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How to protect business interests during a divorce

30th September, 2014

Q. I am a successful business woman and my boyfriend has just asked me to marry him. Do I need to protect the business in any way?

A. Yes. You should certainly consider entering into a Pre-Nuptial Agreement. The law now recognises these agreements and provided that needs are met within the agreement, Courts will be slow to depart from them. Where there are children, however, the Courts will still have the power to make provision separately for those children. Both parties should ideally have had legal advice; they must enter into the agreement of their own free will and they need to be fully aware of each other’s financial circumstances. It is good practice that any agreement is completed at least one month before the date of the wedding or civil partnership.

In addition, there may be other practical steps you could take, such as ensuring that in the event of a divorce or any other claim, the company itself is protected. If you are not the only shareholder then you should really have a carefully worded Shareholders’ Agreement, which will prevent a Court from transferring the company shares in the future to your husband, or even prevent a sale of those shares in the event of a future divorce. This will allow the business to continue trading without interference or disruption.

Q. I didn’t listen and now we are getting divorced. What can I do?

A. Whatever you do it needs to be legal! The Court has the power to prevent assets being disposed of (including business assets) and can undo transactions that have been entered into in order to defeat a claim. Any dealings between you and the business must have a clear and obvious commercial rationale otherwise you run the risk that your actions could be interpreted as trying to minimise the assets available. This would be counter-productive and costly if you get it wrong. Seeking expert advice before taking any steps is always advisable.

The company shares are assets like a house, but are usually treated very differently in a divorce. They often underpin the parties’ income and so Courts will be slow to invade. Even so, planning ahead with a Shareholders’ Agreement will add an additional layer of protection in terms of direct invasion and may also, in some circumstances, reduce the value of the shareholding.

The most important thing is to approach any divorce process in a constructive way and one that enables the business to continue. The Collaborative process is ideal for cases such as this and involves both parties signing an agreement not to go to Court. Instead there would be a series of four way meetings with you and your respective legal representatives in the same room as each other. Any legal advice would be given openly and experts could be consulted along the way to ensure the best outcome for all concerned and, in particular, for any children.

All of these areas are complex and you are advised to seek good legal advice from a corporate and/or family lawyer at the earliest opportunity.

If you would like to discuss this, or any other family law issue, in more detail please contact Sandy Edwards on 01743 453689 or email [email protected].

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