Dealing with businesses in divorce

Knowing how to divide any of your assets during a divorce can be confusing. If you're business owners, it can become even more complicated.

But it's possible for businesses, and any business assets in divorce proceedings, to be handled smoothly and successfully. Reaching a point where everything is resolved can be complex, but getting expert legal advice is the first step towards a fair outcome.

Our divorce lawyers are specialists, highly skilled in handling difficult divorce and family business cases with empathy. We'll take the time to understand your concerns for your family and your business, then use our extensive experience and practical understanding to guide you to the best possible outcome.

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What happens to a business in a divorce?

If you're a business owner facing a divorce, you may be worried about how your personal situation will impact on daily operations and performance, and whether you'll still have a business at the end of things.

Your divorce lawyer will explain the process in detail and take you through how business assets in divorce proceedings are handled. All assets owned by you and your ex are taken into account and can potentially be divided by the court during a divorce. This includes businesses or any business interests, as well as other assets like your family home, savings or pensions.

The court can order a shareholder to sell or transfer their shareholding in a business and a business owner can be ordered to sell or transfer business assets that they own personally. Although this is rare and would be a last resort, it's vital that you take early advice to ensure you understand the legal position, helping you to make the best decisions.

Dealing with a business in a divorce

The first thing to remember is that all your family's assets (including property, money, investments and pensions) are taken into account in a fair financial settlement. Everything must be disclosed upfront but, depending on the circumstances, it may be possible to ring-fence or preserve assets such as businesses.

Assets are classified as either matrimonial assets or non-matrimonial assets. Matrimonial assets are assets that have been acquired during a marriage or civil partnership. These include jointly owned property, investments and family businesses. Non-matrimonial assets are assets that were acquired before the marriage or after separation. Examples can include inheritances, property bought before the marriage and businesses set up before the marriage.

In England and Wales, the starting point is that matrimonial assets should be shared equally. However, to achieve a fair financial settlement , sometimes the assets are not shared equally, for example:

  • If one of you clearly has a greater financial need than the other
  • If one of you can show you made a significant contribution to the matrimonial assets

Sometimes it's possible to get a fair settlement with just the matrimonial assets. Sometimes it isn't possible though, and then the non-matrimonial assets have to be included and divided up. 

How your business or company (or your ex's business or company) is treated in your divorce will be specific to your circumstances.  If the business was built up during the marriage, the most likely starting point will be that you each share the value of the business 50:50 (even if only one of you worked for the business). 

Although the court has the power to order a sale or transfer of a business owner’s shareholding or other business assets owned by them personally, this is usually a last resort.

When you seek legal advice, your divorce lawyer will look at your circumstances, advise you and take you through what the court may decide to do.

If you have questions about your divorce and how to proceed in the best interests of your business, contact our family lawyers and we'll help you.

Points to note about dealing with a business on divorce

Dealing with a business as part of a divorce can be tricky. While we'll talk you through your options, there are some key points to be aware of:

  • The value of a business can be "offset" against other matrimonial assets.
  • Business owners can take steps before and after marriage to protect assets from divorce.
  • The courts in England and Wales have jurisdiction to make an order against a foreign business.
  • Commercial property owned by a company pension scheme – for example, a small self-administered scheme (SSAS) – can be divided between spouses by way of a pension share.

Usually, a formal business valuation will be needed. A single joint expert (SJE) will be instructed to act for both parties. There are different ways a business can be valued. Some of the most common valuations are on a net asset basis or based on future income stream. An SJE may also be asked to advise on the sustainable future income of the business owner, tax issues, and whether there is any liquidity within the business to fund a financial settlement on divorce.

How can we advise you on dividing a business in a divorce?

Whether you want to know how a business is divided in a divorce settlement or if there's a chance you'll have to sell your company, we can help. Our expert divorce law team will listen to your concerns and then talk you through the complexities of your case to give you the answers you need.

We'll work closely with you and your family, blending our technical knowledge of the law and our understanding of how divorce can impact on businesses to give you clear, practical guidance.

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Our family lawyers

We're experts in dealing with businesses as part of divorce proceedings. Our lawyers have years of experience in acting for business owners and their families.

You can be confident in our ability to deliver top quality business legal advice, whatever your interests. Knowing that each business is different, we take time to understand the commercial realities you need to deal with. We draw on our wealth of practical experience to give you clear advice from the start.

You'll also benefit from our unrivalled multi-disciplinary approach, network of global contacts and expertise in resolving disputes away from the courts.

Our business assets in divorce experience

On a daily basis, our divorce lawyers provide resolution-focused, tailored legal advice to business owners and their spouses who are dividing business assets, going through a divorce or taking steps to protect their business if the worst were to happen. We've helped clients ranging from those who run small, owner-managed businesses through to large-scale companies.

