Divorce and your Business – how to protect your assets

A Pre-nuptial Agreement is a written agreement drawn up by a couple prior to their marriage. The purpose of the agreement is to enable you and your future spouse to express how you would want your assets to be divided in the event of a subsequent divorce. This can also be done after marriage and is known as a Post-nuptial Agreement.

Where one spouse is a business owner, it is important to understand that this will be considered a marital asset upon any subsequent divorce. It is likely that a shareholding with be formally valued and there will have to be a consideration as to how the other spouse’s interest in the business will be dealt with. They do not need to be directly involved in the business for this to be the case. In fact, it can be more complex if both parties have been made shareholders in the business or are both partners in the business.

It may be possible to set out prior to the marriage, how the business will be dealt with on any separation by drawing up a pre-nuptial or post-nuptial agreement. Whilst the agreements are not automatically enforceable by a court, they are given increasing weight, subject to the agreement having been properly prepared.

Ideally, both parties will have separate independent legal advice. The agreement will need to be drawn up in plenty of time prior to the marriage. There can be no pressure from either party on the other to enter into the agreement. It is important that you and your future spouse exchange financial disclosure before finalising the terms of the agreement. This allows you both to fully consider your respective income, property, other assets, pension and liabilities before agreeing on how to separate your assets in any subsequent divorce. In particular, the business accounts will need to be available and some indication as to the likely value of the business.

In any future divorce proceedings, the court has the discretion to depart from an agreement considered to be unfair in all circumstances. It is important therefore to take advice on the fairness of any intended agreement at the outset.  

For further information in relation to Pre-nuptial or Post-nuptial Agreements, or any other family matter, please contact our Family team on 01302 341414 or 0114 272 1884, alternatively, you can fill out our online enquiry form.

We have further articles on our website relating to divorce, here are four that you may find helpful:

• What is a Pre-nuptial or Post-nuptial Agreement? 
• What is a Separation Agreement? 
• Will my spouse be entitled to half of the assets I inherit if we divorce? 
• How do finances get split in a divorce?