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Divorce law blog

Mills & Reeve’s Full Scale Ahead report highlights issues faced by business owners on divorce

08/06/2015   By: Jane Booth

Mills & Reeve asked the owners of 500 medium sized businesses (50-500 employees/ £200m+ turnover) to tell us about the challenges they face in becoming the next generation of world-leading large enterprises. The result, a 28-page Full Scale Ahead report, produced some interesting findings, particularly for business owners who are going through divorce or those who are concerned about protecting their business in the event of divorce.

Businesses form part of the assets to be shared on divorce and are a central part of financial proceedings and discussions on divorce. As part of the divorce settlement business owners could find that:

• their interest in the business (if they wish to retain it) is offset against other non-business assets

• they have to withdraw sums of money from the business in order to make a payment to their former spouse

• that their former spouse could become a shareholder in the business

• the business (or their interest in it) is sold

The family courts have wide powers and can make a range of orders in relation to the business depending on the particular facts of the case.

If the court orders (or it is agreed) that the business is to be retained by one spouse then the findings of this study will make an interesting read. 94% of mid-market business leaders feel confident they could scale up (i.e. grow significantly every year in employees or turnover, without plans for sale in the foreseeable future) with the right support. However, more than 44% claim that it has never been so hard to grow their business and 40% believe it would involve more risk than selling it. This is particularly pertinent if one party in the divorce retains the business and this is offset by their spouse receiving a greater share of the non-business assets. This research shows that there is a significant challenge to the business owner if it is their intention to re-build the “pot” by growing their business.

There are ways to provide business owners with certainty and protection in relation to their business interests. Business owners should consider whether it would be appropriate to obtain a pre-nuptial agreement and/or a post nuptial agreement. These agreements can be considered alongside other methods of wealth protection and planning.

If you are interested in reading the Full Scale Ahead report, which details the challenges businesses (and their owners) face, please visit www.fullscaleahead.co.uk.

Jane Booth

Family Law Associate

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