It has recently been reported that the Chinese business owner of Grindr was recently ordered to pay $1.1 billion to his wife in his divorce settlement – one of the largest divorce settlements in China. 

Whilst we appreciate that no one entering marriage does so thinking about financial consequences if it was to break down, it can sensible to do just that as it may reduce the legal costs incurred in arguing over the finances once the marriage has broken down.

If you are married you should consider:-

  • ring fencing any pensions
  • whether to transfer shareholdings and/or entering into a shareholder agreement
  • Whether to enter into a partnership agreement

Whilst there is no way to divorce proof your assets there is a number of things you can consider to start to protect your business:

  1. A prenuptial or post nuptial agreement can be helpful. If you plan ahead at the time you get married (or at the time you inherit the business) get the agreement of your spouse not to make damaging claims against the business;

  2. Do not mix your business assets with your private assets unless absolutely necessary. Keeping the business entirely independent of your private wealth can help on divorce; 

  3. It is sometimes tempting to involve a spouse in the business, not least for tax purposes. There is however a balance to be struck as involving a spouse will help them make a claim by having been involved in the business and so having contributed to its success;
  4. Sharing ownership of a business with outsiders helps on divorce. If the business is owned 100% by one spouse then the courts are likely to treat it just like any other asset to be divided and shared (unless there are good reasons not to). If the business is jointly owned then the court is less likely to take steps which would damage the livelihoods of the other shareholder/partner;

  5. Enter into a shareholders’ agreement which could deal with life after a potential divorce such as whether you both stay in the business and in what capacity, whether one of you sells out to the other and if so how are the shares valued. A shareholders agreement does not give absolute protection as courts have wide sweeping powers. If a judge feel the agreement is unfair they may redress any inequalities.

The length of the marriage will determine the scale of the settlement. The longer the marriage, the more equal the split, particularly if you have children. In shorter childless marriages where the spouse has played little part in the business, means you can generally hang on to much more.

 

If you would like more detailed advice on the above, please do not hesitate to contact Louise Neville in our Family department on 01254 872272.