Gardner Leader

Divorce and the Family Business

Divorce not only affects those directly involved in the relationship, but it can also have an impact upon their business interests. Collette Bailey, Partner within the Family Team at Gardner Leader LLP, looks at how separation and divorce can have an impact on owners of family businesses.

Q         “My wife and I are getting divorced.  We have run a successful business together for 10 years and have equal shares.  What happens to the business now?”

A         You need to take legal and accountancy advice to help you decide the best option for you.  The points to consider are:-

(a)  You could continue to run the business together and agree a    division of profits and responsibilities;

(b)   One of you buys the other out;

(c)  The business is sold and monies divided.  It is likely there would be CGT and corporation tax payable.

Q         “I do not want to sell the business. It provides income to support our family and I want to continue running it but do not believe I can do so with my wife once we are divorced.  Can I force her to let me purchase her share?”

A         In order to reach a fair settlement, we need to look at the business together with the value of the other assets of the marriage.  Both of you need a home and income and our role is to try and work out how that can be achieved.  Hopefully, we will reach agreement as to the value of the business and a company accountant would be the first person to approach to discuss the valuation.  If the value is not agreed then both parties would jointly instruct an independent expert.  A court could order a valuation if necessary.

            Your solicitor can advise you as to the options open to you to achieve a settlement.  Either you both instruct your own solicitors and negotiations begin to resolve the issue of division of assets, including the future of the company or, alternatively, you could both attend mediation or resolve matters through the collaborative law process.  This process allows you both to be separately represented and have independent legal advice, but focuses on discussions between you and your wife as to how assets are to be shared fairly so that you can each go your separate ways. In collaborative law the only applications to court are by agreement. 

           If you were involved in proceedings outside the collaborative law process and there was a dispute as to the future of the company, a Judge could make an Order for transfer of shares from one party to the other as part of the matrimonial settlement.

Q         “Would a court take into consideration the fact that it was my family business before our marriage?”

A         One of the factors which the court takes into consideration is both parties contributions.  It would be relevant that the business was owned by you prior to the marriage and it may be that the court would not hold that your wife had an equal share in the company, it depends on the facts.  The aim of the negotiations is to try and understand what your wife’s aims and needs are and how they can be met bearing in mind your needs and those of any dependant children.

It is important to take realistic advice from a family specialist to reach a solution and avoid court proceedings which can prove expensive and stressful.

For further advice and information, contact Collette Bailey at Gardner Leader LLP on 01635 508100.

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