Under English and Welsh law, when considering divorce and business settlements, a business is usually seen as a ‘matrimonial asset’ when it comes to a financial settlement upon divorce. As a result, your business may be included as part of the financial settlement.
If you and your spouse were unable to reach an agreement about your financial settlement (how your assets would be divided upon divorce) and the family courts were asked make the decision for you, there are a number of possible outcomes, including:
A judge may decide that you can keep your business but your spouse should be given a larger share of, for example, the family home.
In some circumstances, the courts may decide that dividing the shares between both spouses may be the best option. Alternatively, a judge could come to the conclusion that sharing the income would be appropriate.
Sometimes, it may be necessary for two people who are divorced to regularly be in touch with each other to deal with business issues. Obviously, this may not be ideal, especially with the courts’ emphasis on clean breaks, but in some circumstances there may be no other suitable options.
Asking a judge to decide your financial settlement upon divorce should normally be viewed as a last resort. Not only can going through the courts be time-consuming and costly, it ultimately takes the final decision of how your assets should be divided out of yours and your spouse’s hands and into the hands of a judge.
Reaching an agreement outside of the courts is usually the preferred option. This way, you and your spouse may be able to work towards an agreement that both protects your business and provides a financial settlement with which you are both satisfied.
If you are unable to decide how your assets should be split between yourselves, there are other options available. Mediation, for example, where an independent third party aids discussions between you and your spouse, can be helpful in some circumstances.
Collaborative law, a series of 4-way meetings between you, your spouse and your respective solicitors, may also help you to reach an agreement with your spouse.
If you are not yet married, pre-nuptial agreements, also known as pre-nups, enable you and your future spouse to specify what should happen to your assets if you divorce. A pre-nup which includes your business, may help to avoid any future issues.
If you are already married, a post-nuptial agreement may be possible.
Although these agreements are not legally binding, they will usually be taken into account by the courts, as long as certain procedures have been followed.
If you are worried about how your business will be affected by your divorce, it is highly recommended that you seek legal advice from a specialist solicitor.
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