Protecting an entrepreneur’s business interests during acrimonious divorce proceedings

Our family law team helped a young entrepreneur to reach a suitable financial settlement in highly contested court proceedings following his divorce.

This enabled him to protect his business interests and maintain sufficient liquidity to rebuild his businesses after the Covid-19 pandemic, despite his ex-wife asking for a significant settlement.

Here, Debbie Heald explains how the two parties’ opposing positions — and some major initial missteps from our client — led to court proceedings in the first place, as well as how we achieved a satisfactory resolution.

An acrimonious split

Our client and his wife separated after a short, childless marriage. The separation was acrimonious and our client was served with a financial remedy application. 

Before the parties had met for the first time, our client had built up successful businesses — having tapped into a lucrative market at just the right time. This provided him with extensive income and an extravagant lifestyle, which was later enjoyed throughout the marriage. The luxury cars, frequent exotic holidays and designer clothes were a far cry from the wife’s relatively modest living as a beautician. So, when the marriage ended, while the wife could support herself this bore no resemblance to the high standard of living she had enjoyed previously.

The parties’ positions

The wife was adamant that she wanted to remain living in the matrimonial home, which was held in our client’s sole name and had been purchased by him prior to their marriage. 

She argued that his businesses were valuable and therefore not only sought a transfer of the property but also a further lump sum in respect of her alleged claims against his businesses.

On the other hand, our client’s position was that his businesses had been highly successful before the Covid-19 pandemic but that the hospitality industry had been irreversibly impacted by the national lockdowns. While his businesses had produced significant profit, this had been stripped out to fund his lifestyles — which he argued that the wife had benefitted from but wasn’t sustainable. 

Our client was aggrieved by the wife’s approach — particularly as she had come to the marriage with nothing. While her case was limited to her needs and the court wouldn’t seek to jeopardise his ability to earn an income moving forward, our client assumed — incorrectly — that since all the assets were in his name, the wife wasn’t entitled to anything.

He wanted to achieve a clean break but not at the expense of his ability to meet his own housing needs. This meant that liquidity was a live issue throughout the case. 

Analysing the business interests

Early on, we worked closely with the company accountants to ensure the accuracy of our client’s financial disclosure. A valuation report from a jointly instructed expert was obtained to determine the capital value of our client’s business interests and consider liquidity.

The letter of instruction was carefully drafted to provide a detailed timeline and understanding of the nature of the businesses, the impact of the lockdowns and the extent of our client’s Director’s Loan Account. A full analysis of the Account was undertaken and provided to the expert alongside corroborating bank statements. While our client found this to be extremely time consuming, it was invaluable to ensure that the expert had a solid understanding of how the businesses had been run. This resulted in a favourable valuation for the purposes of the settlement negotiations. 

We worked seamlessly with the company accountant to put questions to the business valuation expert and consider the tax implications of the various proposals. This included prompting the expert to consider the timescales for profit levels to return to their pre-pandemic heights.

Satisfactory resolution

Ultimately, we managed to deal with this case by consent — removing the uncertainty of a final hearing for our client as well as the associated time and legal costs. 

We accommodated his preference for in-person meetings whenever they could be fitted into his tight schedule. Otherwise, we acted flexibly and remotely — dealing with matters verbally whenever possible to reach fast resolutions and avoid ‘legal speak’.

His main priority was to retain his businesses, while he also wanted to meet his own housing needs. Our work was performed to ensure that the proceedings brought minimal disruption to his business ventures as he was seeking to rebuild after the pandemic. 

Key learning points

This case demonstrates the critical importance of taking early legal advice from solicitors who are comfortable when working alongside your other professional advisors. Since our client was proceeding on the incorrect assumption that his wife wasn’t entitled to anything on divorce, he didn’t immediately seek legal advice (or provide full financial disclosure). This prevented him from being able to resolve matters more quickly and easily through alternative (non-court) dispute resolution. 

The lack of financial disclosure also hindered our client when it came to valuing his businesses. This resulted in the need to obtain an expensive valuation report to resolve the issues at play as the wife questioned the client’s motivations. It was this lack of trust that ultimately resulted in highly contested court proceedings.

We’ve since provided the client with advice to protect his position in a new relationship — ensuring that he’ll never face such uncertainty again. This included a cohabitation agreement, with advice surrounding the protections afforded by nuptial agreements in advance of any re-marriage.

Talk to us

Whether you’re thinking about marriage, going through a divorce or simply looking to protect your financial interests at any stage of your life, we can help. 

Our Brabners Personal team can help you to plan ahead effectively and access legal support when you need it most from a wide array of specialists, including our award-winning family lawyers.

Talk to us by completing our contact form below or emailing personal@brabners.com.

Please note that we've altered some details within this case study to respect our client’s confidentiality.