The family court will look at all assets, including the realisable income and capital value of any investment in a limited company when deciding upon a financial order in divorce proceedings. But the valuation must be fair and is best assessed by a neutral accountant. Which means that the liquidity and debts of the business and any shareholder’s agreements are properly taken into account.
In a recent case, we acted for a husband who held a 30% minority interest in a private limited company. His wife tried to use the gross asset value of the business on the balance sheet as the basis for assessing the realisable value of his investment, in order to claim that she should retain the large family home.
However, this was not accepted by the court because:
- There was a shareholders agreement which dictated how and to whom any shares disposed of had to be dealt with (as is common in any private limited company in order to protect the stability of the business).
- There would be tax implications for the husband in realising the shares
- The business employed the husband and was his only source of income, and it was entirely unreasonable that he should be expected to liquidate the shares which would have led to losing his employment as a director.
The District Judge granted our application on behalf of the husband for a Single Joint Expert report to provide a neutral valuation of the Husband’s interest in the company. After carefully assessing the company accounts, this resulted in a valuation of less than half of the Wife’s submission. The report also clarified that this was an illiquid asset for future realisation, like a pension, and therefore could not be equated on a pound-for-pound basis to the cash represented by property or funds in the bank.
The husband was as entitled to a reasonable share in the available cash represented by the family home, as the wife was to a share in the true valuation of the husband’s interests in the business.
The parties reached an agreement, based on this sensible approach to the husband’s investment, without either ignoring or overvaluing the realisable value of the shares and allowing both sufficient liquid cash from the sale of the family home to purchase a house as a base for themselves and the shared care of their children.
As a solicitor and a forensic accountant, we have over 50 years of experience between us in dealing successfully with cases like this, for both husbands and wives, and in the vast majority of cases we are able to achieve a fair settlement without a trial.
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