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Protecting Your Business Assets From Divorce

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The separation of celebrity power couple, Brad Pitt and Angelina Jolie, brings into sharp focus the turmoil that can accompany a divorce.

The stress and anxiety of a separation can be exacerbated if one or both of the parties want to protect their assets and income. The situation is not assisted by the lack of a formula, set down by law for married couples to determine how assets and income should be divided upon divorce.

It is little wonder then that those wishing to protect themselves from the financial fallout of a divorce may find the prospect of entering into a Pre-Nuptial Agreement (PNA) appealing, particularly as it is now established that the Court should uphold the terms of a PNA, subject to certain safeguards.

A marriage creates financial claims between the couple. Business assets are not automatically excluded from “the matrimonial pot” and the Court has the power to make orders relating to business assets; surely unwelcome news for anyone who has spent time and money establishing and building a business or who is to inherit a share in a family business which may have existed for generations. Therefore, anyone with business interests needs to be alive to the effects of a later divorce on the business and to take pre-emptive action to protect those business assets.  A PNA could be enormously effective in this regard.  Others connected to the business will also find this reassuring themselves.

In cases involving a limited company consideration should also be given to the provisions of the Articles and Shareholders’ Agreement and whether these require amendment, for example whether a non-transfer of share clause is appropriate or whether a formula for valuation of the business should be specified.

 

Finally, it is important to be aware of the need for the PNA to be revisited from time to time, to ensure that the agreement remains fair and appropriate between the couple; what is fair at the beginning of the marriage may very well not be fair after a long marriage, particularly if there has been any significant upturn in the fortunes of the business during the course of the marriage. 

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