Can My Ex Claim Part of My Business in the Divorce?

Business assets are considered assets of a marriage or civil partnership and are therefore potentially open to a claim by the other party to a relationship. This will include shares in a limited company, an interest in a partnership or a sole trader business.

Whether you are looking to protect your wealth, and/or reach a fair divorce settlement, our team of expert divorce lawyers in Milton Keynes can advise you on the best options available to you. This article offers a look at some of things to consider when thinking about business and divorce settlements. For further information and detailed legal advice please get in touch.

Entitlement to a financial claim is broadly based on three concepts: needs, compensation and sharing. S25 of the Matrimonial Causes Act and pertinent case law govern how we calculate that entitlement.

The value of business assets will be included as part of a person’s overall asset base though a business asset is considered differently to more “copper bottomed assets”. It will also be taken into consideration that there is commonly a link between the parties’ business interests and their income. Therefore, the liquidity of that interest and the impact on the business of any settlement are key considerations.

A crucial consideration when looking at a business as part of a divorce portfolio is whether the business should be treated as an income resource or a capital asset. If the income produced from the asset is required to meet parties’ needs and a liquidation of the asset would impact this, then its preservation may well be a priority going forward. In certain circumstances an argument can be made that some or all of those business interest should not be viewed as matrimonial such as if inherited.

A business is classed as an asset in divorce although the value of that interest is inherently different to the value of a liquid asset such as monies in a bank account or a property. Interests in businesses are recognised as risk laden assets and issues of liquidity must be considered in deciding how to deal with those assets.

In most cases, expert evidence will be required from an accountant in relation to business interests. It is common practice for two parties to a divorce to agree a single joint expert in accordance with the family proceedings rules to value the business. The single joint expert (PODE) will be specifically asked to advise on liquidity, and the range of possibilities available to extract money from the business and tax consequences as dealt with above.

A valuation is not simply a case of adding whatever value is given to the business to the balance sheet and looking for a division – consideration needs to be given to how that interest is held and the impact on liquidity of the business and the parties’ resources if there was to be a sale or transfer of those assets.

Ready to take the next step? As leading divorce lawyers in Milton Keynes, our team of family law specialists can advise and guide you from the moment we start working with you. We also have offices in in Bicester, Watford and London. Talk to us in confidence and find out where you stand. Get in touch – we’re here to help.

This article is intended for the use of our clients and other interested parties. The information contained in it reflects the author’s view and is believed to be correct at the date of publication. However, it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional legal advice.