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6th June, 2018 by Justine Flack , Alishia Marrocco
It is often said that one should never mix business with pleasure. Not everyone heeds this advice which may come home to roost when a marriage breaks down. Equally, business disagreements can themselves put a huge strain on family relationships.
If you work with your spouse you should carefully consider issues on a personal level, thinking about what should happen to your business if the marriage were to fail.
Practical problems can arise when husbands and wives work together and there is a marriage breakdown. Will you be able to continue working together? If not, what’s best, a sale of the business or a transfer of it from your spouse to you? Negotiations on this issue can be very stressful and you may feel that your business life is being compromised.
We always advocate addressing these issues before problems arise and to plan ahead. This may involve the introduction or revision of a Partnership Deed, considering the structure of shareholdings, review of the Articles, or the preparation of a Shareholders Agreement.
A Pre-Nuptial or Post-Nuptial Agreement should also be considered for your marriage. These detail the financial arrangements in the event that you go through a divorce. They are negotiated and prepared ahead of problems arising in your marriage and, if done properly, are likely to be upheld by the court.
A Pre-Nuptial Agreement and other documents can specifically cover issues such as terms of working, whether your spouse or you would be prevented from setting up in competition and they can control the confidential information which can be shared.
If your spouse does not work in the business a Pre-Nuptial Agreement gives protection to you as the owner of the business. It may be a family business which has passed down from an earlier generation. Preserving it within your family may be important; a Pre-Nuptial Agreement would allow ringfencing of that asset. There may be members of your extended family who are involved in the business and their interests can be addressed. This may prevent them from having to intervene in your divorce. Pre-Nuptial Agreements can recognise these situations and deal with them, removing risk.
Whilst the divorce court may be reluctant to ‘kill the goose that lays the golden egg’, a business is by no means off limits. It’s an asset within the marriage just like property, bank accounts and pensions. Taking advice early in the divorce process is important but perhaps more important still is that people take advice even earlier - at the point of going into business with their spouse or introducing them to an existing business or prior to marriage in general.
Our Family Team recognises the importance of planning for your business. We have extensive experience in advising business owners both within divorce proceedings and prior to issues arising. Justine Flack, a Partner and Collaborative Lawyer in the Leicester office and Solicitor Alishia Marrocco, can give clear and pragmatic advice. We work closely with our Corporate Teams and focus on practical solutions to reduce business risk.
As Justine says:
What’s important is to instruct lawyers who prioritise resolving issues rather than litigating, who will work with your accountants and who seek to understand your business and assist you in retaining it, particularly where marriage breakdown poses a risk. This is the focus of the Family Team at Howes Percival.
If you would like any further advice on this matter, please contact a member of our Family Team who would be happy to discuss your situation.
The information on this site about legal matters is provided as a general guide only. Although we try to ensure that all of the information on this site is accurate and up to date, this cannot be guaranteed. The information on this site should not be relied upon or construed as constituting legal advice and Howes Percival LLP disclaims liability in relation to its use. You should seek appropriate legal advice before taking or refraining from taking any action.