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Before addressing business owners and pre-nuptial agreements I felt it may be helpful to revisit some of the general principles that apply in relation to pre-nuptial agreements.
It is an agreement between two people about to get married/enter a civil partnership which sets out what they want to happen to their finances if the relationship breaks down.
If they are fair and certain safeguards are followed then there is a high probability that the Family Court will respect the terms of the agreement. However, the Family Court does not have to impose the terms of the pre-nuptial agreement and can vary it if it feels the circumstances warrant this.
Businesses can present a number of difficulties when resolving financial claims following a separation. The issues that arise are typically although not exclusively, related to private companies such as:
It is all very well assigning a value to a business but a value assigned to a business is not cash that can be used as a deposit to allow someone to buy a house, for example.
That does not mean that the value of the business should be ignored as often businesses are the source of income for one or both parties. Therefore, it is not practical to sell it. If that is the case then consideration needs to be given as to how assets are divided to make sure any agreement is sustainable.
A carefully considered pre-nuptial agreement can address the issues highlighted above and look at the role of the business, the wider context of the family finances, what future provision is needed and, as a consequence, what is appropriate regarding the business if the relationship breaks down.
At a time when people are entering into a pre-nuptial agreement, communication is generally better than at the time when the relationship is coming to an end. This means that whilst these conversations are still challenging, both parties tend to be more receptive to listening to each other’s point of view. There is more motivation to reach an agreement which both parties are comfortable with in order to ensure that the relationship has a positive start. In contrast, upon separation, the natural reaction of many people is to want to protect themselves. As a result, it is often harder to reach an agreement at the end of the relationship than it is at the beginning.
If you own a business and are considering putting in place a pre-nuptial agreement please get in touch to speak to our specialist solicitors.