I run a family business. Where do I stand?

If you run your family-owned business and are thinking about a divorce, it's understandable to be concerned about the future of your company. Every business and every family is different. Your family lawyer will advise you on the key features that apply in your case, and what options are open to you. One consideration will be who owns the business. If you own the business outright, then it's more likely it will be treated as a matrimonial asset in your divorce. If the business is owned by you and other family members, and you have a minority shareholding for example, then it will be the value of your shareholding that is taken into account when negotiating a financial settlement. If other family members own the business and you're simply employed, then what you earn will likely be the focus. If you do own your business with other people – whether family members or business partners – those other people could ask to be involved in your divorce. This is called “intervening”. It happens when those other people have an interest in the outcome of your divorce and want to protect that interest. People intervene for many different reasons, but there is a fairly standard procedure that has to be followed, which your lawyer will explain to you. Intervening is a costly and time-consuming process and specialist legal advice is essential to navigate this.

Can a husband or wife take half of the business in a divorce?

In a divorce, the proportion of your business to which your spouse is entitled depends on the circumstances. If, for example, your partner has a stake or shares in your company, this will be considered when deciding on a fair financial settlement. If your ex doesn't have any experience in managing the company, it's unlikely that they will receive a portion of its ownership as part of the financial settlement. This is because there is a risk of damage to the business if someone unskilled is given ownership – especially if you and your ex cannot work together. It's usually preferable to keep the business under the management of its current owner if there are other assets that can be awarded to the non-owner spouse.

How will divorce impact the running of my business?

In many cases, the divorce of a business owner is likely to be very disruptive, including requests for lots of information and documentation about the trading history of the business. This will take up management time. If both you and your ex are employed by the business, there is a risk that either of you could bring an employment claim. Sometimes, employment claims can be brought by other employees if they are caught in the crossfire of a relationship breakdown. If both you and your ex are directors and/or shareholders, then disagreements may prevent important and difficult decisions being made, and opportunities to grow the business may be lost. The key is to enter into open dialogue about how the business will operate while the divorce is ongoing. It's also important to start these discussions, supported by trained professionals, as soon as you're able to do so.

Can I lose my business in a divorce?

The court has the power to order a shareholder to sell or transfer their shares in a business to fund a financial settlement. However, this power is rarely used, particularly if third-party business owners and employees would be negatively impacted. Also, if the process is too complex or there would be difficulty in ensuring desired outcomes, the court will look for an alternative solution. If there are sufficient non-business assets to meet the family’s needs and/or there is a pre- or post-nuptial agreement , protecting the business assets will further reduce the chances that a business will need to be sold in a divorce.

Is a limited company protected in a divorce?

Yes and no. The family courts respect the separate legal personality of businesses and cannot make an order against the company unless it is a party to proceedings. However, the court can and will make an order against the business owner’s stake in the business – their shareholding – rather than individual assets owned by the company. It may be that protective steps have been taken to further lessen the risk.

What can I do to protect my business in advance of a divorce?

First, you and your business partners should enter in to a pre (if not yet married) or post (if already married) marital agreement with your respective partners to record any agreement to ringfence the business from any claims on divorce. It's important for family businesses the next generation enter into these agreements too, perhaps as a pre-condition of them receiving a shareholding. You should also review your company’s articles of association and shareholders agreements which may not have been updated since the company was set up. The company will want to ensure it has control over who can be a shareholder. This can prevent an ex-spouse being transferred shares by the court to achieve what it deems a fair outcome for the couple (albeit not a fair outcome for everyone else) but also to regulate the position on the death of a business owner.

Can I sell my business before divorce?

You can sell your business before you get divorced, but there are a couple of things to consider first. For instance, might you regret your decision? If you enjoy being a business owner, this could be the wrong time to make this move. Also, if your spouse finds out about your planned sale of the business, they might think that you are selling up so you can avoid having to pay them as much in a divorce financial settlement. They could then apply for an injunction order to try to stop the sale.

Can I sell my business during a divorce?

Yes, you can still sell your business if you're going through a divorce (unless the court has made an order preventing a sale). However, the profit from the sale may be treated as a matrimonial asset and therefore your ex could be entitled to a share of whatever profit you make. Additionally, if the business is owned by both you and your ex, you'll need their agreement to sell the business.

