Family Partner James Howarth answers some key questions if you're facing divorce and own or run a family business.
Q: My wife and I have decided to go our separate ways. My wife has built up a successful business. How will the business be taken into account when we need to reach a financial agreement?
A: Where one party has an interest in a business, the court will need to have a broad understanding of the value of the business. The business is an asset of the marriage that the court will need to consider. It needs to know what funds can be raised on the strength of the business to finance a matrimonial settlement. The court will not wish to jeopardise the ongoing stability of the business as it often funds the family's home and lifestyle.
Q: She claims that it is not doing very well, yet, she seems to be good at getting clients in and has recently expanded to larger premises. Will my wife be able to hide her financial assets to avoid them being taken into account when reaching a settlement?
A: Matrimonial law works on the principle of full and frank disclosure of both parties' financial resources. Financial agreements reached can be set aside by a court if it becomes clear that a material fact is not disclosed.
Q: I am a director of a small family business, which has a company pension scheme. How will be pension be taken into account when we divorce?
A: Often there will be a big disparity between the position of the spouse involved in the business and the other spouse. This disparity of pension assets must be addressed to give a more equitable solution and try to ensure security in old age for the former spouse.
Q: How will our tax position be affected?
Dealings with the family business in matrimonial situations raise significant tax implications including tax relief and allowances; the tax implications of extracting funds from the family business, reorganising assets and how tax impacts on the business valuation. It is also important to involve an accountant or other tax specialist here.
