Protecting the Family Business against Divorce: Post Nuptial Agreements
9th March, 2015
Whilst most people prefer to keep the two separate, it is a fact that business issues can also become personal issues.
The biggest question on the mind of any business owner going through a divorce is “will my spouse have a claim against my business?” In every case, prevention from the outset is much better than a cure.
In a divorce, ALL the parties’ assets are relevant no matter whether they are personal, business or trust assets at home or overseas. The court determines the division of those assets.
If one party owns shares in a business, an independent investigation of the share value and the business’ available cash is common.
This analysis scrutinises the business in great detail looking at factors such as past performance, trading forecasts, cash flow and directors’ use of funds.
This process is intrusive not only to the divorcing shareholder but to also to other shareholders and the business itself.
Agreements such as pre and post nuptial agreements have become increasingly common in a variety of circumstances such as second marriages, inherited wealth and business assets. The law is now strongly in favour of supporting pre and post nuptial agreements.
We are advising business clients that these agreements should be seen as critical business documents alongside Articles of Association, Shareholders Agreements and Succession and Tax Planning. They are part of the full service that Ward Hadaway provides to its business clients.
These agreements offer protection to the business and its shareholders in the event of divorce proceedings.
Protection is against potential claims to carve up the shareholding, the intrusion of detailed investigation into the business’ management and the likelihood of huge legal costs.
Pre and post nuptial agreements have developed to support people make their own advice-backed decisions on dividing their assets if their marriage fails.
We have been able to take this further to allow a business to limit its own risk and protect itself should one of its leading individuals face a divorce in future.
* This article first appeared in a supplement on the Greater Manchester Fastest 50 Awards 2015.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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