Divorce is rarely a simple process, but when a family business is involved, the difficulties are compounded. The distribution of spoils has traditionally been a contentious issue, but recent cases have at least clarified the thinking of the nation’s highest courts. Mr. and Mrs. White, who were farmers, were at the centre of the prominent case decided by the Lords. The ruling established the principle that there must be a valid rationale for unequal asset distribution.
In some instances, unequal divisions of joint business assets may be appropriate. Mr. Justice Coleridge awarded the wife 39% of the total assets, which included the family home, in a case where the husband’s business lacked sufficient liquidity (ability to generate funds) to finance an equal split. Due to the business’s financial situation, the remainder of her settlement was commanded to be paid over a period of years. The judge stated that “old taboos against selling the golden-egg-laying goose have been mainly abandoned… however, if she must be sold, her egg-laying abilities must be harmed as little as possible during the transaction.”
In a recent case, a spouse who argued that his ex-wife’s settlement should be reduced because she had remarried and was living a lavish lifestyle was unsuccessful. Similarly, a husband’s attempts to persuade the court that the required settlement for his daughter should be reduced were denied because it was not in her best interest for her to change schools. In such situations, the requirements of the child are paramount, not those of the father.
The relative contributions of the two parties to the formation of the ‘marital assets’ is a crucial factor in the division of ‘marital assets’ in general. This need not be direct, as a ‘stay-at-home’ spouse can be awarded a significant portion of the assets if instrumental (i.e., by supporting the ‘wealth creator’) in the creation of the family’s wealth.
If there are no “surplus assets,” the courts will prioritise the housing requirements of the parent who has custody of the children. Any additional assets will be equitably divided according to the needs of each party and their ability to meet those needs. In light of a recent Supreme Court decision, it would appear that business assets may be divided in accordance with a pre- or post-nuptial agreement in the appropriate circumstances.
In exceptional cases, the court will “lift the veil of incorporation” to allow the company’s assets to be treated as directly available if the assets are held in a company (which is by law a legally separate person from the shareholders themselves). However, it is clear that this will only occur in rare circumstances. However, a case in which assets were placed in a trust was decided differently: the trust assets were considered to be ‘under the control’ of the ex-husband and thus available for division.
Early in 2014, it was announced that ‘pre-nuptial’ agreements would become legally binding.
Two significant cases were decided in 2015. In one case, the Court ruled that a woman whose ex-husband was retiring should not continue to receive the previously-ordered maintenance for life and should instead seek employment. A woman who divorced her then-poor spouse, who is now a multimillionaire, more than a decade ago was granted the right to file for financial support from him in an instant.
In 2017, more significant decisions were made, ostensibly sanctioning an unequal division of assets in childless, relatively brief marriages.
These decisions may have a significant impact on future decisions, highlighting the importance of obtaining legal counsel throughout the process.
The government has recently published online guidance on the procedure.
While marriage revokes a previous will, divorce does not, so it is always prudent to revise your will upon divorce.
Learn more about how our divorce attorneys can help you reach a favourable resolution.
