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Companies on Divorce

Dividing Business Assets in a Divorce


Working out how to divide company shareholdings and business assets on divorce can be one of the most stressful and complex elements of the financial settlement.

An owned company is often one of the most valuable assets in a divorce and it is understandable that you may have concerns about the division of business assets once you have separated legally from your spouse.

Furthermore, there are often deep emotions connected with a business, which you may have built over many years of hard work, and the changes being proposed may be very difficult to come to terms with.

At Clifford Johnston & Co, we provide practical, commercially minded advice to ensure the optimal outcome, devising a financial settlement that properly reflects your wishes.

Will I lose my business if I get divorced?

If it is not possible to fairly divide the assets of the business, the court does have the power to order that a company be sold.  However, this is quite rare, especially if the business is the sole or main source of income for one or both parties.

If the business assets are illiquid and difficult to distribute, the court will try to find other ways to achieve a fair settlement.  For example, the value in the business could be offset against the value of other assets that are easier to sell or divide.

In circumstances where the sale of the business is considered necessary, the court will usually try to minimise the immediate impact on the owner and any employees, by structuring the terms of the financial settlement to allow staged payments or adequate time to find a buyer.

How we can help

We recognise that third parties may be anxious with regards to their position within the company which is why we encourage you to contact us sooner rather than later to ensure the legal process runs as smoothly as possible.

We offer practical support and advice tailored to your individual circumstances to help remove some of the emotional strain of the divorce process.

Our team of leading divorce lawyers can help you achieve an outcome that is agreeable and fair to both parties, giving you one less thing to worry about.

How do we fairly divide our company?

In the case of a limited company, you are legally allowed to reach a financial settlement without involving the courts and it is your choice on how to divide the company, providing there is a fair outcome to both parties and mutual agreement.

There are various options available to you when it comes to dividing the company:

  • Offsetting – Where one party transfers assets to the other, in return for keeping the business interests.
  • Buy-out – If both parties have shares in a limited company, one partner could buy out the other
  • Spousal maintenance – Where there is little capital value but reasonable business income, one partner could be paid ongoing maintenance
  • Sell the business

What if we are unable to reach an agreement?

In the event of a dispute, the court has the power to transfer company shares from one spouse to another, subject to any restrictions in the Articles of the Company. If your finances will not permit a buy-out of one party, it is customary for the court to assist in the division of the business assets rather than forcing ex-spouses to continue working together as this is seen as unreasonable.

Usually, one party exits the company so there is a clean break, but some couples may wish to continue in business together. If so, a shareholders’ agreement will be required to ensure neither party is able to solely make future business decisions.

What happens when one spouse exits the company?

Specialist financial advice should be taken in the event of a transfer of business shares or a buy-out as there will be tax consequences for both parties.

In these circumstances, a valuation of the company as a whole will need to be undertaken in order to determine the divisible financial assets.

How to value a business in divorce

The first step when dealing with the division of company assets in divorce proceedings is to get an accurate valuation.  Supported by evidence from the accounts and possibly a statement from your accountant, we will be able to help you arrive at this valuation.

When a valuation is backed up with sufficient evidence it is usually easier to reach an agreement, and an amicable agreement is always preferable.  We are highly experienced at negotiating business and company valuations, and we’ll help things move forward as efficiently as possible.

If the valuation is challenged by your former partner, the court may appoint an independent expert, deemed to have been instructed by both parties, to provide a valuation.

The business valuation will be included as a part of the financial settlement in a divorce. Valuing a company can be complex and will need to take in to account:

  • Business income
  • Business assets (property; machinery; stock)
  • Value of any pensions

Valuation of business assets are often regarded by the court as ‘risk-laden’ and can be less straightforward than other ‘safer’ assets such as savings or non-business owned property. It is for this reason we encourage you to seek expert legal advice.

What information is needed for a business valuation?

You will be required to provide the following information for the business valuation:

  • Assets – at least two years’ accounts
  • Cash flow – typically forecasting five years ahead
  • Analysis of comparative business models – used if your business lacks assets or you cannot produce a sufficient cash flow forecast

If the company is small or both spouses agree to a ‘desktop’ valuation, this can be much more straightforward. In many cases, an independent valuation will be required to ensure a fair outcome for both parties.

The business has been valued – what next?

After valuation, the ownership structure of the company determines how it will be divided by the court. The business will be treated as a divisible marital asset if one or both spouses own it outright.

If a group of people own the company and you are a minority shareholder, the value of your shareholding will be relevant. In the majority of instances, the business will remain in the interest of the owner and the other spouse will be awarded maintenance payments or a greater share of the other marital assets.

Contact Us

Our team of divorce lawyers is proud to offer the highest standards of client care. We understand the emotional toll that a divorce can take, and the unique challenges of dividing business assets in divorce, but we will help you reach a clear and amicable agreement as swiftly as possible.

Our divorce lawyers are based at both of our offices and their vast experience makes them an integral part of our team of Family Solicitors in Stockport & in Manchester.

With offices in Stockport (Heaton Moor) & Manchester (Burnage), our expert solicitors are easily accessible.  We represent clients not only locally and throughout Stockport, Cheshire, Lancashire & Manchester but also across the United Kingdom. You can count on us to help and guide you whatever your challenge or circumstance.

During the current Covid-19 crisis we can make arrangements to take instructions from you by telephone or video conferencing and will still be able to access the courts to deal with any emergency applications which may need to be made.

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