Can I start a business during divorce?

You can start a business during your divorce, but it might be considered to be part of the matrimonial assets, even if you separated from your ex before you started the business.

How is a business valued in a divorce?

A business owner will need to provide up-to-date company or partnership accounts as part of their financial disclosure, along with their view on the value of their shareholding/interests. If a couple can't agree the value to be ascribed to the company, then it's more than likely that a formal valuation will be needed. This is ordinarily done by a single joint expert (SJE) who is instructed by the couple to provide a value and advise on: The liquidity of assets within the business to fund a financial settlement. The tax consequences of extracting assets from, or selling, the business. I sustainable income of the business owner. In some circumstances, there will need to be a valuation of the underlying assets of the business – for example, plant and machinery, commercial property or even livestock in a farming business.

Should I get my own valuation of my business?

You should speak to our legal advisers before doing so. On the one hand, you'll have the benefit of that valuation advice to make early informed decisions for you and your business, be able to complete your Form E disclosure more fully and potentially be able to fast-track settlement discussions. On the other hand, such a valuation may not be seen as impartial if only one of you instructed the expert valuer. Valuation reports can be expensive and you may find your money has been wasted if you can't use or rely on your report in negotiations or even court proceedings. It may be that a written overview from your company accountant is sufficient.

Can an SJE report be challenged?

Once the report has been received and considered, there is the opportunity to ask questions of the expert valuer to seek clarification if anything is unclear. If necessary, the expert can be ordered to attend court to be cross-examined. Business owners often have their own accountant or expert (known as a shadow expert) to help advise on the SJE report. If there remain significant issues with the SJE report, then you can ask the court to order that other evidence is provided to the court or even that a new valuation report is obtained. This cannot be guaranteed and it's, therefore, very important that the right expert is chosen at the outset and the scope of their report is correct.

I started my business before marriage. Is it at risk on divorce?

The short answer is yes. The business is a family asset and the court has powers to order shares to be transferred or sold. The following can help protect the pre-marriage value of a business: A pre-nuptial agreement can state that the parties do not intend to share any pre-marriage value in the business (ie, the pre-marriage value of the business is ring-fenced). A valuation of the business at the point of marriage can be recorded in the pre-nuptial agreement and will make it easier to ring fence this amount. An SJE accountant can be asked to retrospectively value the business at the point of marriage. However, this isn't straightforward and can be difficult after a long marriage if key documents have been lost.

Do I need to disclose my directors loan account (DLA) in a divorce?

Yes. Any money owed to you by the company is a disclosable asset. The DLA balance may have been amassed because of money you lent to the company or because you have undrawn income. Any money you owe to the company will also be relevant.

Dealing with businesses in divorce

Knowing how to divide any of your assets during a divorce can be confusing. If you're business owners, it can become even more complicated.

But it's possible for businesses, and any business assets in divorce proceedings, to be handled smoothly and successfully. Reaching a point where everything is resolved can be complex, but getting expert legal advice is the first step towards a fair outcome.

Our divorce lawyers are specialists, highly skilled in handling difficult divorce and family business cases with empathy. We'll take the time to understand your concerns for your family and your business, then use our extensive experience and practical understanding to guide you to the best possible outcome.

Award-winning family law lawyers
Recognised within the legal industry
91% client satisfaction
Offices across England

What happens to a business in a divorce?

If you're a business owner facing a divorce, you may be worried about how your personal situation will impact on daily operations and performance, and whether you'll still have a business at the end of things.

Your divorce lawyer will explain the process in detail and take you through how business assets in divorce proceedings are handled. All assets owned by you and your ex are taken into account and can potentially be divided by the court during a divorce. This includes businesses or any business interests, as well as other assets like your family home, savings or pensions.

The court can order a shareholder to sell or transfer their shareholding in a business and a business owner can be ordered to sell or transfer business assets that they own personally. Although this is rare and would be a last resort, it's vital that you take early advice to ensure you understand the legal position, helping you to make the best decisions.

Dealing with a business in a divorce

The first thing to remember is that all your family's assets (including property, money, investments and pensions) are taken into account in a fair financial settlement. Everything must be disclosed upfront but, depending on the circumstances, it may be possible to ring-fence or preserve assets such as businesses.

