Is a limited company protected from divorce?
August 2021 | Patrick Reeve
If you run a limited company, you will be naturally concerned to keep it going after your relationship breakdown. You may have built up the business over many years, and it may be providing your main livelihood. Maintaining the business is probably a key part of your plans for the future.
However, a business interest such as shares in a limited company is likely to be included in the assets to be considered and possibly divided by a court on divorce or dissolution of a civil partnership, even if all of the shares are in your name. The court takes into account matrimonial assets and the financial resources of both spouses, as well as a number of other factors including the needs of the children, the parties needs and obligations and their standard of living before the separation. The court will be looking to achieve a fair result, and in the case of longer marriages or civil partnerships there will be a starting point of a 50/50 split.
If you owned the company before the marriage or civil partnership, then you can seek to argue that it is not a matrimonial asset, especially in a shorter relationship. But if for example, income from the company has been used to support you and your partner before the breakdown then the shares are still likely to be considered as a matrimonial asset.
The good news is that whilst a court has power to order a business to be sold in divorce or dissolution, it will be unlikely to want to destroy a viable business particularly where it provides an income for the family. The court is more likely to grant your partner other assets or shares in other assets in return for you keeping the company. A court can also order company shares to be transferred.
So how do I keep my business on divorce?
Even assuming the company is a matrimonial asset, there are a number of options open to you to make sure that you are able to keep the business going.
Many of these solutions can be achieved by negotiation. They include:
“Swapping” some other matrimonial asset in return for your partner giving up any claim on the company. So, for example you could agree to give your partner a greater share in the family home.
Buying out your partner’s interest-for example via a loan or a deferred payment.
Agreeing to pay maintenance so that your partner continues to get a benefit from the company.
We will advise you on the best option and negotiate creatively on your behalf. In such cases, the issue of dispute is often the valuation of the business, and we will be able to obtain an expert valuation for you. You are also likely to need advice from a specialist on the tax implications of any settlement.
What steps can I take before a divorce to protect my business?
You can enter into a pre-nuptial agreement before the marriage setting out what will happen to the business in the event of divorce. If you are already married, you can enter into a post nuptial agreement to seek to achieve the same effect. These agreements do not formally bind a court, but the court will take them into account particularly where both parties have obtained independent legal advice on the agreements and the contents are not unfair.
We are able to draft these agreements on your behalf to give you the best chance of protecting your business
There are other steps that you can take during the relationship to try and reduce the likelihood of a successful claim on your business such as
-not involving your partner in the business - for example by making them a director or shareholder; or
-not securing business loans on the family home.
Our lawyers are specialised in business cases and are looking forward to helping you keep your business.
Please contact us on 01234 343134, fill in the contact form below, or email us at enquiries@fullersfamilylaw.com so that we can guide you through the process and ensure that you receive the best possible outcome for your situation.
We also offer an initial free callback, which will be carried out over the telephone. You can book your free callback here now.
