Handling Business Assets on Divorce

It is important to review your family’s overall financial and personal circumstances when determining how best to provide for both parties to a divorce. This involves examining how the assets were acquired, which assets each party brought to the marriage, the parties’ ages, and the future financial responsibilities of each party.

Here are some questions we need to answer:

  1. When was the family business set up?
  2. What is each party’s role in the business?
  3. Is the fact that it is a family business an intrinsic part of the business’s value?
  4. Does the family derive most of its income from the business?
  5. Is the family home the business premises?

A basic tenet of company law is that a company is a separate legal entity from its members, but the separate legaI entity concept is disregarded by the courts in certain situations. During divorce proceedings, the courts may order:

  • corporate information be provided to facilitate a proper valuation of the shareholding
  • shares be transferred from one party to the other as part of such settlements

If the main asset is the family’s company, it is vital to:

  • extract enough value from the company to enable adequate provision for the spouse who may not be the key driver of the business
  • ensure that the value extracted from the business to make that provision does not threaten the company’s long-term ability to continue as a going concern

The court could, in principle, order the winding up of a company and the division of its assets, but this would be rare and not undertaken lightly.