Finding out how much the family assets are worth is a crucial part of financial disclosure. Knowing how much is “in the pot” is the first step, before then dividing what there is.
Valuing businesses is far harder than, for example, valuing properties. There are far fewer businesses being bought and sold, so it is far harder to know what somebody would pay for a business.
If a business is involved on divorce, the question of valuation will arise early on. At the first appointment, the court may well give directions.
Usually, the court prefers to appoint a single joint expert – a specialist accountant who will be appointed by both parties jointly to value the business. Other issues, like the ability to raise money through the business, or future profitability, can also be considered.
Having a joint expert undoubtedly keeps the cost down. But in a difficult area like business valuations, it can be a subjective process.
Sometimes it can feel as though the valuation is too low and bears little resemblance to the lifestyle the business provides.
At other times, the valuation can appear very high, set at an optimistic level, given the absence of prospective purchasers.
Given how variable valuations can be, it is easy for too much reliance to be placed upon them – especially if the other spouse is being given hard cash or property of a similar value. The courts are more alive to this now – see the court’s approach.
Getting separate accountants to value the business will need the permission of the court.
It may be justified if:
- there is a substantial gap between what the accounts show, and the lifestyle involved;
- there are substantial fluctuations in the company figures, without adequate explanation;
- the business owner is not straightforward in supplying information and figures; or
- there are good grounds for believing that the business is being manipulated because of the divorce.