Will I Have To Sell My Business If I Get Divorced?

The idea of having to sell your business just because you are getting divorced fills most business owners with horror. Thankfully, the courts are as reluctant as you are to sell a profitable organisation unless absolutely necessary to reach a fair divorce financial settlement. However, divorce can place a business under close financial scrutiny, and in some situations, the Family Court may conclude that selling is the only realistic option. In this article, we explain when that might happen and what you can do to avoid having to sell your business if you get divorced.

Can the court order a sale?

The Family Court can sometimes order the sale of a business interest, such as company shares, to help reach a divorce financial settlement. Under section 24A of the Matrimonial Causes Act 1973, this power is linked to certain other financial orders, such as an order to pay a lump sum or transfer property. The court can order the sale at the same time or later, provided you or your spouse has a beneficial interest in the asset or a right to its sale proceeds.

Under section 25 of the Matrimonial Causes Act 1973, the court must consider “all the circumstances of the case”. These include each spouse’s income, earning capacity, property, financial resources and needs. Your shares and the income they generate can therefore affect the settlement, even if your spouse has never worked in the business.

Much depends on whether you are a majority shareholder or a minority shareholder.  The Court may also have to take into account other shareholders in the business and how any proposed sale or transfer of your shares affects them.

How is the business value assessed in a divorce financial settlement?

The business value is usually assessed by estimating what your ownership interest is worth and the income it can provide. An accountant with valuation experience may examine recent accounts, current management information, borrowing and the rights attached to your shares. A private company valuation remains an estimate where there is no ready market for its shares.

Value and available cash answer different questions. The business may own equipment or property that supports its trade, and taking out working capital may weaken its ability to pay bills. Our business assets in divorce advice explains how ownership and future income may shape a settlement.

How can I avoid a sale?

You may avoid a sale if another arrangement gives your spouse a fair outcome without placing unaffordable pressure on the company. The figures should account for payment dates, security, tax treatment and the company’s continuing cash needs. Possible terms include:

• You keep the business while your spouse receives a larger share of other assets.
• You pay a lump sum over time from personal income or lawful company distributions.
• Shares are transferred under terms covering voting rights, dividends, information and a future exit.
• Your ex-spouse receives an agreed share of the net proceeds if the business is sold later.

Section 23 of the Matrimonial Causes Act 1973 permits lump sums to be paid by instalments and allows the court to require security. Once the parties agree on terms, a court-approved Consent Order records the payment timetable and makes the settlement enforceable.

What should I do now?

Gather reliable records and seek expert legal advice before accepting a valuation or payment timetable. Start with filed accounts, up-to-date management figures, shareholder documents, and borrowing details. Keep normal business reporting in place and record the commercial reason for any significant management decisions.

Avoid unusual withdrawals or share transfers intended to change the financial position. The court can examine transactions and disclosure, while an ill-planned withdrawal may create tax or cash-flow problems. your accountant, can test whether the proposed terms leave enough money for the company to trade.

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.