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A recent report prepared by BDO NI, "The Future of Family Business in Northern Ireland" found that 60% of the businesses surveyed agreed changes in family relationships are likely to cause disruption to their business. Despite this, an astonishing 60% of family businesses do not have a strategic plan in place to address succession or a clear procedure in place to resolve family differences which may arise.

In the unfortunate event a member of the family business should find themselves separating or divorcing, in the absence of a strategic plan or prior agreement, the divorce process may have a serious impact on the stability of the business and its future. This is relevant not just for couples who both are part of the business, but for couples where only one spouse is a member.
All assets owned and incomes received by both spouses are examined during financial negotiations relating to divorce. A valuation of the company will need to be obtained from a forensic accountant to adduce what value can be attributed to either parties’ interest in the business. That value will be added to the matrimonial assets to be divided. Depending on the value of the other assets in the marriage, the difficult decision of selling the business or business share may need to be addressed.

The best way to prevent such a devastating impact on the business is to plan ahead. If family members are getting married, have them seek advice on obtaining a prenuptial agreement and/or create "a bespoke and robust Shareholders Agreement ... to provide some protections for the shareholders, the family and the business".
If a family member is separating and none of the above suggested measures have been taken in advance, seek legal advice from an experienced family lawyer at an early stage. It will dispel any myths on the proceedings and provide a helpful guideline on how your business may be affected. Most importantly, any initial consultation will provide an outline of the potential costs involved.

If you would like to read BDO NI's findings further, you can find the report here

 

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