Divorce?...What’s the rush?

When couples separate often the last thing they want to think about is Divorce.  Their focus is on sorting out the financial issues or arrangements for the children, which are often more important to them.

Clients often say to me that really the "Divorce" element of their separation isn't that important to them immediately and some even would say that they don't like the idea of such finality when they have just separated (despite intending to remain apart and clear about their wish to separate).

If agreement about financial matters can be reached then issuing proceedings is not immediately necessary and parties may choose to delay issuing a Divorce Petition and enter into a “Separation Agreement”. The purpose of a Separation Agreement is to set out the financial arrangements clearly and in such a way that it will be upheld by the Court later on.

Most commonly the intention of parties dealing with a break-up in this way will be to issue Divorce proceedings and apply to the Court for the terms of their agreement to be incorporated into a legally binding Court Order at a later date – usually after they have been apart for a period of 2 years. That allows time for emotions to be worked through, people to move on and for the Divorce then to be dealt with amicably and at a time when the parties feel more ready to deal with it.

Separation Agreements cannot be used where there is dispute between the parties as to how assets are to be divided. If Mediation cannot resolve the dispute or it cannot be negotiated then Court proceedings might be needed to determine matters. Financial proceedings cannot be brought without Divorce proceedings first being issued and, in some circumstances therefore, an immediate Divorce is necessary.

The same goes for cases in which there is some urgent need for the Court to intervene, perhaps where assets are being dissipated.

There are emotional benefits to dealing with separation in this way but Separation Agreements are not a “quick fix”. Separation Agreements are not legally binding and will require the Court's approval (which may only be given once Divorce proceedings have been issued and the Decree Nisi granted) to become so. 

They must be approached and prepared properly to hold weight with the Court and ensure a fair outcome and it is important that both parties provide detailed financial information to one another and have the opportunity of taking independent legal advice.

So... consider it as an option and take advice about whether it might be possible in your case.

Family Businesses and Divorce

Many business owners are concerned about the impact that Divorce proceedings will have on their businesses and are unsure about how the business will be taken into account in reaching a financial settlement.

There are many different ways in which a family business might be operated but sole trader arrangements, partnerships (be that with or without any formal paperwork), or Ltd companies are most common. Those businesses might involve retail, manufacturing or provision of services and there might be specific market factors to take into account. The structure of the business may also give rise to additional issues around the status and responsibilities or obligations of a spouse in the business and whether dividend payments or other monies are due to them as a result.

To the extent that the business has been run throughout the marriage by one or both parties, for example, if one has been a company secretary (as is commonly the case) or has undertaken some work in the business, such as payroll or book-keeping etc. the business will be considered a “marital asset”. There may be some argument if the business was established by one party and successful at the outset of the marriage or if there has been some level of entrepreneurial skill shown by one party in developing the business.

Where assets are “marital” in nature, they fall subject to the principle of “sharing”. However, the way in which a business is considered in marital finance negotiations depends largely on the type of business and the issues in dispute and the business cannot be looked at in isolation but must be considered alongside the other assets of the marriage, such as property, investments etc.

There may be several solutions to achieve a fair outcome in terms of capital and income and having regard to the nature of the assets – such as share transfer, continued maintenance or off-setting any true capital value against other liquid assets but how settlement is structured will depend on a variety of factors including the other marital assets and the needs of both parties.

The Court is unlikely to enforce a settlement that sees a business unable to continue trading. It is unlikely that the Court will consider that the business should borrow against assets or otherwise fund lump sum payments if such borrowing or payments are not commercially viable.

Whether the business is to be considered a capital asset or one that is solely income –producing will need to be considered and this will depend, to some extent, on the needs of the spouse and whether there is any argument for one party to receive on-going maintenance from the other or whether a “Clean Break” can be achieved. The case law in this area makes it clear that the Court will be careful not to “double count” in treating the business as capital and counting its income as well. 

The Court has equally made clear that they will seek a “business solution”, which might often mean that a clean break cannot be achieved, because of the reliance that there would have to be on “snap-shot” valuations of the business – which can be undertaken by reference to a number of different indicators from the business accounts; such as earnings, assets, dividends and cash flow and which can lead to widely varying figures.

Cases involving Family businesses are complex and on separation specialist advice should be sought to ensure that all issues are considered.