Protecting your family business in a divorce

Family breakdown and divorce inevitably causes stress not only to the parties involved but also to their wider families. This is even more the case where there is a family business which often provides the main source of income for the family. If you find yourself in the unfortunate situation of separating not only from your partner, but your business partner, there is no doubt that serious consideration needs to be given as to how best to separate the financial ties between you.

It is common for one or both parties to think that they are best off remaining business partners because they simply can’t see how it can be divided up. However, if the Court becomes involved with litigating on the division of the matrimonial assets, very rarely would they consider continuing in business together to be an option. This is because in reality it is unusual for parties who have separated to be able to work together for a common interest to achieve the best for their business.When deciding who should continue to run the business (or whether it should be sold) the Court is likely to look at the roles that each individual plays in the business and what the origins of the business are.

Sometimes for example, the business may have been started before the relationship and the spouse or partner has become involved in the company only as a result of the relationship. These considerations assist the Court is deciding who is best placed to continue the business into the future.Once a decision has been made, whether by the individuals or the Court, about who should continue the business, the next concern is whether the ex-partner will simply go and start up their own company in competition with the other. This is an issue that has recently been considered by the Court in the case of R v R. In this case the wife retained the family business (which they had previously run jointly) and was concerned that the husband was about to set up in direct competition with her. Her legal team made an application to the Court and were successful in obtaining an injunction against the husband which prevented him from competing with the family company. The Court allowed the injunction to continue on the basis that there was sufficient factual basis for the wife’s concerns and that the husband, as a Shadow Director, owed a fiduciary duty to the company to act in the best interests of the company rather than in his own interests.

This case doesn’t prevent the ex-partner from setting up a new business of a different type but simply prevents them for setting up in competition. It provides practitioners with a good remedy for protecting our client’s business assets and ensures that the party retaining the family business is in the best possible position to continue its success following relationship breakdown.

Vikki MartinAssociate, SolicitorTel: 01752 292218Email:

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