Dividing Assets and Reaching Settlement in Matrimonial Proceedings for Shareholders continued…

A blog by Blue Stephenson, Trainee Solicitor in the Family Department at Pepperells Solicitors.

If you are a shareholder in a limited company and are contemplating getting a divorce, you are likely to have questions as to how this might impact upon any financial settlement reached between you and your spouse. Perhaps both you and your spouse are shareholders in the same company and you are concerned as to how you will separate your business ties as well as your marital ones.

Shares may be matrimonial or non-matrimonial

The general principle is that matrimonial property (i.e. property built up by the parties during the subsistence of the marriage) will be divided equally between the parties. Parties will typically have a much less strong claim to assets which are non-matrimonial, for example:

• Pre-acquired assets;
• Assets brought into the marriage from an external source (without any contribution from the other party); or
• Assets or income which are the product of one party’s sole endeavour.

This is not a straightforward area of the law and it has been subject to much litigation at appellate level. Specialist legal advice should always be sought when such issues are raised.

It is important to note that in cases where needs predominate over sharing (i.e. there is not a surplus of assets beyond meeting the parties’ primary needs), those needs will take priority which means that assets cannot necessarily be ring-fenced because of their non-matrimonial nature.

Furthermore, the fact that the parties to the marriage have always kept their finances separate and one holds business assets whilst the other does not is not an automatic reason to depart from equality. The Court may depart from an equal division of the assets if it can be shown that one party has made or is going to make significant contributions to the business post-separation which will increase its value markedly.

Following the decision of the Court of Appeal in Wells v Wells [2002] EWCA Civ 476, it is now a well-established principle of law that the value of a business is not the same as the value of cash on the basis that shares are illiquid and risk-laden assets. It may therefore be the case that a percentage discount is applied to shares received by a party to account for this risk, or perhaps it may be deemed that the total assets should be divided in such a way as to provide each party with a proportionate share of the liquid and illiquid assets.

At Pepperells Solicitors, our family matrimonial team are able to provide you with sensible and comprehensive legal advice and assistance to ensure that you are fully protected post-divorce.

Should you wish to arrange an initial consultation then please do not hesitate to contact us via email, telephone, live chat or by visiting one of our six offices in Hull, Scunthorpe, Grimsby, Lincoln, Beverley or Newcastle.