We understand that going through a divorce is difficult (to say the least) and when finances become and issue, things can become more contentions.

In an ideal situation, you and your partner will amicably agree on how the matrimonial assets will be disrupted but, as we know this may not always be the case.

To complicate matters further, whilst it may be slightly easier to value and agree on how the matrimonial home, for example is to be divided. It is worth noting that other assets such as a business can be problematic.

In order to understand how settlements are reached when businesses are involved, we must first look at how finances are dealt with in accordance with the law of England and Wales.

The Procedure in ancillary relief (financial) matters

Many couples reach an agreement with regard to the finances following negotiation and financial disclosure between solicitors.

Aforementioned, parties must initially provide each other with disclosure, this must be full and frank disclosure in other words, you must disclose all assets (overseas and in the UK) which you retain, this of course includes details of your business and its value.

Thereafter, once exchanged parties will be in a position to negotiate and attempt to come to an amicable agreement. However, in some cases, for a variety of reasons, it is necessary to make an application to Court for the Court’s involvement in reaching a financial settlement.

So, will your partner get a share of your business?

Now that depends on a number of factors, for example, do you retain sole ownership of the business? When was the business incorporated (pre-marital asset, martial asset or post separation)? what is the value of the business? Do you hold the bulk of the matrimonial assets? In turn, does your partner also own a business; the list is non - exhaustive.

It is worth noting that in divorce proceedings involving a business, the business is considered an asset. Regardless of whether you are a sole trader, limited company or a partnership, the family court will take the value of your business into account when dividing the family’s assets between you and your spouse.

How is the business valued?

However, unlike the matrimonial home or other assets, a business if not considered a liquid asset and therefore, extracting a cash value can be extremely difficult.

Valuing a business is tricky stuff and often requires a skilled expert i.e. a forensic account.

Recent case law:

In Martin v Martin [2018] EWCA Civ 2866 - the Court of Appeal dealt with the difficult issue of how to deal with shares in private limited companies when a marriage ends. The facts of the case are as follows:

“Mr and Mrs Martin were married for 26 years following 3 years’ cohabitation. At the date of the first instance decision they had been separated for 3 years; Mr Martin was aged 68 and Mrs Martin was 54. They had two adult children. This was therefore a lengthy marriage and the sharing principle would apply to division of the parties’ assets.

The main asset was a private limited company which Mr Martin had set up with a friend 8 years before he and Mrs Martin began to cohabit. In the same year that the parties married, Mr Martin bought out his original business partner and 1% of the shares were transferred to Mrs Martin, with Mr Martin holding the remaining 99%.”

Court of Appeal Judgement:

The Court of Appeal considered what the extent of the husband’s company (founded before the marriage) was a non-marital asset. As noted in the initial judgement, the court confirmed that it was compelled to consider fairness and, whilst it was required to evaluate on the basis of all of the evidence whether the asset was non-marital, it still had discretion to apply weight as it saw fit in order to achieve fairness.

It was held that 80% of the husband’s business was marital property, based upon a straight-line apportionment to the value from the date when the business was first incorporated to the date of the hearing.

The wife received 50% of the £146m marital wealth. The wife’s award included non-business assets of £53.7m, and shares in the husband’s company worth £19.2m. The husband retained non-business assets worth £18.4m and shares in his company worth £90.6m.

The above case is an imperative reminder that there is not a guaranteed outcome in ancillary relief proceedings, as the Court has huge discretion when assessing marital assets and deciding the weight each asset should be given. Furthermore, it highlights the significance of the sharing principle and accentuates the court’s overriding objective of fairness.

Considering the above, what can we do for you?

At Specters, we have a wealth of knowledge and experience in dealing with finances arising from divorce which includes, supporting business owners on both smaller and larger scales. We value the importance of your business and understand how dear such an asset is to you.

Our accomplished and professional solicitors will utilise their communication skills and endeavour to get the best possible result for you. We will ensure that we:

  • Advise you on how your business could be valued
  • Ensure that the business is valued correctly
  • Advise you on how your business can be handles in such proceedings
  • Advise you on the court process to ensure that you feel comfortable
  • Provide you with regular updates and keep you in the loop at all times
  • Arrange mediation on your behalf and seek to settle matters without the need of court intervention
  • Negotiate and endeavour to obtain a fair and reasonable financial settlement for you.

Our offices are currently open to the public. Please book your free consultation at our offices today, or call 0300 303 3629