Navigating a divorce is often considered one of life’s most stressful events.
There are heightened emotions and endless arrangements that need to be considered, such as childcare, bill payments, living arrangements and the division of assets.
All of these can be confusing, but the division of assets can often be the most prolonged and divisive argument. Add a business interest into the mix, and things can become more complicated.
A Quick Explanation Of Dividing Assets
The first stage in considering the division of assets will be determining the size of the matrimonial pot – essentially, adding up the sum of all the family assets.
This will include property (whether in the UK or abroad), money, savings and investments, and pension funds.
Some of these assets will be matrimonial assets, i.e. anything that has been acquired during the marriage itself. Typical examples include jointly owned property, investments and family businesses.
Some assets may be non-matrimonial assets, meaning anything owned before the marriage. Typical examples include property owned by one party or perhaps even a business that was started before the marriage.
To determine the size of the matrimonial pot, both parties will typically undertake a disclosure exercise, either voluntarily or upon order of the Court. Disclosure must be full, frank, and accurate. Only once all assets are identified can we effectively consider a suitable division.
The second stage is to determine the division of assets themselves. In England and Wales, the starting point is that all matrimonial assets are to be shared equally between the parties.
This, however, doesn’t always achieve a fair financial settlement, and there are occasions when assets are divided in differing proportions. Usual scenarios would be that one party can demonstrate a greater financial need than the other, or one party may have significantly fewer resources than the other.
How To Deal With Business Interests In A Divorce
Businesses and business interests are assets for the purposes of divorce proceedings.
As such, consideration needs to be given as to whether they have value when determining the size of the matrimonial pot. Whilst there may well be an argument to say that a business or business interest is non-matrimonial, all assets owned by you or your spouse must be disclosed.
When it comes to valuing a business or business interest, the parties will often require expert evidence in the form of a report from a Single Joint Expert, i.e. an independent expert who is instructed jointly by both parties.
The expert will determine how to best value the business or business interest, whether that be based on its income or asset-based. They will likely indicate whether there is sufficient liquidity within the business to assist with any financial settlement and consider any tax implications.
The complexity of the valuation will depend on the nature of the business or business interests. It will also be impacted by the structure of the business and any third-party interests, such as other partners or shareholders. Whether a party owns the whole of the business or a minority interest will affect the value, assets, and liabilities of the business.
Once a valuation of the business or business interest has been determined, the parties may either negotiate a settlement themselves (whether through mediation or via solicitors), or if that isn’t possible, litigation may follow so that the distribution of assets can be determined by the Court. The Court has wide discretion but will look to achieve a fair outcome that meets the needs of the parties and any children.
A business is often a main source of income, and the Court will, therefore, usually seek to cause minimum disruption to its operation. A sale would be extremely unusual. The Court can, however, order that shares held by the parties be transferred to the other.
The treatment of business assets in divorce is complex, and there can be other implications, such as tax. Therefore, it is imperative that specialist legal advice is secured so that, where necessary, input from other professionals can be obtained.
Contact Us
At Slater Heelis, our team of specialist divorce solicitors is committed to providing clear, practical advice.
Our service will be tailored to suit your needs, and our Corporate and Commercial team is on hand to assist with any sale or transfer of a business that may follow from financial settlement.
If you’d like to talk to our team, contact us through our online form or call 0330 111 3131.