by Richard Buckley, Editor, Business Eye

Clare Curran, Solicitor and Director of Curran Bowles Family Law, a specialist company dealing with finances on separation and divorce, looks at what happens to a family business when a marriage breaks down.   Divorce is inevitably a stressful process and where one or both parties to a marriage are involved in the running of a family business, this can make matters more complicated to resolve.


 

In long marriages, an equal division of the available assets is the starting point. In dividing assets between a separating couple, the desired outcome is to achieve a fair result when taking into consideration the respective needs of the parties and the other relevant circumstances in the case.

To consider what would be fair, both parties should make full and frank financial disclosure evidencing the extent of their financial interests. If either party has an interest in a business, its value will form part of the overall discussions.  Given the nature of a business as an asset, how it will be treated upon divorce is different to cash in the bank or a property and will depend on the specific facts in the case.  Getting specialist matrimonial legal advice as early as possible is therefore always advisable.

The context of how the business was started or acquired can be important.  If the business was inherited before marriage, for example, there may be an argument for some or all of the business to be ‘ring-fenced’. However, where one spouse’s financial needs cannot be met without taking it in to account, then ‘need’ will take priority and ring-fencing arguments may fail.

Some of the relevant factors to be taken in to account will be how the business is owned, who is responsible for its running, the income produced, any property or assets owned and capital available or ability to borrow against its assets.

To determine how any business will impact on a matrimonial settlement, it will usually require to be independently valued, ideally by a jointly agreed forensic accountant, unless the business has minimal or no capital value and purely generates an income. In this case, the costs of obtaining such a valuation may be considered disproportionate, however the income generated will still be relevant in terms of whether maintenance obligations arise.  

Outcomes will depend on each case’s particular facts but generally, the Court is unlikely to order a business to be sold to the detriment of the other owners in cases where such an outcome can be avoided. The court will also want to try and help the parties achieve a clean break where possible and  has various powers at its disposal. These include ordering that one party keeps the business and the other is compensated for their share, or where there are insufficient assets to meet the parties’ capital needs, both spouses can be made shareholders, but the downside of this is a lack of clean break. The court can also order transfer of shares from one spouse to another to achieve a fair result.   Alternatively, where selling a business is essential to ensure fairness, this can be done, but efforts will be made to avoid such an outcome.  

With a significant number of private businesses in Northern Ireland regarded as ‘family-owned’, and divorce an unfortunate reality for many, these issues frequently require to be resolved. There is no doubt that divorce or separation can be more complex when a business is involved, but specialist matrimonial lawyers will be able to guide you through the process and discuss the options to help you resolve matters in the best possible way. 

If you require any advice in relation to a family law matter, get in touch today with our specialist family law team at Curran Bowles Family Law either by phone on 028 91871880 or by emailing clare.curran@bowles-law.com

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