Disclosure
The short answer is yes; the business would be treated as a financial resource. It could be a capital asset, a means of income or possibly both. A Form E is usually completed by both parties to provide financial disclosure and if applicable, the form requires you to disclose details of all your business interests along with business accounts for the last 2 financial years and any documents (e.g. accountant’s letter) that you wish to rely upon as an estimate of your interest in the business.
Value of the business
As there is no market to sell shares in a private company, valuations tend to be uncertain, the onus being on reaching fairness rather than mathematical accuracy. An expert is only appointed where absolutely ‘necessary’. You should discuss with your lawyer as to whether an expert will be needed as this will depend on the business and the value it adds to matrimonial finances as a whole. It is unlikely a valuation will be needed where the value lies in the income stream i.e. the company is only vessel for the provision of services.
Possible orders in relation to the business
It is rare that the court would order the company to be sold where the business is the main source of income for the family. If both parties have shares in the property there may be an order for the transfer of shares, possibly in return for a lump sum or an offset against other matrimonial assets (your solicitor should advise you whether the shares should be discounted to reflect the risk that comes with taking an illiquid asset). Where a business holds a property portfolio, it may be appropriate for those properties to be sold. There may also be arguments to suggest that some of the business should be ring-fenced as non-matrimonial property. Ultimately, what is fair will depend on the individual circumstances of the case.
Taxes
Be mindful that there may be CGT to pay if there is an order for transfer or sale of shares.
Income tax may also be payable on dividends, notification of which may be received after a settlement is reached. If there is to be a transfer of shares, be mindful that the transferring party is likely to seek an indemnity in respect of this.
You may need to seek additional tax advice depending on your individual circumstances.
If you require advice, please contact Madia Aslam or our Family Law specialists here.