Family businesses are the backbone of the UK economy, contributing significantly to employment and economic growth. However, when a divorce looms, the future of a family business can be at risk. Divorce proceedings can complicate the ownership and management of a family business, potentially leading to its division or even sale. To protect your family business from the impacts of divorce, it is crucial to take proactive measures.
Naim Qureshi, Senior Associate in the Family & Divorce team at Blaser Mills Law, outlines key considerations.
Prenuptial and postnuptial agreements
One of the most effective ways to safeguard a family business from the uncertainties of divorce is through prenuptial or postnuptial agreements. These legal documents outline the distribution of assets, including the family business, in the event of a divorce. While prenuptial agreements are made before marriage, postnuptial agreements can be established after the wedding.
It’s essential to engage experienced family law solicitors to draft a comprehensive and fair agreement that can be regarded by the court.
Shareholder agreements
For family businesses structured as limited companies, shareholder agreements are invaluable tools. These documents specify the rights and obligations of shareholders, including those of family members. They can include provisions that protect the business in the event of divorce, such as requiring the departing spouse to sell their shares to the remaining family members at a fair market value.
Shareholder agreements can help maintain the stability and continuity of the family business by preventing outsiders from acquiring a stake during a divorce.
Protecting non-family shareholders
If your family business has non-family shareholders, it is crucial to protect their interests during divorce proceedings. This can be achieved through buy-sell agreements, which stipulate the terms and conditions for the sale or transfer of shares owned by the divorcing family member. These agreements can help maintain the stability and continuity of the business by ensuring that control remains within the family or is transferred to trusted individuals.
Mediation
In many divorce cases, mediation can be an alternative to lengthy and costly court battles. Engaging in mediation allows both parties to negotiate and reach mutually agreeable terms for the division of assets, including the family business. It can be a more amicable and less disruptive approach, particularly when children or other family members are involved.
Conclusion
Protecting your family business from the impacts of divorce requires careful planning and proactive measures. Prenuptial and postnuptial agreements, shareholder agreements, buy-sell agreements, valuation experts, and alternative dispute resolution methods can all be vital tools in preserving your family business.
It’s essential to seek advice from experienced family law solicitors and financial advisors who understand the complexities of family business ownership and the legal intricacies of divorce. By taking these precautions and seeking professional guidance, you can help secure the future of your family business in the face of marital challenges.
Get in touch with Blaser Mills Law
To speak to our Family & Divorce team please contact Naim on 01494 781356 or email naq@blasermills.co.uk.