Protecting the Family Business on Divorce

11th October 2012
Protecting the Family Business on Divorce image

Protecting the Family Business on Divorce

One of the first considerations of any potential divorcee after worrying about the impact of the divorce on any children will be, no doubt, to ensure that after the divorce they are left with sufficient income to live on, a property to live in and sufficient capital assets to provide “nest egg” provision. Sadly, in a lot of marriages this is not always possible. Of particular concern to business owners will be the need to protect the business especially if that business is regarded as a “family business” which has traditionally been the main source of the family’s income.

Generally a Court will not seek to interfere with a long established family business. Quite often in a family business the case is that one party will hold shares with, for instance, siblings and parents. If at all possible the Court will do everything it can to preserve the business but will compensate the other party to the marriage by awarding a greater share of the other assets thus keeping the family business and the shareholdings in tact. It tends to be accepted that trying to put a price on a minority interest in a private limited family Company in particular is very difficult if not impossible. A minority interest will usually be heavily discounted. A formal forensic report from a suitably qualified accountant can be helpful and sometimes essential depending on the potential value of the Company but with smaller family companies such a report may not be considered worthwhile.

It is important for parties to a marriage to understand that purchasing or registering assets in one party’s sole name will not necessarily “ring fence” those assets against claims from a spouse in the event of divorce. The Divorce Court generally has an absolute discretion as to how to divide up the assets of the marriage (including business assets) as it sees fit taking into account a variety of factors under the Matrimonial Causes Act 1973 (as amended). Those factors include the income and earning capacity of the parties, the age of any children and the contribution made to the marriage in money or monies’ worth. It is not correct to assume therefore that there will be a 50% division of the assets. In some marriages virtually the entire wealth of the marriage may have been contributed by one party, especially for instance, where the family business is an inherited farming business passed down the generations.

Although reported cases do provide some guidance as to the approaches adopted by the Court it is important for each case to be considered on its own facts and merits.

The question is, can anything be done to protect assets and in particular the family business?

There are a variety of things that can be done in an attempt to protect the family business or assets provided exclusively by one party to the marriage from a source entirely external to the marriage.

One possible preventative measure is to enter into a pre-nuptial or post-nuptial agreement setting out how assets will be divided on any future separation or divorce. Please see our website for further details on pre and post- nuptial agreements. Briefly however the position is that in English law a Divorce Court does not have to follow the terms of any pre or post nuptial agreement. The Courts are becoming increasingly sympathetic however to following the terms of such agreements so long as certain conditions apply.

One other possible way of attempting to protect the family assets is by the parties entering into a Declaration of Trust relating to specific property setting out the shares in which the property is owned.

The parties should also make a Will and regularly update or review the Will.

Generally assets acquired from a source entirely external from the marriage ought, wherever possible, to be kept entirely separate and not “submerged” with joint matrimonial property.

Certain trusts can be entered into in an attempt to protect family wealth. Pension and Life Insurance assets ought to be protected by making appropriate nominations.

The Memorandum and Articles of Association of any family Company ought to be reviewed to ensure that shares are protected wherever possible.

Whatever measures are taken however it is important to keep in mind what is said above about the absolute discretion of the Court to divide up the assets of the marriage in the event of a divorce as it sees fit. Whatever is done it does not carry any guarantees of protection in the event of a divorce but it is always important to do whatever can be done in an attempt to protect family assets and in particular the family business.

Should you require any further information regarding divorce then please contact Anita Toal on 01775 722261 or email anita.toal@maplessolicitors.com

If you would like advice regarding Trusts/Wills please contact Jane Mawer on 01775 72261 or email jane.mawer@maplessolicitors.com or Faye Blair 01775 722261 or email faye.blair@maplessolicitors.com or Jamie Dobbs on 01775 722261 or email jamie.dobbs@maplessolicitors.com

For any advice on Company Law contact Dav Naghen on 01775 722261 or email daven.naghen@maplessolicitors.com


Maples supporting Macmillan Coffee Morning image

Maples supporting Macmillan Coffee Morning

On 29th September 2017 Maples Solicitors LLP will be hosting a coffee morning as part of Macmillan’s “World’s Biggest Coffee Morning”.

Tea, coffee and cakes will be served from 10:00am until 1:00pm and all donations received will go to Macmillan Cancer Support to assist them with providing medical, emotional, practical and financial support to those facing cancer and their families.

At the same time, Maples will also be running a free Wills, Lasting Powers of Attorney and Probate clinic so that whilst you are in the office you may take the opportunity to discuss any of these with one of the Private Client Team with no obligation to commit. You can use the time to raise any questions you may have about making a Will, who you could appoint as Executors, whether you need a Power of Attorney or how a Power of Attorney works, for example.

Maples hope to see their existing clients join them for the coffee morning and very much look forward to meeting new people- everyone is welcome!

If you would like to discuss any matters in relation to Wills, Lasting Powers of Attorney or any Probate related matters prior to the coffee morning then please contact one of the lawyers in our private client team:-

Jane Mawer- jane.mawer@maplessolicitors.com
Jamie Dobbs- jamie.dobbs@maplessolicitors.com
Faye Blair- faye.blair@maplessolcitors.com

Or telephone the office on 01775 722261 and ask to speak with one of the team.

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Over the last forty years I have cause to deal with many law firms both in a personal and professional capacity, including some ‘top’ London Companies. In all of those dealings I have never found anyone as proactive and so willing to offer help and advice as Jamie Dobbs. During the last two years Jamie guided my parents through the completion of Lasting Powers of Attorney. Helped myself with the use of the LPA and recently dealing with Probate and Estate Administration following their death.

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