What Happens To A Family Business In A Divorce?

Dividing business assets in a divorce financial settlement is one of the most complex areas of family law I handle. This is because a business, whether started by one spouse before the marriage or run as a family enterprise, is deeply personal. As a business owner myself, I understand how much work goes into making one a success. The idea of having your business, customers, and employees negatively impacted because your marriage has broken down can be difficult to accept. However, with the right legal advice and a willingness to come to an agreement with your ex-spouse, it is often possible for the business to continue even if your relationship does not.

How does the family court treat your interest in a family business?

The court treats your interest in a family business as part of the wider financial picture. Just because one spouse legally owns and runs the business does not mean the other spouse is not entitled to a share of it in the divorce financial settlement. The court will examine when the business began and how its value grew. It may also consider whether the profits generated supported family life.

In Standish v Standish [2025] UKSC 26, the Supreme Court confirmed that dividing matrimonial property equally is the starting point. An unequal division required proper justification, following a comprehensive analysis of the parties’ circumstances in line with the factors under section 25 of the Matrimonial Causes Act 1973. Assets classified as non-matrimonial fall outside the sharing principle, although the court can draw on them to meet financial needs or a compensation claim arising from disadvantage caused by the marriage. The classic example of this is where one spouse either quits work or steps back from their career in order to look after dependent children and the home, allowing their spouse to fully focus on growing the business.

Whether an asset such as a business has become matrimonial property therefore depends on the circumstances of the marriage and the evidence of how its profits have been used.

How is a business valued for a divorce financial settlement?

The business is valued by estimating what the shares are worth and how much money it can provide while continuing to trade. An accountant may examine earnings, assets, liabilities, tax, and the rights attached to each shareholding. Retained profits and director’s loan accounts may also affect the financial picture. Parties could agree to appoint the company accountant to undertake the valuation. More common is for the parties to jointly appoint an independent accountant as a single joint expert to provide a neutral and independent valuation and report on the likely future maintainable income from the business.

Private company valuations contain uncertainty. In Versteegh v Versteegh [2018] EWCA Civ 1050, Lord Justice Lewison said at para 185:

“The valuation of private companies is a matter of no little difficulty. In H v H [2008] EWHC 935 (Fam), [2008] 2 FLR 2092 Moylan J said at [5] that “valuations of shares in private companies are among the most fragile valuations which can be obtained.” The reasons for this are many. In the first place there is likely to be no obvious market for a private company. Second, even where valuers use the same method of valuation they are likely to produce widely differing results. Third, the profitability of private companies may be volatile, such that a snap shot valuation at a particular date may give an unfair picture. Fourth, the difference in quality between a value attributed to a private company on the basis of opinion evidence and a sum in hard cash is obvious. Fifth, the acid test of any valuation is exposure to the real market, which is simply not possible in the case of a private company where no one suggests that it should be sold.”

The value attributed to shares in a business, is often different in value to other more liquid assets. Company shares are often referred to as the more risky of assets, and other assets such as the family home or savings/investments referred to as “copper bottom” assets ie more certain. It is therefore important to have advice on how to approach each type of asset when you divide your assets,

Can one spouse keep the family business?

One spouse may keep the family business if the overall settlement gives the other a fair outcome. The arrangement must reflect company cash, tax treatment, shareholder rights, and trading needs. Taking too much working capital may reduce the income available to support both households.

Possible arrangements include:

• ✓One spouse keeps the shares and pays a lump sum to the other, which may be paid by instalments.
• ✓One spouse keeps the shares while the other receives more of the non-business assets.
• ✓Both spouses retain shares under terms governing control, dividends, information, and a future exit.
• ✓The company or shareholding is sold, and the net proceeds are divided.

Ideally, you and your spouse can agree on terms that preserve the business and provide both of you with a fair divorce financial settlement. If you have trouble negotiating, you can use non-court dispute resolution methods such as a private financial dispute resolution hearing or mediation to work out the best way forward.

How can I protect my business’s trading and reputation during divorce financial settlement negotiations?

You can protect trading by:

• ✓Preparing reliable records. Gather accounts, current management figures, loans, investments, and government records. Keep decisions properly recorded and do not make unusual withdrawals or share transfers.
• ✓Separate the business and personal finances. It is common for couples who own a business together to use their business accounts to pay for a coffee or dinner when they go out together; after all, it’s a ‘business meeting’. But if you are in the process of getting divorced, this and all other mixing of business and personal funds must stop.
• ✓Check your shareholders’ agreement and company articles for pre-emption rights to prevent shares from being transferred directly to an ex-spouse in certain circumstances.
• ✓Avoid going to court to resolve any disputes. Journalists may report on high-stakes business and asset disputes. Even if the judgment is anonymised, your business may be identified, and sensitive management and financial information disclosed may inadvertently become public knowledge.

Please note that this article is for information purposes only and does not constitute legal advice.

How can Purcell Solicitors help you?

We can assess the ownership and future of your business within the divorce settlement. Contact Purcell Solicitors to arrange a confidential appointment in Milton Keynes or by video call.

Please note that this article is for information purposes only and does not constitute legal advice.