Divorce & Business

Divorce/Separation and Your and/or Your Partner’s Business

Introduction

Where one or both parties in a marriage or  civil partnership have an interest in a business can this be taken into account when it comes to a financial settlement on divorce or dissolution? The answer is generally yes in England and Wales to which this articles applies (the law being different in Scotland).

An asset

A business shareholding will be seen as an asset which can generally be taken into account where assessing the finances of the parties. In order to do this the court would need to look at what type of shareholding it is and ultimately what is its present day value.

What type of business?

The first question in this respect is to identify  the structure of the business in question. This might be for example a limited company which would need a valuation but it might instead be, for example, a sole trader or a partnership which would be treated very differently. It is also important to identify  exactly what interest or shareholding each party may have in that business. For example, whether a party is a minor or majority shareholder.

How will the business be valued?

Valuing a business might well be seen as more of an art than a science. But that would perhaps understate the type and amount of information which can be gathered in order to arrive at the valuation. With sufficient information about issues such as the revenue, costs, profits and assets of the business  along with the type of business, its history and projections into the future it should be possible to come up with a fair value taking everything into account. This process might involve a forensic accountant and potentially other experts depending upon the type and size of the business in question.

It should be remembered in this context that  whilst the value of a business in itself may be important, the income that that business generates should also not be ignored and can often be more important. An example of this might be when considering the level of maintenance that may have to be paid or retained by the person in business to meet their own outgoings.

What if I dispute the valuation?

But that is not to suggest that the valuation is always either obvious or indeed agreed. In the absence of such agreement each may make their own case. With this in mind it may become necessary for one side to seek disclosure from the other as to further details of the business. This can be both complicated and involved and it is important to be on top of all the various issues which might arise.

Would the judge divide up the  business?

When a relationship has broken down it might be particularly difficult if one party is then awarded a share in a business run by the other. This is something that a judge does have the power to do. However there is the alternative that the value of the share of the business is taken into account in other ways such as a money award. Where possible this is something a judge may well order though this will depend upon the means of the parties and the particular circumstances of each case.

Conclusion

Ownership of a business can sometimes be a key issue in divorce or separation. There are both legal and detailed factual issues to be aware of and it is therefore a topic on which specialist legal advice can be particularly helpful.

Contacting Campions

Campions Solicitors have substantial experience of these issues. If you would like further advice or wish to discuss in general please contact our Director Daniel Priest on  DPriest@campions.co.uk.

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