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.
Initial steps to be taken and possible orders that can be made
The Court has two essential functions in financial remedy cases where a business is involved:
1. To establish the value of the parties’ interests in the business; and
2. To decide how that value should be reflected in the final financial distribution so as to achieve fairness between the parties.
In the absence of existing documentation evidencing the value of a party’s shareholding, the first step in financial remedy proceedings will be to obtain an expert valuation of the business by way of a report. Once prepared, the expert’s report may consider (amongst other things) issues of liquidity and how money can be withdrawn from a business to fund a settlement.
An expert will often be asked to also consider the tax implications of extracting money from a business so that the parties can find the most tax-efficient methods of raising capital.
Under the Matrimonial Causes Act 1973, the Court has the power to order that shares be transferred from one party to another by way of a Property Adjustment Order. The Court also has the power to make an Order for Sale which can apply to shares in a private limited company. As to which of these Orders (if any) the Court would be likely to make, this will be entirely dependent upon the facts of each case and there is no one-size-fits-all approach.
In many cases, the business in question may have been established before the marriage or inherited by one party during the course of the marriage. It may be that the value of the business has grown substantially post-separation owing solely to one party’s efforts. This is a factor that may be reflected in the final division but it is not a hard-and-fast rule.
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.