Divorce can be a challenging time, especially when a business is involved. Here’s a guide to help you understand how businesses are considered in divorce and financial remedy proceedings in England.
1. Full Financial Disclosure
At the outset, both parties need to provide full financial disclosure, including details about any business interests. This is done through Form E, which requires supporting documents like bank statements, tax returns, and business accounts.
2. Valuing the Business
A business can be a matrimonial asset the value of which is taken into account in a divorce settlement.
Valuing a business or shareholding is a crucial step and can involve several factors:
- Market Value: What would the business sell for on the open market?
- Income: How much money does the business generate?
- Assets and Liabilities: What does the business own and owe?
Professionals, such as specialist accountants, are often brought in to ensure an accurate valuation, to advise as to what liquidity there is in the business to meet any payment that might need to be made to the other party as part of an overall settlement, to advise as to the different ways in which this can be achieved and the tax implications of these options.
If the business owns a property, it may be necessary for there to be a valuation by a chartered surveyor who has experience in valuing commercial properties.
3. Dividing the Assets
The court aims to achieve a fair division of assets looking at all the circumstances of the case. Here’s what they consider with first consideration being given to a child under the age of 18:
- The income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire;
- The financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
- The standard of living enjoyed by the family before the breakdown of the marriage;
- The age of each party to the marriage and the duration of the marriage;
- Any physical or mental disability of either of the parties to the marriage;
- The contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family;
- The conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it
- The value to each of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.
The business is an asset the value of which can be taken into account in a divorce and as it is an income generating asset, the income of the parties generated from the business will also be considered.
4. Financial Orders
It is important that the parties endeavour to agree how to divide the assets so that the agreement can be incorporated into a financial remedy consent order. The options might be:
Transfer of Shares between the parties and lump sum payment/s; one spouse might receive a lump sum to balance the division.
The goal is to ensure fairness and to meet housing and income needs, while maintaining the business’s future viability.
5. Keeping the Business Running
The court tries to minimise disruption to the business. This might involve a structured settlement with payments being spread out over time to avoid financial strain on the business.
The idea is to keep the business running smoothly while ensuring a fair settlement.
6. Professional Advice
Given the complexity of businesses in divorce, it is crucial to seek professional advice. A solicitor can guide you through the legal process and help you obtain any essential professional reports.
7. Consider Mediation
Mediation can be a less stressful and more cost-effective way to reach an agreement. A neutral third party helps both spouses negotiate a settlement, which can be particularly useful when a business is involved.
How can Nelsons help
If you want to know more, please contact Gayle Rowley, Partner, and Mediator in our Family Law team, on 0800 024 1986 or via our online enquiry form, or book in for a Mediation Information and Assessment meeting by completing the mediation referral form here. Alternatively, if you already have a solicitor you can ask them to refer you if you prefer, see here.
Alternatively, if you don’t have legal representation and feel that you would benefit from legal advice instead, please contact Gayle, who will be happy to discuss your circumstances in more detail and give you more information about the services that our family law solicitors can provide along with details of our hourly rates and fixed fee services.
Please contact Gayle or another member of the team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online form.
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