Will I get a share in my husband’s business?

In English divorce law, a husband and wife have financial claims against each other in respect of income/maintenance, capital, property and pension provision. Those claims do not simply come to an end upon divorce and can only be finally settled by the making of a financial order within the divorce proceedings. This article considers how a husband’s business may be taken in to account within divorce proceedings.

English law allows the courts a wide discretion to redistribute assets of spouses on the breakdown of their marriage, regardless of the origin and strict legal ownership of those assets.

Contributions to the marriage are equal

Although both parties may make different types of contributions to the marriage, those contributions should be considered equal. The role of homemaker is therefore considered no less valuable than that of the breadwinner. This is especially true of long marriages.

Therefore, a spouse may never have set foot in their partner’s business, but if a marriage breaks down they could still claim against the business assets and cash and income streams, or even force its sale.

When assessing a husband’s business as a matrimonial resource, the key questions will be:

1.            How much money can be drawn from that business to fund a financial settlement on divorce?

2.            How much income could the business produce in the future?

The resolution of most court applications relating to financial matters on divorce is a two stage process. First comes the exercise of gathering the financial information and ascertaining the facts and figures.

Secondly, the relevant legislation and case law is applied to formulate a range of possible settlement proposals.

Valuing a business

The information gathering stage can be particularly complex when business interests must be valued. Depending on the size and complexity of the business, accountants may need to be jointly instructed to investigate the open market value of the business, future profitability, the value of the parties’ respective interests, whether funds can be extracted from the business and the tax consequences of doing so.

When it comes to funding a final settlement, the party wishing to continue the business may need to consider transferring a larger share of non-business assets to the spouse to offset against the spouse’s interest in the value of the business, but consideration should be given to the fair sharing of risk and illiquidity.

If there are insufficient liquid assets, aside from the husband’s business itself, to satisfy a spouse’s claims then it becomes necessary to consider whether and how the liquid assets of the business can reasonably be made available in a tax efficient manner.

However, particular care must be taken where claims are being made against assets held by a business. A company is a legal personality and so corporate assets will not necessarily be treated as matrimonial assets that are available for division on divorce. The treatment of business assets on divorce is a complex subject and requires early specialist input to ensure a favourable outcome.

Expatriate Law is ideally positioned to assist business owners, or their spouses, in the event of divorce proceedings: David Hallam-Peel is a highly experienced litigation lawyer who spent many years in the accountancy profession before entering the law. Alexandra Tribe is accredited by Resolution as a specialist in International Family Law and Advanced Financial Provision. Sonny Patel has 8 years of post-qualification experience exclusively at Legal 500 rated central London law firms, where he regularly acted for entrepreneurs.

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