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How is a business divided in a divorce?

At Rayden Solicitors, we frequently act for clients who either own or have an interest in a business/ businesses or for their ex-spouses looking to get their share on divorce.

Following the breakdown of a marriage the assets will need to be divided. A division based on “Entitlement” depends on a number of factors, which includes the length of a relationship (defined as marriage plus any pre-martial cohabitation); the Court will consider it unfair for the same principles to apply to a short marriage compared to a long term relationship.

How are financial assets split in a divorce?

 When considering financial provision on divorce, the court must consider a range of factors enshrined in s25 of the Matrimonial Causes Act 1973. These factors include, amongst others, the needs of the parties, the standard of living enjoyed during the marriage, income and earning capacity, and contributions made during the marriage. The English courts are guided by these section 25 factors and not a set table of precise calculation. Consequently the courts have wide discretion when dividing assets and when considering the level of maintenance. There is no ‘one size fits all’ approach to family law and the outcome will be specific to the circumstances.

Throughout the divorce process there is an ongoing duty of ‘full and frank disclosure’ and all assets are relevant and taken into account. For the avoidance of doubt, this includes any business interests which are commonly central to the negotiations. Typically on divorce, it is the family court rather than the commercial court that will determine what happens to a business/ business interest. The ownership of the business is important. For example, is the business owned by one spouse (or both spouses)? or is it owned by one spouse who has a minority shareholding?

What steps should I take when divorce becomes inevitable?

In some instances, it will be necessary to value the business and/ or a shareholding as part of the process. This is not something that solicitors can undertake and involves the instruction of a single joint expert in the form of a forensic accountant. Generally the costs of instruction are borne equally in the first instance. Once the report is served each party has 10 days to answer any questions they have.

Notwithstanding the above, it is not always necessary to value a business as part of the divorce process. Some businesses are purely income streams with no underlying capital value. In those scenarios, there is no need for a business valuation and it is the income that can be shared by way of a maintenance order.

Whilst the valuation of one’s business interests might be an unnerving prospect, it is unlikely that a Judge would make an order that would either:-

  • require the business to be sold;
  • give a spouse and soon to be ex-spouse an continuing interest in the business as this would be contrary to the clean break principle.

To achieve fairness and if a business is to be retained by one spouse, it’s value may be offset against other assets.

Dividing assets on divorce can be a long and complicated process. This article primarily focuses on businesses and divorce. However if you are looking to protect any business interests prior to a marriage, you may want to consider a pre-nuptial agreement.

Rayden Solicitors are an award winning specialist family law firm with offices in St Albans, Berkhamsted and Beaconsfield. If you are facing difficulties in your marriage, you can contact one of our specialist solicitors who will be able to help guide you through the process.

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If you require assistance with any aspect of Family Law, please contact us on 01727 734260.

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