When business owners get divorced, often their biggest concern is what will happen to their shareholdings and income. They often ask:
What if my spouse is involved in the business? Is my ex-spouse entitled to a share of my business? And how can I protect my business?
In her latest article, businesses in divorce expert Rosemary Sharp outlines what you need to know about whether an ex-spouse is entitled to half of your assets during separation…
Is my ex-spouse entitled to a share of my business?
No, not automatically but the court may find the value of the business should fall on your side of the asset schedule and your ex-spouse should receive more of another asset instead.
When a business is established and operated by one party, the family court will usually look for that person to retain the business. The specific facts of your situation will be relevant including:
- When the business was set up (before, during or after the marriage has ended)
- Your ex-spouses’s involvement in the business
- What the business is worth both in terms of income and assets
- The other non-business assets available
How much of my business is my spouse entitled to in divorce?
The family court will consider whether your business is income generating and/or whether it has underlying assets of value. They will also consider:
- Are you and your spouse both shareholders?
- What liquidity is available in the business?
The court will be mindful not to hamstring the company and prevent it from functioning.
Can my wife take half my business in divorce?
If it is determined that the value of your business (beyond the income it produces) should be factored into the financial settlement, the other party could receive a lump sum in lieu of a share in the business. Alternatively, they could receive a greater share of other non-business assets.
If the business is jointly owned with your spouse and is going to continue to operate post-divorce, it is unlikely the court will order both parties to remain within the business. This can be agreed by consent in certain circumstances.
You can read my colleague, Olivia Le Masurier’s article on financial orders here.
Is my spouse entitled to half my assets?
An equal division of assets can often be the starting point, but it is rarely the end point in a financial settlement.
The family court will want to ensure you and your ex-spouse’s needs are met, with the first priority being the needs of any minor children. At a basic level, needs are housing and income both now and in retirement within the context of the assets available. A needs argument can justify a departure from equality.
If there are assets in excess of both your needs, it will then turn to sharing marital assets (what have accrued during the marriage) and/or ringfencing ‘non matrimonial’ assets (assets which have been brought into the marriage by one party) so they are not shared.
To find out more about prenuptial-agreements, you can read Family Partner Simon Immins article here.
How do I protect my business in a divorce?
If you start your business before your marriage, the best way to protect your business is to have a prenuptial agreement when you marry.
It can also be beneficial to ensure your business operates separately to your personal finances and those jointly held with your spouse. Correct and up to date governance documentation and good record keeping can also help.
How long after divorce can an ex-spouse claim from the husband?
There is no time limit on when a husband or wife can make a financial claim against their spouse following a separation or divorce.
That’s why it’s crucial to resolve your finances at the time of your divorce and have this recorded in an order which is approved by the family court. This order, which can be by agreement (often called a consent order) makes your financial agreement binding and prevents one person coming back for more in the future.
Specialist business asset divorce solicitors
If you have any questions after reading this article or are interested in finding out more about a pre-nuptial or post-nuptial agreement, contract one of our experts on 01202 499255 or by filling out the form.
We offer all new clients a free initial chat so that you can meet the solicitor you will be working with and discuss your needs.
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