How Legal Documents Can Help To Protect Your Business on Divorce

Relationship breakdown and divorce is usually a period of significant change and uncertainty. For business owners, the stress and anxiety can be exacerbated with worrying about what will happen to their business on divorce.

The good news is that there are legal documents that can be put in place to create much greater certainty as to what should happen with assets on divorce including business interests. Having those documents properly prepared is relatively inexpensive particularly when compared to the significant costs that can be associated with an acrimonious divorce.

Pre-nuptial Agreements

If you are not yet married but are intending to do so then the first legal document you should consider entering into is a pre-nuptial agreement. In the last couple of years I have seen an increasing demand for pre-nuptial agreements as there appears to be growing awareness of these legal agreements and less of a taboo around them. A pre-nuptial agreement is essentially a contract between you and your fiancé that sets out how you both would like your assets to be dealt with and divided should the marriage come to an end. The advantage of setting out those terms at the outset is it creates much greater certainty and the pre-nuptial agreement can be used to protect certain assets, for example a business.

Having said that, pre-nuptial agreements should still strive to be fair and the Family Court does retain a discretion to override the terms of a pre-nuptial agreement if the needs of one person and/or the children on divorce are likely to be prejudiced.

Post-nuptial Agreements

If you have already married there is a second legal document which can be prepared known as a post-nuptial agreement. A post-nuptial agreement is very similar to a pre-nuptial agreement except it is a contract that you enter into after marriage rather than before. Again, the purpose of the post-nuptial agreement is to set out how you and your spouse would like your assets to be divided should the marriage come to an end. In my experience, client's often want a post-nuptial agreement preparing if, for example, one of them is due to come into an inheritance or a significant gift from another family member and they want greater certainty that that particular asset will be protected on divorce. The same applies with a business interest, it might be that your business partners would also like greater certainty of knowing that your business interest is not going to be compromised should your marriage come to an end.

Having said all of the above I do wish to reiterate the point that the Family Court will not be bound by the terms of either a pre-nuptial agreement or a post-nuptial agreement but in most cases they are very persuasive and parties to these agreements should expect to be held to the terms.

If you would like to discuss your circumstances, please contact a member of your local family law team, or call 0800 542 4245.