Butcher & Barlow

Divorce can obviously have a wide ranging impact upon family life however when a family business is involved further problems can arise. The law permits potential claims against business assets, by either spouse whether or not they have played an active role in the advancement of the company.

The legislation in this area grants judges great discretion in their ability to divide assets in accordance with the circumstances of the divorce. This reflects the modern day view that the role of homemaker is as valuable in a relationship as that of the breadwinner.

The case of White v White [2001] sets out this position clearly and is accepted as the leading case regarding matrimonial asset distribution. Courts must now use the "yardstick of equality", which requires equal division of assets, as a starting point, including those contained within the family business.

As a result business owners can experience substantial problems which include:

• Small business owners lacking sufficient liquidity within their company to meet their spouse's claim. Ultimately this can result in the business being sold;
• If shares have been transferred from one spouse to another, and they refuse to sell those shares back, then their ownership of the shares can be used as a negotiation tool when considering settlements; and
• Significant costs can be incurred when it comes to the valuation of business assets, specifically those of an intangible nature, for example a company's goodwill.

The following options may be utilised to minimise the damage to a company:

• Establish a pot of assets independently from the company;
• Enter into a prenuptial agreement. Although such agreements are not binding in English Law, courts can consider them in specific circumstances and they have the discretion to pay them credence or not; and
• Place business assets in a trust prior to marriage.

However none of these options are foolproof and therefore the advice and expertise of a solicitor in this matter is imperative, particularly as the division of assets is dependent on a number of complex factors entirely dependent on the circumstances of each individual case.