Divorce is not an easy process, but problems can be compounded when there is a business or family business involved.  The division of the family business has traditionally been the subject of a great deal of argument. Often the party who owns or runs the business will seek to argue that the business is worthless or should not be taken into account, and if it is, that it should not be sold.

What do the courts do with family businesses?

The leading case, which was decided in the House of Lords, involved a Mr and Mrs White who were farmers.  The ruling in that case established the principle that there has to be a good reason for the division of assets to be unequal.

However, this is not always the position as each case is unique and will be decided on its own merits.  Unequal splits of joint business assets can be proper in some circumstances.  For example, in a case in which the husband’s business did not have sufficient liquidity and was not able to generate enough cash to finance an equal split, the court awarded the wife a 39 per cent share of the total assets, which included the family home.  Due to the financial circumstances of the business, the balance of the wife’s settlement was ordered to be paid over a period of years.

While the court usually seeks to ensure that your business is left intact, this is not always the case.  Guidance on this point has been given by High Court judge, The Hon Mr Justice Coleridge, who said:

“…old taboos against selling the goose that lays the golden eggs have been largely laid to rest…but if it is necessary to sell her, it is essential that her egg-laying abilities are damaged as little as possible in the process.”

The division of business assets

One important factor in the division of ‘marital assets’ generally is the relative contributions of the two parties to the creation of the assets.  This need not be direct, as a stay-at-home spouse can be awarded a substantial proportion of the assets if they were instrumental in supporting the ‘wealth creator’ in growing the family’s wealth.

However, where the wife or husband can show exceptional talent or contribution in creating or running the business this may be a factor which the court will consider justifies an unequal division of the business/assets.

The division of business assets on divorce can be difficult so it is important that you seek expert advice. This will assist in achieving a fair financial settlement.

Can we help you?

If you would like to discuss the treatment of business assets, then please do not hesitate to call Colleen on 01242 517949, 01792 892692 or 01933 220651. Alternatively, please email us at enquiries@ds-legal.co.uk. We’re here to help.