Theo Hoppen, head of family law at MLP Law, explains that you don't have to be worth more than £700m like Sir Chris Hohn and Jamie Cooper-Hohn to take steps to ensure your business survives the break-up of your marriage.
Jamie Cooper-Hohn, the estranged wife of London hedge fund manager Sir Chris Hohn, has just been awarded £337m by a High Court judge in what is thought to be the biggest divorce payout ever awarded in an English court. The decision is the latest in a string of high-value divorce disputes along with oil tycoon Harold Hamm and Russian oligarch Boris Berezovsky.
But it's not just multi-millionaires (or billionaires) that should consider protecting their business should the worst happen.
A shareholding in a business would, in normal circumstances, be treated as part of the pot of joint property held by a married couple and therefore one of the things that needs to be counted in the fair distribution of assets upon divorce.
However, unlike a house or bank account, the division of a shareholding can have important legal implications not just for the couple but for other directors, shareholders and employees.
Dividing up a shareholding could lead to major disruption in business and cause instability and uncertainty amongst staff, suppliers, investors and anyone else with an interest in the organisation's smooth running.
Preparing for divorce is therefore a sensible and pragmatic step for business owners to take. It is about good governance, not about trying to squirrel assets away from your partner's legal team.
Consider these five steps to insulate your business from divorce proceedings:
1. Consider entering into a pre- or post-nuptial agreement with your spouse. These agreements can protect your shareholding in the event of a divorce. It is crucial that you obtain specialist legal advice to ensure that the agreement is upheld by the court on divorce.
2. Consider entering into a shareholders’ agreement. This is a confidential contract between the shareholders of a company that provides additional protection around share ownership. It can provide that on divorce a shareholder’s spouse is not entitled to receive any shares in the company.
3. Do not mix your business assets with your private assets. Keeping the business separate from your private wealth can help on divorce.
4. Consider whether you want to involve your spouse in the business for tax purposes. Whilst this enables to you utilise tax reliefs, your spouse’s involvement in the business may strengthen his or her claim on divorce.
5. It can help if you share ownership of the business with outsiders. If there are non-family shareholders then the court is less likely to take steps which would damage the livelihoods of the other shareholders, such as ordering a sale of the business or the transfer of shares to your spouse.