Tips for Business Owners During Divorce
21st January, 2013
Preparation Is Key
Meet your lawyer. Do they have the required skill and expertise to deal with your case? Do they understand your needs and the business needs and are they able to meet those needs?
Ask for recommendations. Discuss, at the outset, the options available and likely costs to be incurred. Discuss whether your solicitor offers tailored fee packages that suit you. Gather documentation and information regarding the business and other assets that your lawyer will need. Your solicitor will advise you what information needs to be disclosed. Information and documentation will be required to be disclosed in some form to the other party. Disclosure must be ‘full and frank’; without this, the other party or the Court may take steps which would ultimately increase the costs of the case. Ask questions. Assess your liquidity and funding options, both in terms of business continuation but also in terms of the funding of any settlement. Plan for the continuation of the business, not for its demise. The Court is not impressed by ‘failing businesses’ that were successful up to the point of separation.
Valuation Of A Business
Take advice from an expert. Consider the consequences and timings of valuations and whether an apparent ‘low valuation’ would actually be counter-productive should there be no other option but sell the business.
Consider the whole picture and all the available assets. Review your objectives with your solicitor and continue to assess whether they are still realistic and achievable. Remember that the Court would wish to keep the business as an asset as, in most cases, it produces the main income for the parties. This is useful for the purposes of negotiation. One man service businesses are unlikely in most cases to ever have a ‘value’.
The Family Business
Again, take advice from your solicitor and other professionals before taking any action. Discuss and consider how the business operates and the roles that various people have in the business.
Is your spouse a fellow director or company secretary? Plan how those roles are to continue to enable the business to remain in operation. Consider any employment law issues as well as family law aspects of your matter. Discuss how can a spouse be safely removed from the role that they have undertaken to date. Discuss the full history of the business with your lawyer and consider your plans for the future and the future of the family business.
Issues Arising From A Co-Directors Divorce
Take independent advice as early as possible. Consider the risks and options with your solicitor and the likely costs associated with them. Take advice as to whether the shareholders agreement covers issues arising for divorce and claims against the business. Consider whether this should be included for new shareholders entering your business.
Plan Before The Marriage
Discuss with your solicitor whether a pre-nuptial agreement should be considered to protect business assets in the event of a future divorce.
Consider whether a pre-nuptial agreement should be a requirement of a shareholders agreement. Remember that at this moment in time, pre-nuptial agreements are not currently legally binding and cannot overrule the Court, however recent case law has given guidance on circumstances where the Court may uphold the agreement. Take advice as early as possible and discuss your plans with your future spouse far in advance of any marriage. Both parties will require independent legal advice and ‘full and frank’ disclosure of information and documentation regarding assets should be exchanged. Post-nuptial agreements are exactly the same, although entered into after marriage. Consider whether this would be of assistance to your circumstances.
For enquiries regarding business assets during divorce proceedings, please contact Chris Longbottom at [email protected] or call 01244 405415.
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