Assets are classified as either matrimonial assets or non-matrimonial assets. Matrimonial assets are assets that have been acquired during a marriage or civil partnership. These include jointly owned property, investments and family businesses. Non-matrimonial assets are assets that were acquired before the marriage or after separation. Examples can include inheritances, property bought before the marriage and businesses set up before the marriage.

In England and Wales, the starting point is that matrimonial assets should be shared equally. However, to achieve a fair financial settlement , sometimes the assets are not shared equally, for example:

If one of you clearly has a greater financial need than the other
If one of you can show you made a significant contribution to the matrimonial assets

Sometimes it's possible to get a fair settlement with just the matrimonial assets. Sometimes it isn't possible though, and then the non-matrimonial assets have to be included and divided up.

How your business or company (or your ex's business or company) is treated in your divorce will be specific to your circumstances. If the business was built up during the marriage, the most likely starting point will be that you each share the value of the business 50:50 (even if only one of you worked for the business).

Although the court has the power to order a sale or transfer of a business owner’s shareholding or other business assets owned by them personally, this is usually a last resort.

When you seek legal advice, your divorce lawyer will look at your circumstances, advise you and take you through what the court may decide to do.

If you have questions about your divorce and how to proceed in the best interests of your business, contact our family lawyers and we'll help you.

Points to note about dealing with a business on divorce

Dealing with a business as part of a divorce can be tricky. While we'll talk you through your options, there are some key points to be aware of:

The value of a business can be "offset" against other matrimonial assets.
Business owners can take steps before and after marriage to protect assets from divorce.
The courts in England and Wales have jurisdiction to make an order against a foreign business.
Commercial property owned by a company pension scheme – for example, a small self-administered scheme (SSAS) – can be divided between spouses by way of a pension share.

Usually, a formal business valuation will be needed. A single joint expert (SJE) will be instructed to act for both parties. There are different ways a business can be valued. Some of the most common valuations are on a net asset basis or based on future income stream. An SJE may also be asked to advise on the sustainable future income of the business owner, tax issues, and whether there is any liquidity within the business to fund a financial settlement on divorce.

How can we advise you on dividing a business in a divorce?

Whether you want to know how a business is divided in a divorce settlement or if there's a chance you'll have to sell your company, we can help. Our expert divorce law team will listen to your concerns and then talk you through the complexities of your case to give you the answers you need.

We'll work closely with you and your family, blending our technical knowledge of the law and our understanding of how divorce can impact on businesses to give you clear, practical guidance.

Our family lawyers

We're experts in dealing with businesses as part of divorce proceedings. Our lawyers have years of experience in acting for business owners and their families.

You can be confident in our ability to deliver top quality business legal advice, whatever your interests. Knowing that each business is different, we take time to understand the commercial realities you need to deal with. We draw on our wealth of practical experience to give you clear advice from the start.

You'll also benefit from our unrivalled multi-disciplinary approach, network of global contacts and expertise in resolving disputes away from the courts.

Our business assets in divorce experience

On a daily basis, our divorce lawyers provide resolution-focused, tailored legal advice to business owners and their spouses who are dividing business assets, going through a divorce or taking steps to protect their business if the worst were to happen. We've helped clients ranging from those who run small, owner-managed businesses through to large-scale companies.

Recent examples of our work include:

Our lawyers acted on behalf of the beneficiaries of various offshore trusts that owned companies and investments worth in excess of £200 million in High Court litigation that was successfully resolved in our clients' favour.
We successfully negotiated a post-nuptial agreement for a separated couple to cover their business assets in advance of private equity investment.
We mediated an agreement between a business owner couple with UK and US companies and with assets in excess of £10m.
We advised a business client's spouse with assets in excess of £100m, the majority of which was value within a privately owned company.
Our lawyers have regularly supported business owners in negotiating and implementing company purchase of own shares from spouses to maximise tax and liquidity opportunities on divorce.

We support Resolution, a national family law organisation based on constructively resolving family legal problems
We're an award-winning team, having received accolades including Corporate Law Firm of the Year at the Insider Central and East of England Dealmakers Awards 2022.
We offer an outstanding client experience. Our work is based on clear values and we recently received a 91% client satisfaction score.
We're recognised by various legal bodies including the Solicitors Regulation Authority, Law Society, Legal 500 and Chambers and Partners.
Our team has featured in 'Innovative Lawyers: Europe' from the Financial Times and Thomson Reuters' Top 20 UK Law Firm Brand Index 2022.

