Tycoon’s divorce battle a warning to small business owners

A leading law firm is warning small business owners to be alert to the implications of marital breakdown as yet another high profile settlement battle highlights the damage divorce can wreak on businesses.

Mace & Jones, an official adviser to small business lobby group the Forum of Private Business (FPB), said the divorce case of insurance multi millionaire John Charman will set an important precedent for business owners. Charman and his wife are currently thrashing out a settlement deal contesting his fortune worth an estimated £160m.

Mace & Jones family law adviser Ros Bever said divorce settlements are increasingly giving big pay outs to estranged spouses of business owners, and that it is difficult to prevent all assets including business assets and trust funds from being taken into account.

“The blunt truth is that a spouse may have never even set foot in their partner’s business, but if a marriage breaks down they could still claim against the firm’s assets or even force its sale,” she said.

“For this reason it really is imperative that business owners pay close attention to the outcome of recent cases, including the Charman appeal and ensure they take advice to protect their business.”

Ms Bever said the bad news for business owners is that recent legal cases have shown that it is increasingly difficult to ring-fence or conceal assets.

“The divorce courts are a lottery, and when businesses are involved the stakes are higher and the odds even harder to call,’ she said. “The final settlement depends on a series of factors, including the length of the marriage, the contribution to the business, the presence of children, future case law and the whim of a judge."

“However the starting point is that there must be a fair division of the assets, including the business, whether your spouse has ever worked in the business or not. A fair division may mean an equal split of the assets, but that is not set in stone: it could even mean more than half. In some cases, there aren’t sufficient assets, apart from the business, to satisfy a spouse’s claims and it is in these cases that the business is particularly vulnerable.”

Ms Bever said businesses should think about the possibility of entering into a pre-nuptial agreement before marriage, or a post-nuptial settlement if they are married.

Businesses wanting to know more about protecting themselves from divorce can email Ros Bever at ros.bever@maceandjones.co.uk or visit www.maceandjones.co.uk