Family businesses on divorce

Protecting a family business from the impact of divorce can be key to achieving an effective financial settlement. It requires lawyers with an understanding of the commercial and practical realities.

We are not just divorce lawyers. We're business lawyers.

There's no hiding the fact that divorce has a financial impact. The wealth the family had pre-separation has to be divided up to support two new separate households so the objective must be to preserve the value of the available assets as much as possible. This is particularly important when there's a business and in most cases keeping a business operating profitably rather than selling it will be the best way to achieve this. 

Whether planning in advance or dealing with it at the time the relationships breaks down, minimising damage to a business on divorce requires legal advice, expertise and experience that goes beyond just family law.  It requires lawyers with a real understanding of how businesses work and the wider picture. With an ability to think creatively and commercially.  And with access to a network of other trusted business experts.

We work closely with our colleagues in our wider private wealth, tax and corporate teams, together with carefully chosen external advisers, to ensure that no stone is left unturned when it comes to advising you on the best way forward and protecting your interests.  

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Experience has taught us that the best way to avoid damage to a family business in a divorce is to plan ahead. Effective options include:

  • A prenuptial or postnuptial agreement. This might provide for one spouse to retain the business with the other having more of the non-business assets to ensure the agreement's fair and will be upheld if challenged in court
  • Trust structures. As well as having tax advantages, trusts are a good way of passing assets such as a family business down through the generations
  • Restricting the transfer of shares to a non-owning spouse through a company's articles of association

If the only way to have a fair overall split is for both you and your partner to have an interest in the business, other factors will need to be considered such as:

  • Directors' service contracts that make your respective responsibilities, pay and benefits clear
  • Whether you have different classes of shares with different voting rights
  • Protection if one of you has a minority interest

Often dispute resolution options like mediation or collaborative law will be the best way to resolve these complex issues.

Our experience in protecting family businesses

When it comes to splitting assets on a divorce where businesses are involved, Mills & Reeve's divorce solicitors have the experience and expertise to help you make the best decisions and achieve the best outcome. Our comprehensive insight into businesses on divorce encouraged us to write the book Divorce and the Family Business. This invaluable resource draws together the key legal and practical issues to guide professional advisers through the challenges of these cases.

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Our team of specialist family lawyers are here to support you if you're facing issues related to family businesses on divorce. Speak to our team today. 

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What others say about us

“Mills & Reeve are an outstanding firm providing exceptional care and services for clients. Clients should know that they will be listened to, cared for, and that the best divorce journey will be created for them by the team.”

Legal 500

“I always found them to be knowledgeable and reliable advocates and I had total confidence in their abilities to protect my interests, however complex the issues.”

Chambers 2024

“Mills & Reeve really listened to me and fought my corner but were also able to make sure I had realistic expectations ”

Chambers 2024

“Mills & Reeve has a client-centric and compassionate approach to family law. Clients are not hurried in making decisions but are guided through the necessarily steps with care and empathy." ”

Chambers 2024

Resources

Explaining family law podcast

Facing a family law issue and not sure what's involved? Our podcast is the right place to start.

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Family and children blog

Our family and children law blog provides practical advice and insight on a wide range of topics by our family and children lawyers.

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Family law vlogger YouTube

On our YouTube channel, Caitlin Jenkins, the Family Law Vlogger gives you guidance on your first step in sorting out your issues.

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Protecting family businesses in a divorce FAQs

Experience has taught us that the best way to avoid damage to a family business in a divorce is to plan ahead. Effective options include:

  • A prenuptial or postnuptial agreement. This might provide for one spouse to retain the business with the other having more of the non-business assets to ensure the agreement's fair and will be upheld if challenged in court. 
  • Trust structures. As well as having tax advantages, trusts are a good way of passing assets such as a family business down through the generations.
  • Restricting the transfer of shares to a non-owning spouse through a company's articles of association.

If the only way to have a fair overall split is for both you and your partner to have an interest in the business, other factors will need to be considered such as:

  • Directors' service contracts that make your respective responsibilities, pay and benefits clear.
  • Whether you have different classes of shares with different  voting rights.
  • Protection if one of you has a minority interest.

Often dispute resolution options like mediation or collaborative law will be the best way to resolve these complex issues.

Valuing a business for divorce purposes is usually complex. It will require input from an accountant or specialist valuer as well as a family lawyer with the necessary expertise and experience. 

The valuation approach will depend on a range of factors such as the nature of the business, how it is structured, the market it's operating in and tax implications.

And valuation is far from the end of the story. What's critical is how that value is factored into the overall divorce financial settlement. It may be possible to raise money from the business to make a payment from the business-owning spouse to the other, but if it isn't there may need to be an unequal split of other family assets to compensate or both of the couple may have to keep shares. 

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