2 minute read
Impact of divorce on family business
How divorce can
affect a family business
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Family businesses come in all shapes and sizes and can often be the most difficult financial settlement to conclude during a divorce – Niche spoke to a local family law solicitor to guide us through the complications
In today’s uncertain economic climate, there are many potential storms on the horizon for the family business and, in the event of a divorce, the company needs to be protected as quickly as possible – for its survival and commercial viability for the future.
Glynis Wright MBE, head of Nelsons’ family law team in Leicester, guided us through the divorce process and how family businesses are dealt with.
She explained: “Dealing with the family business following a divorce can raise many complex issues surrounding inheritance, financial contributions and other family members having a share or interest in the business.
“Historically, the family court would seek to protect the family business from being heavily involved in a matrimonial settlement, in order to avoid the business having to be sold. However, since the White v White case in 2001, the law has leaned towards fairness in dividing the matrimonial assets.
“There are a few steps that need taking to resolve disputes relating to the family business, the first being understanding the business structure of which there are three main types: the sole trader, partnerships and limited company.
“Once you’ve established the family business structure, the next step is to value the business, which is crucial as it determines what is distributed between a divorcing couple. The valuation of the business will be done by a single joint expert, who will be an independent qualified accountant, and will almost always be based on the current market valuation. It’s worth bearing in mind that, when the family business involves land and buildings, it will be necessary to instruct an estate agent as a single joint expert to provide a valuation of these assets.
“The final stage of the process is to decide how to deal with the family business as a settlement between the divorcing couple. This will normally involve three options: putting the business up for sale, buying out the other spouse’s interest or co-owning the family business.
“Divorce and separation can be complicated and emotional, even more so when a family business is involved, so getting the right blend of support and practical advice at a time when it’s needed most, is essential,” Glynis told us.
If you’ve been affected by the issues in this article, you can contact Nelsons for advice on 0116 222 6666.
