How can I protect my family business during divorce?

Dividing assets on divorce can be an extremely complicated and upsetting event. Throw in a family business and lets face it: there’s the potential for mayhem!

As a trusted adviser, the most pragmatic advice we can give to our clients is to plan and prepare – before the event whenever possible.

This approach allows us to pre-empt the potential pitfalls and put the necessary special measures in place to ensure our client’s interest in the business, and the business itself, remains protected.

We regularly advise clients who are involved with the family business directly – or those who may not be involved in the day-to-day dealings of the business, but their spouse is – whose main source of family income is derived from the business. We can therefore advise on all aspects.

There are certain steps spouses can take to minimise the disputes that could occur in the event of divorce – including:

Pre-Nuptial and Post-Nuptial Agreement

It was once thought that these documents were only for the rich and famous. However, these documents can be a vital tool for any couple, particularly if there is a business involved.

Nuptial Agreements can be used to strategically set out the arrangements for the business in the event of a relationship breakdown. These documents are prepared in good faith and by agreement – offering both parties protection, whilst limiting the impact the separation would have on the business itself.

Trust Structures

There are many Trust structures, including Family Trusts and Discretionary Trusts, which can be set up to limit the exposure of the business during a divorce.

It’s imperative, however, that specialist advice is obtained to ensure the Trusts are set up appropriately and seen as legitimate in the eyes of the law.

Employment Contracts & Shareholder/Partnership Agreements

Signing agreements that distinctly deal with transfers of shares – for example, in personal circumstances – can provide another layer of protection for the business.

It’s also important to ensure all documents are reviewed periodically confirm they are up to date and reflective of current circumstances.

Final thoughts

Ultimately, unless parties are in agreement with how a business is dealt with upon divorce , it is a matter for the court.  The court will however give considerable weight to the measures put in place should they be asked to assist on the matter.

By forward planning, we can mitigate the potential issues and help ensure the business suffers as little disturbance as possible as a consequence of the relationship breakdown – allowing your legacy to live on.

If you’d like speak to our specialists about how we can help you protect your business in the event of divorce, please contact our friendly Divorce and Family Law team via email at family@psg-law.co.uk or call 03333 058375. We’re here to help.