How do you protect Protecting the Executive and the Company when getting divorced.
Divorce without the complexity of a business or business interests can be tough, but when a corporation and CEO are involved, issues such as tax and personal finances can get even more convoluted.
If you’re a CEO and splitting up you are CEO and splitting up from your spouse, here’s how you can protect yourself and your business.
The divorce of the CEO
According to AESC, CEOs have a higher chance of divorce. In all divorces, the courts will look to split matrimonial assets between the two parties. These are any financial assets that were acquired during or before the marriage and typically include the family home, personal savings, pensions, investments and business interests. If you are a CEO, you will need to be prepared for any stocks and bonuses to be factored into a financial settlement. The courts will also consider the length of your marriage and the level of contribution to the business from each spouse, plus, if you have children, their financial needs will be brought into the equation too. In all cases, if you and your former spouse can agree on things together, it is much less stressful and costly.
Other important factors to bear in mind:
● Tax – there could be several tax issues related to your divorce, including ambiguity on capital gains tax payments. For instance, family home sales are usually exempt from CGT but on some occasions where there has been the sale of another high-valued item, this may differ.
● Dividing assets can become complex too in high-net-worth divorces. For example, if there are overseas properties, expansive property portfolios to divide and disagreements on what should be considered a matrimonial asset.
● Some CEO divorces may also be subject to press coverage, depending on the nature or the size of the company which may reveal the financial details of your settlement
During a divorce, you will need to be prepared to disclose all your financial interests; personal and business. This will include details of any benefit packages you receive, any past and future financial rewards such as bonus payments, and stock options or Restricted Stock Options (RSUs) the latter of which can be divided in several different ways.
Get a professional valuation
If the business is yours, you will need to get a forensic accountant – you can do this jointly. They will look at all the financials related to your business, including its assets and liabilities, share values, the full income of the business and if there is any capital available and how much it is. A valuer will also be able to advise you on any tax implications. Because of the high value of assets typically involved in a CEO, it is important to fully disclose all financial interests. In cases where concealment of information is suspected, the other spouse can ask their lawyer to request an order for full financial disclosure.
Think about getting a shareholder’s agreement and prenup
A shareholder’s agreement will outline how the company assets will be split if you divorce and as a result, will provide both confidence in the business and peace of mind personally. It’s ideal to obtain a shareholder’s agreement before you marry. Prenuptial agreements are becoming more accepted by the courts, although they are not legally binding. If you are already married, consider obtaining a post-nuptial agreement. CEO divorces are not uncommon but it’s understandable to feel guarded about letting your colleagues know what is happening in your personal life as the boss of your company. However, it can help to be transparent when you run a large or public company as details are likely to emerge regardless.
Being prepared and informed is crucial in how your divorce will conclude. Take stock of all your financial assets and consider how these could be split. If you can, reach a mutually beneficial resolution with your former spouse as this will help reduce both the emotional angst and financial impact of your divorce.