Divorce When You Run a Family Business

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Concept of mediation between spouses, divorce. Divorce proceedings before the Court. The role of the mediator.
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Posted: November 21, 2023
CEO Today
Last Updated 21st October 2024
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Divorce when you run a family business cannot only affect you and your former spouse but your children and your company too.

It’s therefore crucial, in the first instance, to take a measured and cautious approach to protect you and your family’s future. Here, we share some helpful tips.

  • Try to be amicable with your ex

The number one tip when you are going through any divorce is: don’t be uncooperative parents. Doing so is not only damaging for your children involved but by being unwilling to negotiate fairly, you could end up facing sanctions from the judge and you may be looked upon unfavourably going forward. Plus, the process will be slower if agreements cannot be reached easily. If you are the one who instigated the divorce, be careful not to rush your partner in the beginning as it is likely that they will have some emotional catching up to do. 

  • Consider how you will divide assets 

Remember that your business will be considered a matrimonial asset regardless of who founded it or runs it today. There are several options for how you might want to split things, ranging from one person buying the other out, selling the whole business to the other, and one partner receiving a maintenance payment from the other party who goes on to run the businesses on their own. It may also be that a new shareholders agreement is devised where both parties maintain or acquire hares in the company. In some cases, ‘offsetting’ can be applied, for example, one partner keeps the business while the other has the family home. It’s helpful to know your options ahead of time, as this can help remove unpleasant surprises and prevent emotions from running high. When you know all the options you have and take time to consider each, you will be in a much stronger place to negotiate with fairness.

  • Think about getting your business valued

In cases where both you and your spouse share the business or each has a large shareholding it is important to seek a valuation. Ideally, both will agree on who will conduct the valuation (usually an independent valuer or accountant). Valuations will consider the status of the company i.e. whether it is a limited company a sole trader business or a partnership organisation. In cases where there is one clear business owner who undervalues the business, causing a dispute, it’s advisable to get in touch with a family lawyer who will be able to request the company’s official financial records and if deemed necessary, ask for further investigation. Failing this, entering into mediation can help. 

  • Seek mediation 

The mediation process is not exclusive to specific areas of your divorce, it is also a service which can help throughout the entire divorce process, when reaching an agreement is challenging. Rather than making a judgment on what should happen with your divorce, and in this case, your business mediators are third-party, neutral representatives who look for resolutions to help finalise your divorce as swiftly and as amicably as possible. 

Conclusion 

In most cases, your divorce will be counted as a matrimonial asset by the courts and it will therefore become divisible when finances are being split. Although it’s not always possible to remain convivial with your ex-partner, it’s important to try to negotiate fairly as much as you can, and think ahead about how your business will be valued and how your assets will be divided. Having this knowledge will support you in getting the best result for you, your business and your family.

 

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