Will Divorce Affect My Business?
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David Pickering
National Head of Family
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Date: 13/09/11
A common question asked by business people finding themselves embroiled in a divorce is whether they are going to lose their business / part of it / have to transfer shares to their spouse.
The answer - not a straight forward "yes" or "no".
Businesses are viewed as an asset to be dealt with by the divorce court particularly if the business has been built up during the marriage. The courts do not discriminate between the wealth creator and the home maker – they regard it as a partnership.
Dealing with business assets on divorce is difficult and unique; given current economic conditions, businesses are increasingly viewed as an income generator rather than a capital asset carrying value.
In the 20 years leading to 2007/2008, businesses were often valued, liquidity assessed and the non owning business spouse was given a capital sum (between 33% to 50%) of the business value. Rarely, were shares transferred from one party to the other either in part or whole.
The world economic crisis has changed all that; many businesses have struggled to survive; few are being bought and sold and few have surplus liquid funds or ability to borrow.
So, what answer have the family courts come up with?
Joint lives maintenance orders are once again the norm; not ideal for either party but probably unavoidable in most cases today.
The payer/business owner can be left paying maintenance for many years, a limited number of years or even life; the receiver is dependent on his / her ex-spouse for a monthly amount landing in their account regularly.
The position is unlikely to change in the short term.
The only positive is that if a business can create cash going forward or is subsequently sold then there is a possibility to capitalise the maintenance and pay it off once and for all.
If you have any questions about the content of this story, or divorce in particular, visit our dedicated divorce pages:
Or contact our divorce team at - family@dwf.co.uk