Recent examples of our work include:

  • Our lawyers acted on behalf of the beneficiaries of various offshore trusts that owned companies and investments worth in excess of £200 million in High Court litigation that was successfully resolved in our clients' favour.
  • We successfully negotiated a postnuptial agreement for a separated couple to cover their business assets in advance of private equity investment.
  • We mediated an agreement between a business owner couple with UK and US companies and with assets in excess of £10m.
  • We advised a business client's spouse with assets in excess of £100m, the majority of which was value within a privately owned company.
  • Our lawyers have regularly supported business owners in negotiating and implementing company purchase of own shares from spouses to maximise tax and liquidity opportunities on divorce.

Why choose our business divorce lawyers?

We know how complicated, stressful, and emotionally draining divorce can be. We also know how valuable it is for you to work with a team that takes the time to understand your unique circumstances and offers tailored legal solutions to give you the best outcome.

We're proud to have one of the UK's leading divorce law teams. Here are just a few reasons why you can trust us to be your divorce solicitors:

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Business in divorce FAQ's

If you run your family-owned business and are thinking about a divorce, it's understandable to be concerned about the future of your company.

Every business and every family is different. Your family lawyer will advise you on the key features that apply in your case, and what options are open to you.

One consideration will be who owns the business. If you own the business outright, then it's more likely it will be treated as a matrimonial asset in your divorce. If the business is owned by you and other family members, and you have a minority shareholding for example, then it will be the value of your shareholding that is taken into account when negotiating a financial settlement. If other family members own the business and you're simply employed, then what you earn will likely be the focus. 

If you do own your business with other people – whether family members or business partners – those other people could ask to be involved in your divorce. This is called “intervening”. It happens when those other people have an interest in the outcome of your divorce and want to protect that interest. People intervene for many different reasons, but there is a fairly standard procedure that has to be followed, which your lawyer will explain to you. Intervening is a costly and time-consuming process and specialist legal advice is essential to navigate this.

In a divorce, the proportion of your business to which your spouse is entitled depends on the circumstances. If, for example, your partner has a stake or shares in your company, this will be considered when deciding on a fair financial settlement.

If your ex doesn't have any experience in managing the company, it's unlikely that they will receive a portion of its ownership as part of the financial settlement. This is because there is a risk of damage to the business if someone unskilled is given ownership – especially if you and your ex cannot work together.

It's usually preferable to keep the business under the management of its current owner if there are other assets that can be awarded to the non-owner spouse.

The court has the power to order a shareholder to sell or transfer their shares in a business to fund a financial settlement. However, this power is rarely used, particularly if third-party business owners and employees would be negatively impacted. Also, if the process is too complex or there would be difficulty in ensuring desired outcomes, the court will look for an alternative solution.

If there are sufficient non-business assets to meet the family’s needs and/or there is a pre- or post-nuptial agreement, protecting the business assets will further reduce the chances that a business will need to be sold in a divorce.

Yes and no. The family courts respect the separate legal personality of businesses and cannot make an order against the company unless it is a party to proceedings. However, the court can and will make an order against the business owner’s stake in the business - their shareholding - rather than individual assets owned by the company. It may be that protective steps have been taken to further lessen the risk.  

A business owner will need to provide up-to-date company or partnership accounts as part of their financial disclosure, along with their view on the value of their shareholding/interests. If a couple can't agree the value to be ascribed to the company, then it's more than likely that a formal valuation will be needed. 

This is ordinarily done by a single joint expert (SJE) who is instructed by the couple to provide a value and advise on:

  • The liquidity of assets within the business to fund a financial settlement.
  • The tax consequences of extracting assets from, or selling, the business.
  • The sustainable income of the business owner.

In some circumstances, there will need to be a valuation of the underlying assets of the business - for example, plant and machinery, commercial property or even livestock in a farming business.

Once the report has been received and considered, there is the opportunity to ask questions of the expert valuer to seek clarification if anything is unclear. If necessary, the expert can be ordered to attend court to be cross-examined.

Business owners often have their own accountant or expert (known as a shadow expert) to help advise on the SJE report. If there remain significant issues with the SJE report, then you can ask the court to order that other evidence is provided to the court or even that a new valuation report is obtained. This cannot be guaranteed and it's, therefore, very important that the right expert is chosen at the outset and the scope of their report is correct.

Yes. Any money owed to you by the company is a disclosable asset. The DLA balance may have been amassed because of money you lent to the company or because you have undrawn income. Any money you owe to the company will also be relevant.

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