“It offers a range of services in both personal and corporate law – enabling it to offer bespoke solutions for families with complex commercial interests.”

"They're very helpful and knowledgeable lawyers that are always willing to go above and beyond to help. They provide an excellent service."

Frequently Asked Questions

I run a family business. Where do I stand?

If you run your family-owned business and are thinking about a divorce, it's understandable to be concerned about the future of your company.

Every business and every family is different. Your family lawyer will advise you on the key features that apply in your case, and what options are open to you.

One consideration will be who owns the business. If you own the business outright, then it's more likely it will be treated as a matrimonial asset in your divorce. If the business is owned by you and other family members, and you have a minority shareholding for example, then it will be the value of your shareholding that is taken into account when negotiating a financial settlement. If other family members own the business and you're simply employed, then what you earn will likely be the focus.

If you do own your business with other people – whether family members or business partners – those other people could ask to be involved in your divorce. This is called “intervening”. It happens when those other people have an interest in the outcome of your divorce and want to protect that interest. People intervene for many different reasons, but there is a fairly standard procedure that has to be followed, which your lawyer will explain to you. Intervening is a costly and time-consuming process and specialist legal advice is essential to navigate this.
Can a husband or wife take half of the business in a divorce?

In a divorce, the proportion of your business to which your spouse is entitled depends on the circumstances. If, for example, your partner has a stake or shares in your company, this will be considered when deciding on a fair financial settlement.

If your ex doesn't have any experience in managing the company, it's unlikely that they will receive a portion of its ownership as part of the financial settlement. This is because there is a risk of damage to the business if someone unskilled is given ownership – especially if you and your ex cannot work together.

It's usually preferable to keep the business under the management of its current owner if there are other assets that can be awarded to the non-owner spouse.
How will divorce impact the running of my business?

In many cases, the divorce of a business owner is likely to be very disruptive, including requests for lots of information and documentation about the trading history of the business. This will take up management time.

If both you and your ex are employed by the business, there is a risk that either of you could bring an employment claim. Sometimes, employment claims can be brought by other employees if they are caught in the crossfire of a relationship breakdown.

If both you and your ex are directors and/or shareholders, then disagreements may prevent important and difficult decisions being made, and opportunities to grow the business may be lost. The key is to enter into open dialogue about how the business will operate while the divorce is ongoing. It's also important to start these discussions, supported by trained professionals, as soon as you're able to do so.
Can I lose my business in a divorce?

The court has the power to order a shareholder to sell or transfer their shares in a business to fund a financial settlement. However, this power is rarely used, particularly if third-party business owners and employees would be negatively impacted. Also, if the process is too complex or there would be difficulty in ensuring desired outcomes, the court will look for an alternative solution.

If there are sufficient non-business assets to meet the family’s needs and/or there is a pre- or post-nuptial agreement, protecting the business assets will further reduce the chances that a business will need to be sold in a divorce.
Is a limited company protected in a divorce?

Yes and no. The family courts respect the separate legal personality of businesses and cannot make an order against the company unless it is a party to proceedings. However, the court can and will make an order against the business owner’s stake in the business – their shareholding – rather than individual assets owned by the company. It may be that protective steps have been taken to further lessen the risk.
What can I do to protect my business in advance of a divorce?

First, you and your business partners should enter in to a pre (if not yet married) or post (if already married) marital agreement with your respective partners to record any agreement to ringfence the business from any claims on divorce. It's important for family businesses the next generation enter into these agreements too, perhaps as a pre-condition of them receiving a shareholding.

You should also review your company’s articles of association and shareholders agreements which may not have been updated since the company was set up. The company will want to ensure it has control over who can be a shareholder. This can prevent an ex-spouse being transferred shares by the court to achieve what it deems a fair outcome for the couple (albeit not a fair outcome for everyone else) but also to regulate the position on the death of a business owner.
Can I sell my business before divorce?

You can sell your business before you get divorced, but there are a couple of things to consider first. For instance, might you regret your decision? If you enjoy being a business owner, this could be the wrong time to make this move.

