Dividing a Business in a Divorce

When the Court looks at the value of a shareholding in a business in the context of family law proceedings, it looks to ascertain a valuation that a willing buyer would pay to a willing seller for that shareholding.

The Court is, therefore, looking at the true market value when considering business valuations on divorce.

If a shareholding is in a company listed on the stock exchange, it is more straightforward because each shareholding has a transparent market value.

It is usually necessary to have the benefit of business valuation evidence within financial remedy proceedings.

An application to rely on business valuation evidence must be made before the first hearing, known as the First Directions Appointment (FDA).

The parties should agree on the instruction of a Single Joint Expert (SJE).

Before placing any business valuation evidence before the Court, that party must seek permission from the Court to obtain a valuation. The Court must consider whether the valuation evidence is necessary before granting permission.

Below are examples of questions that may be put to a valuation expert:

• What is the value of the shareholding?
• Are there any minority shareholder discounts to take into account?
• What are the tax consequences of any disposal or transfer of the shareholding or any cash extraction, if applicable?
• What is the capital liquidity available to the shareholders?
• What is the likely future gross and net sustainable income available for
• The shareholders now and in the future?

Challenges to Business Valuation Evidence

If one party is dissatisfied with the valuation evidence, the starting point is to raise questions with the expert. If those questions do not resolve the issue, there is the option to cross-examine the expert at the final hearing or apply to rely on another expert.

Liquidity

The liquidity of a business is very important and is often a source of conflict between parties.

In some cases, no or limited capital funds can be extracted from the business without damaging its performance. The ability to continue trading to provide an income for one or both parties is fundamentally important.

• Accurate Business Valuation: We have close links with forensic accountants who can value a business using the right method for the type of business. us
• Expert Guidance: We address issues like minority shareholder discounts and tax consequences of share transfers or disposals.
• Dispute Resolution: We assist with questioning or cross-examining valuation experts and can recommend additional experts if needed.
• Liquidity & Risk Management: We help manage business liquidity and a fair division of risk-laden assets.
• Tailored Solutions: We facilitate share transfers, negotiate lump sum payments, and assist with shareholder agreements for fair business division.
• Full-Service Law Firm: As a full-service law firm, we provide access to expert corporate and commercial law advice, ensuring that all aspects of your case are handled seamlessly.