Divorcing couples or civil partners who have not made plans to protect their business interests through a prenuptial or postnuptial agreement could find the intervention of the court particularly devastating when it comes to reaching a financial settlement, as Fiona Yellowlees, a Partner in the Family Law Department at WBW Solicitors in Exeter and Sidmouth, explains.

‘Even if you single-handedly built your business up from scratch and all of its current value is solely the result of your hard work, if it is entirely owned by you, it could be viewed in the eyes of the law in the same way as any other family asset: as something that can be divided and shared with your spouse on divorce’ says Fiona Yellowlees.

The starting point for any financial settlement is an equal division of the assets acquired or built up during the marriage. From this standpoint, the court will look at all the available assets of the family including property, inherited wealth, savings, pensions and business interests to see how they can be fairly divided so as to meet the needs of both.

As part of this process, your business may come under rigorous scrutiny and it is important not to be tempted to hide any assets or attempt to undervalue the business. Usually an expert accountant is appointed to establish the value of the business and advise on any tax implications. The court will also consider when the business was started, the relative contributions of each spouse whether financial, by time and effort, or by way of other sacrifices.

The process will consider the potential liquidity of the business and other assets, and crucially, whether you have the money to buy your spouse out of the share of the business to which they are entitled. If you do not, the business may have to be sold off to allow you to pay them their fair share, but this is extremely rare.

There are many ways of coming to an agreement about your financial settlement that avoid going to court, including using mediation or collaborative law. These methods rely on active negotiations where you decide, with the help of lawyers or a mediator, how your assets are to be divided. There can be scope for much more creativity in the arrangements, such as:

  • asking your spouse to accept shares in the business to stop it having to be sold. You would thereafter have to pay dividends to your former partner but this may be preferable to having to sell the business altogether;
  • forsaking your claim on proceeds from the family home or other joint assets to generate enough of a settlement for your spouse to allow you to keep the business solely in your hands after the divorce.

If you are getting divorces and own your own business, it is highly recommended that you take legal advice as soon as possible. Our family law experts have a wealth of experience of helping their clients to protect their business interests, allowing a business to flourish and grow even if they do get divorced.

For further information, please contact Fiona Yellowlees in the Family Law Team on 01626 202415 or email fionayellowlees@wbw.co.uk. WBW Solicitors has offices in Newton Abbot, Torquay, Paignton, Bovey Tracey, Exeter, Launceston, Honiton Exmouth and Sidmouth.


This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.