Also, if your spouse finds out about your planned sale of the business, they might think that you are selling up so you can avoid having to pay them as much in a divorce financial settlement. They could then apply for an injunction order to try to stop the sale.
Can I sell my business during a divorce?

Yes, you can still sell your business if you're going through a divorce (unless the court has made an order preventing a sale). However, the profit from the sale may be treated as a matrimonial asset and therefore your ex could be entitled to a share of whatever profit you make.

Additionally, if the business is owned by both you and your ex, you'll need their agreement to sell the business.
Can I start a business during divorce?

You can start a business during your divorce, but it might be considered to be part of the matrimonial assets, even if you separated from your ex before you started the business.
How is a business valued in a divorce?
A business owner will need to provide up-to-date company or partnership accounts as part of their financial disclosure, along with their view on the value of their shareholding/interests. If a couple can't agree the value to be ascribed to the company, then it's more than likely that a formal valuation will be needed.

This is ordinarily done by a single joint expert (SJE) who is instructed by the couple to provide a value and advise on:
- The liquidity of assets within the business to fund a financial settlement.
- The tax consequences of extracting assets from, or selling, the business.
- I sustainable income of the business owner.
In some circumstances, there will need to be a valuation of the underlying assets of the business – for example, plant and machinery, commercial property or even livestock in a farming business.
Should I get my own valuation of my business?

You should speak to our legal advisers before doing so.

On the one hand, you'll have the benefit of that valuation advice to make early informed decisions for you and your business, be able to complete your Form E disclosure more fully and potentially be able to fast-track settlement discussions.

On the other hand, such a valuation may not be seen as impartial if only one of you instructed the expert valuer. Valuation reports can be expensive and you may find your money has been wasted if you can't use or rely on your report in negotiations or even court proceedings. It may be that a written overview from your company accountant is sufficient.
Can an SJE report be challenged?

Once the report has been received and considered, there is the opportunity to ask questions of the expert valuer to seek clarification if anything is unclear. If necessary, the expert can be ordered to attend court to be cross-examined.

Business owners often have their own accountant or expert (known as a shadow expert) to help advise on the SJE report. If there remain significant issues with the SJE report, then you can ask the court to order that other evidence is provided to the court or even that a new valuation report is obtained. This cannot be guaranteed and it's, therefore, very important that the right expert is chosen at the outset and the scope of their report is correct.
I started my business before marriage. Is it at risk on divorce?
The short answer is yes. The business is a family asset and the court has powers to order shares to be transferred or sold. The following can help protect the pre-marriage value of a business:
- A pre-nuptial agreement can state that the parties do not intend to share any pre-marriage value in the business (ie, the pre-marriage value of the business is ring-fenced). A valuation of the business at the point of marriage can be recorded in the pre-nuptial agreement and will make it easier to ring fence this amount.
- An SJE accountant can be asked to retrospectively value the business at the point of marriage. However, this isn't straightforward and can be difficult after a long marriage if key documents have been lost.
Do I need to disclose my directors loan account (DLA) in a divorce?

Yes. Any money owed to you by the company is a disclosable asset. The DLA balance may have been amassed because of money you lent to the company or because you have undrawn income. Any money you owe to the company will also be relevant.

None of your business – judicial approaches to pre-marital business assets

Watch this useful exploration of financial settlements involving the family business, recorded as a webinar by our family lawyers in June 2022.

Leading the way

Divorce.co.uk – our free legal advice website – was the first of its kind when we introduced it 20 years ago and it's still going strong!

Award winning

Nigel Shepherd received Family Law's Cornwell Award for Outstanding Achievement for his three decade campaign to introduce no fault divorce.

Teamworking

We regularly work with accountants, land agents, tax advisers and other professionals to provide joined-up, practical advice.

North West Dispute Resolution conference 2024

28 November 2024 | 13:15-18:15 | Manchester

Registration is now open for this year’s conference, which will centre around domestic abuse in family disputes with a specific emphasis on coercive and controlling behaviour.

22 August 2024

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Mark Twain famously said: “I’m in favour of progress. It’s change I don’t like”. Well, we’re not too sure what he would make of the myriad of changes that are currently facing the family justice system, but at least many are aimed to ensure progress. Here’s some highlights that are already impacting our clients, as well as major potential future changes.

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Dealing with businesses in divorce