Business Assets and Divorce

Along with New Year resolutions, snow and freezing temperatures, the start of the year is also notorious for being the most common time of year for the breakdown of personal relationships.

The financial consequences of personal separations are often the first question asked by business clients. Whenever I am approached to advise in these situations, I will always ask what partnership or shareholder agreements are in place and conduct a review of the constitutional documents.

A common fear among those looking at separation is that a disgruntled former spouse may end up as owner or part-owner of the business and they want to avoid that. Carefully drafted partnership / shareholder agreements can assist clients in these circumstances.

Putting Assets Beyond Reach

Another common question I am usually asked is: “What if my partner transfers assets into trust or to other members of the family?”. This can quite often happen with divisible assets such as shares in private companies. It is possible that such actions could deplete the “matrimonial pot” and affect the ultimate financial settlement. It is equally possible that such arrangements can be successfully challenged.

Anyone looking at these types of transactions, whether from an implementation or “unravelling” perspective must take legal advice on their position.

Valuing Business Assets

Clients often want to know how assets are valued on separation. The easy answer is that this should be done by agreement but, in default of agreement, the matter would be referred to a single jointly appointed expert.

The expert appointed would be different for each different type of asset. More than one expert may be needed – for instance a surveyor to value any privately held land or property and specialist forensic accountant to value shares in the business. Accountants to a business would not be independent so could not be formally instructed to resolve a dispute but might provide an indication to clients.

Of course care should be taken in giving any such advice to ensure that the basis upon which it has been provided is understood by the client and also to avoid any conflicts where the firm acts for both parties – say for example in the preparation of personal tax returns.

Further Information

To find out more or for further advice on relationship breakdown and its consequences please contact me by phone on 0844 824 8744 or by using the form below.  If you want assistance with the preparation or review of shareholder/partnership agreements with the aim of making future separation – however regretful, smoother, please contact my colleague, Peter Bibby on 0844 824 8744 or again using the form below.

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