Understandably, this can sometimes lead to disagreements between different parties, but  how do ownership and management issues cause a dispute between divorcing spouses where a business is involved? 


Common interest

Generally speaking, it is in the interest of both the owner and management of a business, if they are not one and the same, for it to be successful and profitable. Whilst the profits from a business belong to the owner of a company's goods and assets, the retention of jobs and employee livelihoods, including management, are dependent upon its overall performance. For this reason, the aim when it comes to a divorce is to cause as little disruption as possible to the business.


Common disputes

When a business is implicated in a divorce, for example, with a family-owned business, there are significant areas of concern. In smaller companies, owners and managers tend to be the same, but in medium to large businesses it can be different. It is also more likely that one spouse has less knowledge of the operations than the other, which is where disputes around the value of a business can emerge. For example, there may be issues around the suggested value of a company, or its assets, or if it was established prior to the marriage. 


How you can protect your business if you own it?

  • Pre-nuptial

If you are the owner of a business, regardless of whether it was established before the marriage began, it will be considered as an asset of the marriage. Some people choose to sign a pre-nuptial (or post-nuptial) agreement to limit the extent to which a business can be considered within a financial divorce settlement. This is more common when a high-net-worth, family-owned business has been built up over generations. 

  • Negotiation

Entering into meaningful negotiations with the assistance of qualified professionals can help to alleviate fears about a business being negatively affected. Your solicitor can help with organising this, and it is genuinely a more cost-effective way of navigating the process, and coming to an agreement, than waiting for the court to do it. 

  • If your former spouse owns the business

The reason that a business is considered a matrimonial asset in the eyes of the family court, regardless of when it was established, is because it often provides an income and financial stability for a family. The court looks to maintain the functionality of the company so that it can continue to serve this purpose, however this is only relevant up to the point whereby the reasonable living standards for each spouse and any dependents have been met. A spouse will not necessarily be awarded half of the company, and settlements may include the offsetting of other assets against the value of the business.


What you are entitled to as the person who runs the company? 

If you are divorcing from your partner and you are either the sole manager or heavily involved in running the company, the court will seek to maintain you in that position wherever possible. It may consider the transfer of shareholdings from one spouse to another, or a periodical payment as an option, in return for leaving the business operating in its usual capacity. It is not impossible for the court to order the sale of a business in order to divide assets fairly, but it is very rare, and always a last resort.