A range of disputes typically arise for families that own a company together. As is often the case with divorce, it boils down to one key issue; how to divide up the assets. In this, a company is no different to any other asset that the couple may hold. However, there can be difficult disputes to resolve if both parties wish to retain their interest. If shares are to be valued, issues to consider include what, if any, minority discount should be applied, whether either spouse should be considered a “special purchaser”, and the protection afforded to minority shareholders in the Companies Act, which can sit uncomfortably with the matrimonial legislation at times.
There can be tax advantages to consider in the year of separation and it will always be important to consider what, if any, reliefs are available, in particular Entrepreneur’s Relief.
Divorce and family businesses
There can be many unique challenges associated with handling a divorce case that involves a business. As mentioned, taxation is significant. Another key consideration is the role of the people involved – often both parties will work for the company and the departure of one or the other may reduce the value of that business. And the person leaving the business will have to consider the loss of income and their potential to replace that elsewhere.
Vitally important is how to structure the payment for any shares – we take a lot of time to consider liquidity issues and the resources of the person who is to make the payment to the other.
Key to remember is that the valuation of the company in a divorce court differs significantly from the normal market environment, and differences between Scottish and English law mean that the two jurisdictions take a varying approach to issues such as the potential future earnings of the company. There are also considerations as to any discounts or premiums to be paid, given that the acquirer is often taking total control of a business.
Dividing company shares
When dividing shares of a company between two parties, the courts decide who is entitled to what. This is where the determination has more to do with family law. The issue in Scotland is often whether the company can be considered matrimonial property or does it just belong to one of the individuals involved. If a person has inherited the business prior to the marriage then that person may have a stronger claim to be the sole owner, and not face any obligation to pass on shares or a compensatory payment to the former spouse. Here, the difference between English and Scottish law is important – in Scotland the law recognises the matrimonial assets as at the date of separation and does not generally take into account the likely future earnings of either party. In England and Wales, the courts have more discretion to consider matters in the round and it is less easy to predict an outcome as a result.
No one wants to hammer out the details of a separation in the cold and clinical environment of a court, and it is encouraging that alternative dispute resolution (ADR) methods such as mediation, arbitration and collaborative law are becoming more popular in terms of coming to an agreement outside of court. Divorcing spouses will always be encouraged to reach consensus wherever possible, and to agree the terms of a Minute of Agreement or Consent Order as the case may be, depending on jurisdiction.
Requests to relocate abroad with children
Across the UK, the overriding consideration is the welfare of the children. In England, more emphasis is generally given to the position of the primary carer, and therefore the courts can be more positive in considering an intended move abroad by that party. In Scotland, greater consideration tends to be given to avoiding disruption to the children. The reason for the move is vitally important – has it to do with moving back to be near extended family or for employment reasons, or is it centred on the personal preferences of the party wishing to move, or perhaps even to defeat contact with the left-behind parent? Each case will be considered carefully on its own merit.
It is vital to remember though that children cannot be moved abroad without the permission of both parents. If that is not forthcoming then the person wishing to relocate must apply to the court, where the other party can challenge the request.
International family disputes
The most common issue here is determining which court has jurisdiction; for example, a case may be made to dissolve the marriage in the country where one of the parties has been working. Often in international cases, there is a race to find the jurisdiction most sympathetic to the needs of a particular party.
Given the differences between English and Scottish law, it might be assumed that there is some flexibility in whether the divorce application can be filed south or north of the border. However, in the UK divorce is normally considered to be under the jurisdiction of the court in the last location that the couple resided together.
When dealing with divorce and marital breakdown, all the law and knowledge in the world cannot make up for the emotional upheaval that both parties will be facing. It is therefore vital that not only are lawyers familiar with all aspects of how to deal with marital breakdown, but that they are also sensitive to the wider needs of their clients at this difficult time.
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