Decide your company's fate before falling out, couples told
Coming up with a contingency plan to take effect in the event that their relationship ends should be a New Year’s resolution for all husband-and-wife businesses, their advisors say.
Although all traders face challenges ahead, ‘husband-and-wife’ companies are particularly vulnerable, as divorce rates traditionally soar in the first quarter on the back of strains in the holiday period.
With good will from the festivities dissipating, figures show a spouse is more likely to fill in a Form E Financial Statement, a 25-page “full and frank” financial disclosure, in January than any other month.
But if such a basis for a couple’s financial settlement fails to apportion responsibility for the business and it goes to court, then “the judge is likely to decide the asset should be sold”.
Issuing this alert, law firm Bross Bennett told the Mail on Sunday that the ordered sale of the business “could be far from the best option”, so spouses should settle, or at least discuss the fate of their business “before” they fall out.
Pre-nuptial agreements, which are gaining in popularity, appear to have some sway with court judges, a partner at the firm’s London office, Adam Witkover, told the newspaper, at least according to recent case law.
But the lawyer says there are grounds to diverge from a ‘pre-nup’ where a business is involved. New partners or share agreements may have been put in place, for example, or the situation of the business – or the partners – may have changed, since it was drawn up.