A Legacy Intact: safeguarding your family business in the event of divorce - Book - Page 53
P L A N N I N G A H E A D M E A N S C O N C E D I N G T H AT
SOMETIMES A PRE-NUPTIAL AGREEMENT WILL
I N V O LV E T H E P O S S I B I L I T Y T H AT P R O T E C T I N G
F A M I LY S H A R E S W I L L R E Q U I R E P O T E N T I A L LY
LETTING GO OF OTHER ASSETS
FA C T S : A y o u n g c o u p l e h a v e g o t e n g a g e d a n d a r e d u e t o m a r r y i n a
few months’ time. Each of them has little by way of wealth in their
respective names - they rent a flat and earn modest incomes which
do not really enable them to save each month.
One of them, the future husband, comes from a wealthy family - his
father owns shares in a family business alongside his siblings and
cousins. That business was passed down by his grandfather and
i t i s i n t e n d e d t h a t t h e f a t h e r ’s s h a r e s w i l l e v e n t u a l l y p a s s d o w n t o
h i m a n d h i s s i s t e r. H i s f i a n c é e c o m e s f r o m a m o d e s t b a c k g r o u n d
and it is unlikely that she will ever be gifted or
inherit significant wealth from her family. The father provides
significant financial support to his son who is reliant on this
money to supplement his salary and to enable him and his fiancée
to enjoy a standard of living that is higher than their respective
e a r n i n g s w o u l d a l l o w. T h e f a t h e r h a s a l s o m a d e n o i s e s a b o u t
buying a property for his son within the next few years. The father
has asked his son to enter into a pre-nuptial agreement in advance
of his wedding to seek to protect his future wealth.
OUR VIEW: Given the requirement to ensure that a pre-nuptial
agreement is fair to the financially weaker spouse so that her
needs are met, careful consideration would need to be given to the
content of the agreement. This would be particularly challenging
given that the parties’ standard of living is already being
supported by family money. The ultimate priority would be the
p r o t e c t i o n o f t h e s h a r e s w h i c h t h e s o n i s d u e t o i n h e r i t . H o w e v e r,
that may come at a cost - for example, in the absence of any other
assets, the son may have to concede as part of the financial
provision in the pre-nuptial agreement that any capital that is
accumulated by way of dividend stream he receives in the future
ought to be shared with his wife to ensure that her needs can be
met. Alternatively or additionally, if the father did decide to buy a
property for his son, the son may need to consider whether to
accept that the property ought to be considered as ‘marital’ under
the terms of the pre-nuptial agreement and therefore capable of
being shared on divorce with his wife as a quid pro quo for
ensuring the protection of the shares.
T H E C O U R T W I L L T R Y T O A V O I D I T, B U T
S O M E T I M E S F A M I LY S H A R E S A R E A W A R D E D
T O T H E N O N - F A M I LY S P O U S E I N A D I V O R C E
FA C T S : A h u s b a n d a n d w i f e h a v e b e e n m a r r i e d f o r 3 0 y e a r s a n d
have three adult children at the time of divorce. The husband is a
minority shareholder in a business which he set up with his
parents and his brother during the marriage. The dividend stream
from the business has enabled the family to enjoy a lavish
standard of living during their marriage. The wife has never
worked outside of the home. They did not sign a pre-nuptial
agreement before their marriage.
OUR VIEW: Given the length of the marriage, the English Family
Court is likely to find that the wife ought to be entitled to half of
the matrimonial wealth (including half of the value of the
h u s b a n d ’s s h a r e s ) g i v e n t h a t s h e h a s c o n t r i b u t e d t o t h e s u c c e s s
of the business. The support she provided to her husband and her
role in looking after the home and caring for the family would be
seen as equal in the eyes of the law to the financial
contribution made by the husband during the marriage.
The husband may succeed in an argument that the value of his
share in the business ought to be discounted to reflect the fact
t h a t h e i s a m i n o r i t y s h a r e h o l d e r.
Depending on the extent of the assets held outside of the
business, the Court may manage to achieve a clean break by
awarding the wife a higher percentage of the non-business
related assets. If this is not feasible, the judge may consider
ordering either some deferred lump sum payments to the wife over
time to buy out her share in the business or a transfer of some of
t h e h u s b a n d ’s s h a r e s i n t h e b u s i n e s s t o t h e w i f e .
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