A divorce can be incredibly difficult to deal with whatever your circumstances, and those that involve business assets can be even more so. Whether the business asset involves just one spouse, or is a joint venture, a divorce can have a devastating effect on a business that has taken many years of long hours, hard work and sheer determination to establish. The impact on just the morale of the co-directors, partners and employees cannot be underestimated as they wonder how your change in personal circumstances will impact upon the future viability and profitability of the business.
The bad news is that an acrimonious divorce can have a devastating effect upon the company as the directors pull in different directions. The good news is that it does not have to be this way.
It is inevitable that there will need to be full and frank financial disclosure, a detailed scrutiny of the business including a valuation of the business itself and shareholdings. A joint valuation with clear parameters will cut down on the cost to you both and will be actively encouraged by the court. Any value attributed to the company will be treated as part of the matrimonial pot to be divided between you. How it is divided will depend heavily on your individual circumstances; liquidity, third party interests, contributions and the availability of other assets will all be taken into account. The court will try to meet your reasonable needs for income and capital with a view to your both becoming financially independent as soon as possible.
If you find yourself involved in a separation what can you do?
Understand your business. You will be asked to give information about how the business began, contributions made and how it is owned ie either independently or with other third parties;
Get your documents in order. Being able to produce up-to-date or interim accounts, management accounts and projections will save time and expense and allow you to focus on how the business can be adapted to take into account the separation.
Understand your options. Talk to the professionals involved in the business. They can assist and advise you as to the implications of your decisions. Legal, accountancy and tax advice at an early stage is essential.
Choose the right way to deal with your divorce. This is particularly important if you are continuing to retain an interest in the business. Collaborative Law or Mediation can be an alternative to court.
A divorce is difficult but it does not need to be acrimonious. It is possible to ‘part company’ in a fair and constructive way and in a manner that does justice to your hard work and endeavour.
Carmelita Ardren is a partner, head of Raworths’ family law unit and a member of the Law Society Family Law Panel. To contact Raworths telephone 01423 566666 or visit our offices at Eton House, 89 Station Parade, Harrogate, HG1 1HF. Alternatively you can email Carmelita at Carmelita.email@example.com