With the current economic climate, historic evidence would suggest an increase in the levels of marriage breakdown over the coming years. Statistics have shown that divorces are up 5% from 2010.
The recession generally puts financial strains upon marriages and this can be heightened when a family business is involved.
In business, individuals generally know where they stand, the law is quite clear in commercial contracts or with employment law or with regard to matters of health and safety. But family law is different, a husband or a wife can secure an entitlement to an interest in a business or property by virtue of marriage despite never having their name on the ownership record.
The landmark ruling in 2010 by the Supreme Court upholding the prenuptial agreement for Katrin Radmacher has provided businesses with a tool for protecting themselves.
Business owners who come into a relationship should now be encouraged and advised to enter into a pre-nup if they intend to marry. Those companies offering shareholdings in businesses should ensure that the individuals have appropriate arrangements in place to provide for what is to happen should their relationship fails.
Whilst the courts will not want as a matter of course to sell the golden goose, it can and will make orders which can cause for the business to restructure itself sometimes at significant cost to ensure a spouse is provided for. As a last result it will order a sale.
Business owners would be well advised to keep ownership completely separate from a spouse. If joint partners or owners then a clear exit strategy should be built into any business plan if a separation was to occur. It is often easier to discuss this when a couple are happy at the start of a relationship as opposed to at the end.
The courts are seeking to distinguish between marital assets and non marital assets once a parties needs have been met, however particularly in the case of Farmers the marital home is usually the farmhouse and lived in by a couple and central to the business. The courts will consider the home to be a joint asset to be shared which can mean farmers having to sell off valuable land to pay out an ex spouse.
So if you are a business owner then as part of your business planning you should consider at every stage the impact of a divorce upon you or the business or if you are a farmer worried about protecting the family farm for future generations, I recommend you take advice as to whether a pre or post nuptial agreement could be appropriate for you or your children.