CEO Divorce: Protecting the Executive and the Company
Protecting your finances as a CEO in a divorce is perhaps your first thought, but what about your company?
A complete guide to divorce explains the general process, the paperwork you need, and how long a divorce typically takes. But as a CEO, you will also have concerns both about the stability of the business. Executives can often face complex financial matters in a divorce, in this article we outline the fundamental ways you can safeguard yourself and the company.
Keep things private
As the public face of a company, you must keep your divorce as private as possible. Your divorce will become a public record and as such, this may result in lower confidence in the company and your leadership from the board of directors and shareholders, and in turn, this can affect the value of stock in the company. If you can agree on the finances and how you will divide assets with your ex-spouse, including property and child maintenance, for example, before the divorce is filed this can reduce negative publicity surrounding your divorce. The legal team representing you is also duty-bound to keep the details of your divorce private and you are within your rights to request that things are kept confidential.
Handle complex finances carefully
As CEO, you will receive a base salary, along with other remuneration packages linked to the success of the company. Restricted Stock Units are a common form of financial reward for a Chief Exec. A vesting schedule is usually applied to RSUs. This means that a CEO would have to meet particular conditions related to the length of time at the company, and/or performance. They are complex finances to split in a divorce, largely because they remain non-transferable assets until the specified conditions have been met. The timing of your divorce may therefore be an issue with how financial divisions can be made with your ex-spouse. Often specialist expertise is needed to decipher how much the other spouse is entitled to.
Take crucial steps before divorce
- CEO or not, it is often wise to get a prenuptial agreement before you get married. Although they are not legally binding, they can hold weight in court. If you own the business, you can specify that it was in existence before the marriage began and make clear it is solely yours. In addition, you can specify the agreements you have made between you and your spouse, for example, how assets should be split in the event of a separation. If you are already married, you can obtain a post-nuptial agreement, ideally, this will be drawn up way ahead of a divorce to be fairly considered.
- In divorce proceedings, assets belonging to both parties will be taken into account and divided as equally as possible. If you have your own business and want to maintain sole ownership, look at counterbalancing finances with the offer of other assets, for example, the marital home.
- If you own the business, getting it valued is also prudent. You can do this by appointing an independent valuer or broker who will provide an accurate valuation of the company. They will look at the value of similar businesses, consider the financial worth of company assets and look at cash flows and financial forecasts.
If you are a Chief Executive considering or going through a divorce, financial matters can become protected. It is always advisable to seek professional legal support early on in the process, to ensure you and your company are as protected as possible.
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