How will Coronavirus affect the value of my business if I am getting divorced?

Coronavirus (Covid-19) does not in itself impact the means of dividing assets in a divorce. The assets will, as usual, need to be attributed values, which are agreed by both spouses or accepted by a Court, and those assets then sold or otherwise distributed between the parties in a way that is considered by the Court to be fair.

The pandemic does, however, have implications for the valuation of a business, which can, in some marriages, be the sole or most valuable asset owned by the parties. Therefore, it is only natural to wonder how will Coronavirus affect the value of my business in relation to divorce proceedings?

This will entirely depend on the nature of the business, and as always business owners should seek the advice and opinion of their accountant. For example, many retail or hospitality businesses will see a decline in sales due to people being required to stay home. Furthermore, people may be concerned about spending money on non-essentials at the present time.

On the other hand, manufacturers of face coverings, for example, may be experiencing increased demand, and therefore profits.

For small businesses that are struggling, the government has pledged assistance and have recently announced schemes including grants for the self-employed and delayed-interest loans for businesses. There is also the furlough scheme which employers can take advantage of to help to pay employees’ salaries.

Judges are astute to those who attempt to conceal or undervalue their business interests. However, they are also realistic. The Judge will consider both the reasonable value of the business now and the likely future realisable value of the business when the economy recovers – but they will not ascribe a falsely high value to a business, even if this means there are not enough funds remaining in the pot to meet both parties’ needs.

Some people who feel that their marriage has broken down but have not yet begun the process of divorce, may feel that now is the time to do so. However, there are many considerations in starting this process and, in the same vein as businesses seeing a decline in their value, the same may be true for property and other assets.

It is also the case that the Coronavirus may significantly impact how long it takes to sell a house and/or the ability to obtain a mortgage. If there are children, their needs must be a priority.

Ultimately, the decision to divorce should not be taken solely based on the state of the economy. The question, how will Coronavirus affect the value of my business, should be considered alongside many other factors.

In divorce proceedings, evidence of the value of a business is often crucial. This is usually obtained either by the parties, or the Court, appointing a Single Joint Expert to produce a report as to the value of the business. This is then to be used in negotiations or for a Judge to consider when deciding the financial split. It is likely that, during the present time, Judges will heavily rely on expert evidence and will in more cases appoint independent accountants and valuers to provide their opinion.

The Judge then has discretion as to the extent to which he/she applies the valuation provided. Their approach will vary in the circumstances of each individual case, such as potentially deducting a proportion of the value from the pot if the business was already established and valuable prior to the marriage.

The treatment of businesses in divorce proceedings is a complex issue, but our expert family lawyers are available to provide further clarity and advice in the current climate. If you would like to discuss how will Coronavirus affect the value of my business if I am getting divorced further, then please contact us.