Divorce and the Family Business: A little certainty in uncertain times

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Written by Christian Gape, Barrister at Magdalen Chambers.

It hardly needs saying that these are uncertain times for everyone and the business community in particular.  Now imagine throwing a divorce into the mix. 

Cases involving businesses are some of the most difficult cases that divorce lawyers have to deal with.  Often a lot of the family wealth is tied up in the business and the Court has to answer the thorny question should the business be ‘broken up’ to ensure each spouse has their fair share or can we find a way to preserve the business whilst also being fair to both parties? 

One thing that married (or soon to be married) couples can do is enter into an agreement to govern what will happen to their assets in the event of a divorce.   

Many people think that a ‘pre-nup’ (or a ‘post-nup’ if you are already married) is the preserve of the rich and famous but this is far from true.  These agreements are a simple tool that can be used to reduce some of the uncertainty that comes with a divorce and reduce the risk of the business assets having to be sold to meet one spouse’s claim.  

These agreements are not binding, the Court can deviate from them if it is right to do so, however in recent years they have begun to carry far more weight.  Provided an agreement is entered into with both parties having a full appreciation of its implications and, crucially, it is fair then the Court is likely to give effect to these agreements. 

What this means in practice is that each party should have separate legal advice and a fair agreement should be reached. 

The right approach will be different in each case.  Where one spouse is bringing the business into a marriage it may be the case that the agreement allows them to retain the business provided the other spouse’s reasonable needs are met.  Where the business is entered into after marriage then consideration may be given to providing a fair share of the business assets to each spouse.  In either case finding a way to do this that is right for your business and ensures that you can keep trading can be to everyone’s benefit.    

It is often difficult to discuss a potential divorce when you are planning your happy futures together or are already happily married but it is far easier to plan for these things in happy times than in the emotional heat of a divorce.  Deciding what is right for your business will require consideration of both commercial law and family law.  In family-run businesses, a divorce can be truly devastating. As difficult as it is to plan for a divorce it makes good business sense, one less uncertainty in these uncertain times.  

Magdalen Chambers is a leading local provider of advice in both commercial law and family law.