Q. What happens if it all goes wrong? The stress of running our restaurant business has finally taken its toll on our marriage. My wife wants out of both the marriage and the business, what are my options?
A. In matrimonial law, a family business is treated as an asset like any other. When dealing with a matrimonial case the court has very wide discretion as to how the assets - including the family business - are dealt with.
Recent developments in matrimonial law mean that any court dealing with this case will have equality in mind when considering a division. This means that the starting point for a division of assets is going to be a 50-50 split of all assets - including the family business.
Traditionally the courts have tried to avoid the sale of a family business against the wishes of a party who wanted to continue in business. This is because the business is a both a source of income for the future as well as liquid capital for division.
Unfortunately, with the new emphasis on equality, a sale is more likely. The position was neatly summed up in the case of N v N (2001) where the judge stated: "Those taboos against selling the goose that lays the golden egg have been laid to rest. Nowadays the goose may well have to go to market for sale"
Even so, the court will try to avoid a sale in these circumstances.
Advice
What can you do about this?
The first thing to appreciate is that the hopes, dreams and aspirations of both of you are tied up in this restaurant. This will require sound legal advice, sensitivity and an objective approach to finding solutions.
A sale is an option but the best way to preserve the value of your business is likely to be for you to retain it. Valuing a family business can be problematic and is essential that your reach agreement with your partner about this to avoid escalating costs.
You should obtain an independent professional valuation to establish the market value and take your accountant's advice on the mechanics of transferring the title. If the property is leasehold you will need the landlord's consent. The landlord may want your wife to remain liable under an Authorised Guarantee Agreement and it is important you understand the implications of this at an early stage.
One way for you to keep the business would be for your wife to retain other assets. Are there other assets (such as the matrimonial home or pensions) that can be offset against this business? If not, could you buy her out with staged payments? Alternatively, could you find a new business partner who could purchase her share?
This might be an ideal case for you and your wife to attend mediation or even better, you could try Collaborative Law. This is the new method of settling matrimonial disputes where husbands, wives and their solicitors work together to reach agreement and to avoid going to court.
For immediate consideration:
- See a solicitor as soon as possible. A member of Resolution (the Solicitors Family Law Association) will be able to give sound legal advice on matrimonial issues and direct you about the business issues.
- Consider mediation or speak to your solicitor about Collaborative Law as this may help you resolve these difficulties amicably.
- Consider how the business might be preserved. Could you buy her out? If so, how will you value her share?
- Don't let this difficulty affect the prospects of the business.
Beware!
Please do not think about running the business down in a way to spite her. Such a move is likely to make any resulting court case more complex, more hostile and more expensive.
Contacts
At stevensdrake, we can guide you through these difficult times whilst safeguarding your financial interests. We are expert in all legal matters relating to businesses and family relationships.
As accredited members of Resolution, we have the experience to deal with complex issues relating to your business.
Published - June 2009
This article is provided for general information only. Please do not make any decision on the basis of this article alone without taking specific advice from us. stevensdrake will only be responsible for the advice we give which is specific to you.
