Keeping it legal

Jan 15 2008 by Lyn Rutherford, Dickinson Dees

IT is often said that the matrimonial lawyer’s busiest time of year is after the Christmas holiday.

At Christmas the husband and wife are together for an extended time and it dawns on one of them that things are not all they should be and that either he or she cannot stand their spouse. In addition, there is always the fall-out from the office party.

So, frequently thereafter, there follows a separation and then a divorce. If you are a businessman or woman, the issue for you may be how to ensure your goose is not cooked. Beware, as the family business is no longer sacred and the courts have laid to rest the old taboos against selling the goose that lays the golden egg.

Arguably England is now one of the best jurisdictions in the world in which to bring divorce proceedings, as the starting point in most cases is for the spouse to receive no less than half of all the assets, particularly if earned or acquired during the marriage – regardless of the length of the marriage.

A spouse’s interest in a limited company, a partnership or a sole trader enterprise is as relevant as the equity in the former matrimonial home, transfer value of the pension scheme and the cash deposits.

No longer can we treat the business separately. As the value of the business will be taken into account to avoid a sale, a proactive and imaginative approach is required to the raising of capital to finance a settlement. This may involve, for example, one or more of the following where the business is a limited company:

The paying of a dividend;

Borrowing funds secured over the assets of the company;

Sale and leaseback of the property owned by the company;

Sale of surplus assets;

Invoice discounting/debt factoring.

Complications may arise if the husband or wife is not the sole or majority shareholder or partner in the business or if both have an interest. At that point he or she may reflect upon what they might consider their previous generosity in making their spouse a shareholder or partner.

The key to saving your goose (and enjoying the office party) is the right advice and proper planning. If the business exists, consideration should be given to a pre-nuptial agreement. Similar protection can be gained after marriage with a post-nuptial agreement. If you should not have a happy new year, the first thought should be to obtain legal advice from a specialist law firm.

Lyn Rutherford is a partner in the Dickinson Dees Wealth Management Team