Recent recommendations from the Law Commission have sparked much discussion in the legal community. One of the most important recommendations is the introduction of qualifying nuptial agreements (QNA’s). These agreements will set out what a couple wish to happen to their financial affairs in the event they divorce. If the proposals are made into law QNA’s will be legally binding provided that the couple have complied with the necessary safeguards.
The Law Commission has also suggested that there should be greater guidance for judges as to outcomes in financial cases on divorce. Judges currently have a very wide discretion when determining how assets should be divided and this can lead to inconsistencies in the way divorce cases are handled across the country.
The proposals would hope to bring greater certainty and sense of fairness.
These changes, however, have yet to be made into law, and it is therefore important to think about how your business would be affected now if anything happened to your relationship.
While it might not be nice to consider, marriage breakdown or separation can impact on your business. There are some practical steps you can take to try and safeguard your business or company in such a situation.
The most effective means of protecting your business is still by entering into a nuptial agreement with your spouse.
A pre-nup or post-nup is a written agreement signed by the couple which specifies how they wish their financial affairs to be handled if the marriage breaks down.
The agreement can specify that a business should remain in one party’s name or have its value excluded during divorce. Whilst these agreements are not legally binding, the terms are usually upheld unless to do so would unfairly impact on either spouse or any involved children.
You will need to provide full details of all your business interests supported by documentation. Ensure you, and not your spouse, provide this information. You will be better placed to explain its relevance and to provide the correct documentation. Keep all documentation and financial paperwork secure and any accounts password protected. Documents are likely to be safest if kept at the office.
Business assets owned or inherited prior to the marriage may be excluded in part or full by the courts, so it’s important to keep records of when the business was established and how it was initially funded. If you inherited your assets then keep the evidence of how and when you acquired them.
Be wary of transferring business interests
If you intend to transfer your interest in a business to any friends or family members, be cautious. Family courts can set aside transfers made up to three years before a divorce application if they believe it was done so to affect the claims of a spouse, even if that was not your intention.
Keep business and personal life separate
It is important for the company books to demonstrate that the business is run independently for the benefit of the company rather than a party to a marriage.
If the business bank account has been used as a personal account, for the spouse or couple, the court may assume that this is to continue and attribute them income accordingly. Keeping business and personal spending or bank accounts separate can help keep the business separate to matrimonial assets during a divorce.
It’s preferable not to allow your partner to acquire a shareholding in your business; during a divorce this can help demonstrate an intention to keep the business assets separate from the matrimonial pot.
Likewise if you make your partner or spouse an employee in some form, this can create further issues regarding employment law and unlawful contract terminations in the event of a divorce. It is unusual for couples to continue working together after a divorce but the end of employment relationship must still comply with employment law.
Article Provided by: Vicki McLynn, Principle Lawyer, Family Team, http://www.pannone.com/