider a strong marriage to be based on good teamwork, a good divorce will also rely on the efforts of many lawyers and other professionals, collaborating closely to deliver the desired outcome for their client. Children in the relationship can undoubtedly increase the problems during a divorce, but matters can be seriously tricky when one or both of the divorcing couple own or manage a business. Research shows around 1.4million UK companies are now run by couples, with the number on the rise.
Many business owners remain unaware their partner may be entitled
to some share in their
company, even if the partner has never been involved in the day- to-day activities of
The likelihood of this situation grows with the length of marriage
12 DIY WEEK 22 FEBRUARY 2019
he beginning of a new year is often a busy time for divorce
in the UK, with enquiries rising
or inequality in financial resources. In the UK, for the court to consider
a ‘fair’ division of all your assets, everything will be taken together in one lump, with little distinction made between assets, unless you have
legal documentation proves a different position.
Divorce can be bad for business Dealing with a family business during the divorce process often raises many complex issues, starting with its valuation, inheritance wishes, financial contributions, dividend payments and the shares or interests of other family members. The family court will hope to
protect a family business from becoming too involved in a divorce, to avoid the business having to be broken up or sold off to realise enough to pay the court determined settlement. Alternatively, one of the couple may have
buy out the other if they have a share in the company, or liquidate assets to achieve the same outcome. All of which can be messy and time-consuming, often negatively impacting
the the company. It is not uncommon for newly
divorced partners to have to work together until the business can be sold, which brings a whole new series of challenges – to achieve
performance of that
the maximum sale price will need the pair to work together and
make beneficial decisions!
Protect your business from divorce
The first step to protecting a business is not particularly romantic and requires foresight at the outset to draft appropriate documentation. Pre-nuptial agreements are a tricky topic for many couples, although seen as overly pessimistic, they are essential for any business. The
agreement is its reputation, not just
about the relationship between the owners, but the future of the business,
of its employees, any investors, its clients and even its customers. A Founder’s Agreement is a good place to start. The agreement sets out formally how the founders of a business are going to operate it, to avoid any disputes or misunderstandings which could threaten the business in the future. In the UK this formal document will typically be in the form of a Shareholders Agreement.
Leave emotion at the door The time to discover your business has not been set up with the correct agreements, is not when divorce lawyers are looking to get it valued in preparation for a sale.
It will be an emotional time, and preparation in advance will ensure a more amicable divorce, with everyone aware what’s at stake. Whether your relationship
strong and long or it is becoming tense, now might be a good time to have a chat with one of our lawyers to understand your position. We can leave emotion aside and call on the services of a wide range of specialist lawyers who will advise and protect your position. You might own all, part or none of a family business, but knowing which direction your next step should take you in the future, requires first knowing where you are now.
“Children in the relationship can undoubtedly increase the problems during a divorce, but matters can be seriously tricky when one or both of the divorcing couple own or manage a business.”
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