The timing of a sale, the structure of the deal, and the future value of the business can all affect what is considered a fair settlement during divorce proceedings. At Laurus, we have helped many clients navigate these complex issues and achieve practical solutions that protect both their personal and commercial interests.
If you are concerned about how the sale of a business could affect your divorce settlement, speak to our team to arrange a consultation with one of our specialist family solicitors.
Specialist advice for business owners facing divorce
Whether the company is a long-established family enterprise, a recently formed venture, or a business that is already on the market, careful consideration needs to be given to how the value of the business should be treated.
At Laurus, we are highly rated law firm specialists with extensive experience in financial settlements involving business assets. We understand that the interests of the company itself, employees, shareholders, and family members often need to be balanced alongside the interests of the divorcing spouses. No two cases are identical, and the right approach will depend on the circumstances surrounding the business and the marriage.
Business sales in progress during divorce proceedings
It is not unusual for a company to be in the process of being sold while divorce proceedings are ongoing. In these situations, one of the first issues to consider is whether the financial settlement should be delayed until the sale has been completed.
Waiting until completion can provide certainty because the parties know precisely what the business has been sold for and what funds will ultimately become available. However, business sales can be unpredictable, and transactions may take many months or even years to conclude.
In some cases, prospective purchasers withdraw, valuations change, or negotiations continue indefinitely. It would be unreasonable for spouses to remain in financial limbo indefinitely while waiting for an uncertain event to occur.
Where a sale may take a considerable amount of time, the court can proceed with a settlement based upon expert valuations and available evidence. Mechanisms can also be included within the financial order to account for future developments. This allows the parties to move forward with their lives without waiting endlessly for the transaction to complete.
Our team are specialists in helping clients manage these situations and ensuring that financial arrangements remain fair even where uncertainty exists.
Deferred payments following the sale of a business
Many business sales do not involve the entire purchase price being paid immediately. It is increasingly common for payments to be staggered over several years, or for part of the consideration to be received in shares or through earn-out arrangements linked to future performance.
These arrangements can present challenges within divorce proceedings because the eventual value of those assets may not be fully known at the time the settlement is reached.
Deferred payments are still assets that need to be considered. The court will examine the structure of the deal and may decide that future instalments should form part of the matrimonial assets available for division.
Where shares are received instead of cash, their future value may fluctuate significantly. A financial settlement may therefore include provisions designed to ensure fairness if the shares increase or decrease in value after the transaction.
If you are unsure about how deferred consideration should be treated, we can help. We have assisted many clients whose business sales involved complex payment arrangements and understand how to address these issues effectively.
Tax considerations following a business sale
The headline sale price of a business does not necessarily represent the amount available for distribution between spouses, because tax liabilities may substantially reduce the net proceeds. Capital gains tax and other associated liabilities may need to be taken into account before any division of assets is considered.
The court is concerned with the actual value available rather than a theoretical figure. Accordingly, professional evidence from accountants and tax advisers is often required to determine the realistic amount that will remain after liabilities have been met.
Ignoring the tax consequences of a sale can produce unfair results. One spouse could otherwise find themselves responsible for substantial tax obligations that had not been properly factored into the settlement.
Circumstances where sale proceeds may not be divided equally
There is sometimes an assumption that the proceeds from a business sale will automatically be shared equally between spouses. In reality, the court has wide discretion when determining financial settlements and will consider numerous factors when deciding what is fair.
The origins of the business can be particularly relevant. A company established long before the marriage may be viewed differently from one created during the relationship. Likewise, where a business has been inherited or has remained within the same family for generations, arguments may arise regarding whether some or all of its value should be treated as non-matrimonial property.
In some situations, especially following lengthy marriages, assets that originally came from outside the marriage may still be shared. In other cases, particularly where resources are plentiful and the marriage was relatively short, a greater proportion of the business proceeds may remain with the spouse who owned or inherited the company.
Post-divorce sales at higher values
Business valuations are only snapshots in time, and a company that appears to be worth one amount during divorce proceedings may subsequently be sold for considerably more. This can lead to disappointment where one spouse later discovers that the business has achieved a much higher sale price than had originally been anticipated.
Generally speaking, the court expects parties to achieve finality once a financial order has been approved. It is recognised that valuations involve uncertainty and that future changes in value are part of normal commercial risk.
A later increase in the value of the business will not automatically entitle the former spouse to reopen the settlement. There are, however, limited circumstances where further applications may be possible. Cases involving non-disclosure, fraud, or serious procedural irregularities can sometimes justify revisiting matters. Equally, if information was deliberately concealed during the original proceedings, the consequences can be significant.
This highlights the importance of obtaining accurate valuations and ensuring complete financial disclosure from the outset. We are experts in how to handle this issue and have helped many business owners and spouses achieve settlements that are robust and capable of standing the test of time.
Contact us today to request a free consultation to discuss your situation with our specialist family law team.
