Protecting your business from divorce

Specialist Divorce and Family Solicitor Stuart Duncan explores how to future-proof your business from divorce.

Resolving financial matters on divorce can be a complex issue, particularly where there is a business to consider.

Once a divorce is underway, you must exchange financial information about all of your assets, including any businesses.

In most cases the value of the business will be considered alongside the value of the family home, savings, pensions etc.

The business can come under intense scrutiny and you may find that other people have different ideas about how it should be valued and/or distributed.

This can be a particular problem if the liquidity is intended for future business development.

A divorce is something most people don’t expect or plan for and it can be extremely bad for your business if not handled correctly. These are some of my top tips to future-proof your business from divorce:

Before getting married

  • Consider getting a pre-nuptial agreement to limit any claims against the business.
  • Consider making a will to mirror the terms of the pre-nuptial agreement, so it is absolutely clear how your interest should be dealt with by your estate.
  • Consider revising the terms of any shareholder or partnership agreements.
  • Consider getting an appraisal of the business before you get married, so that any appreciation during the marriage can be clearly identified.

If you are already married:

  • Consider getting a post-nuptial agreement. Nuptial agreements can be very persuasive in divorce proceedings, provided that each spouse has had independent legal advice. Post-nuptial agreements are particularly persuasive.
  • Be sure to maintain good financial records and document any monies in or out of the business, including loans.
  • Consider sharing ownership of the business with third parties. If a business is owned exclusively by a spouse, it will be treated like any other asset unless there are good reasons not to. If the business is owned with other partners or shareholders, this is much less likely.
  • Keep your business independent from your private wealth if possible.
  • In the case of a family-run business, consider the contractual terms that cover your working relationship and think about any restrictive covenants you might want to use in the event of a separation.

If a divorce is already on the horizon:

  • Get quick and clear advice from a specialist family lawyer.
  • Do not try to move assets or alter shareholdings unless there is a commercial reason for doing so. If the court feels you have done this to avoid a potential claim it could damage your credibility. The court also has the power to prevent or set aside such disposals.
  • Try to set your own agenda for any settlement discussions.
  • Consider alternative means to court proceedings, including mediation and arbitration, and seek expert advice at the earliest opportunity.

Stuart Duncan is a specialist Divorce and Family Solicitor at Rowberry Morris, based at our Tadley office.  He is a member of Resolution with an accreditation in advanced finance and offers fixed fee consultations for £150+VAT.

If you have any questions about divorce or separation, please contact Stuart on 0118 982 3774 or stuart.duncan@rowberrymorris.co.uk.