Taking care of business can be done in a divorce - Richard Smith

However, if things are handled constructively, a solution can usually be arrived at that satisfies everyone and minimises the impact on the business. That usually makes sense for everyone involved. If the business is damaged in any way, that can have financial ramifications not just for the business owner but for an estranged spouse. For example, if income is adversely affected, that can affect the amount of ongoing financial support able to be paid.

If a business owner is going through separation and divorce, and the business is “matrimonial property” (part of the asset pool to be divided upon separation or divorce), one of the first steps is to establish the value of the business in question. That can be a complex matter and it is often necessary to involve forensic accountants. Whilst that can be expensive, one way of reducing the cost is if both spouses are prepared to cooperate and appoint a single accountant. That ensures that both spouses have input into the process and affords the opportunity of dialogue with the expert.

Once the value of the business has been calculated, often the next issue to be considered is how the value of the business can be “extracted” to pay the other spouse their share. That can be done by other assets being used to “offset” the value in the business. If, for example, there are investments with an equivalent value to shares in a private limited company, it may be the case that the business owner retains the shares in the business, and the other spouse receives the investments to “balance the books”.

If “offsetting” isn’t a viable option then other ways need to be considered in order to finance a deal. Whilst that can of course include a partial or full sale of the shares, often finding a buyer for some of the shares is impossible on a practical level. And of course, selling all of the shares means the business owner no longer has control of the business so often isn’t a desirable choice. Other options can be the release of cash via a director’s loan or the distribution of profit, often over a number of years into the future.

In looking at how best to resolve financial issues arising from relationship breakdown, adopting a constructive, problem-solving approach is almost always conducive to arriving at an endpoint that works for everyone involved.

There are usually more options available to the couple if they deal with matters in a collaborative way than if they take a combative and aggressive stance. Agreeing settlement terms is hugely beneficial in that it removes the considerable downsides of unnecessary litigation – minimising acrimony, cost and risk.

Whilst an agreed settlement is unlikely to ease the personal and emotional pain of separation and divorce, it can at least lower the burden of conflict and ensure that a fair and workable solution is found that benefits everyone.

​Richard Smith is a partner and head of family law, Burness Paull

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