By Senior Solicitor Rachel Baul

I was delighted to be invited to contribute an article for the Farmer’s Guardian on divorce in farming communities and how to protect assets for future generations. 

Constant pressures and wider uncertainties in farming communities have been further exacerbated by the Covid-19 pandemic – with dairy farmers hit particularly hard by falling demand.

The knock-on effects of recent unprecedented developments unfortunately extend to business owners across wide ranging sectors including hospitality and tourism.

The cumulative impact will no doubt leave business owners with even less time or energy for planning ahead with survival being the overriding priority.  

However, effective succession planning – irrespective of which industry you are in – is vital to ensure business continuity.   

When undergoing separation and divorce, lack of knowledgeable legal advice can irreparably damage future financial planning. We have recently stressed the importance of choosing the right family lawyer in these situations.

I encourage business owners who are about to get married to make time to set up a pre-nup which will outline how the company will be treated and dealt with in case the marriage ends in divorce.

The agreement will help protect against the business when the court considers how the finances of the parties should be shared.   

In farming communities Courts treat divorces differently because they need to resolve how ex husbands and wives and their children can be provided for – avoiding, if possible, the excessive sale of land and thereforeto prevent a financial crisis and long-term suffering. 

Although not legally binding in England and Wales, pre-nups are nowwidely accepted as the sensible way to avoid the potential distress, acrimony and expense associated with resolving financial matters across all key areas, should a marriage break up.  

Both parties should be open and honest about their financial situation before signing the agreement. Situations where the contracts can run into problems include when judges think they have been signed in haste and under pressure.

A judge will want to know that the financially weaker partner understood the agreement, was not under duress when they signed it, and took independent legal advice. Courts may ignore or vary pre-nups drawn up in haste.

It is important that the agreement is signed at least 21 days before the wedding, making full financial disclosure and securing sound legal advice.

There are of course situations when parties do not marry.  In those circumstances we recommend a cohabitation agreement which would reflect and dictate how the parties’ assets should be treated if the relationship breaks down.

It is always worthwhile before committing to a relationship to fully consider the financial situation and take specialist advice on the consequences of a future breakdown and how to avoid them.

Jones Myers has extensive expertise in working with business owners across wide ranging sectors and in pre-nup and post-nup agreements. Call us at Leeds on 0113 246 0055, at Harrogate on 01423 276104, or at York on 01904 202550. Visit jm2023.jonesmyers.co.uk, email info@jonesmyers.co.uk or tweet us @helpwithdivorce

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Should boardroom squabbles ever make their way into the bedroom? Not if the recent spate of high profile co-business divorce cases is anything to go by. The well documented cases of oil trader Michael Prest and his wife Yasmin, Ford boss David Thursfield and his wife Linda, Scot and Michelle Young and billionaire philanthropist Sir Christopher Hohn and his former wife Jamie Cooper-Hohn have firmly turned the spotlight on the issue of marital discord and corporate asset division.

In all of these cases, problems have arisen as a result of one party believing that the other party has inaccurately declared their assets. In the UK, divorcing couples are required to complete a Form E, which is the financial statement that details their assets, liabilities, living costs and income. It is the primary document that the courts use to decide the financial division of assets.

However, whilst Form E arguably has many plus points in its favour – indeed, many believe it to be the best method to date that the legal system has implemented regarding full financial disclosure – one of the major drawbacks is that it only requires the previous 12 months of information to be declared.

This means that some ‘forward thinking’ spouses who are planning to divorce their husband or wife, may begin to divert assets long before they officially call time on their relationship. As a result, these assets may not then be taken into consideration when settlements are being made, unless the court can be persuaded to allow much more extensive enquiries to be made.

As with all divorces, the dividing of assets plays a key role, but when a couple are in business together, or one of them has their own company, the issues become even more complicated. The business will be seen as an asset, which means that it’s value will be taken into consideration when the couples’ assets are being divided up. If there is found to be a surplus of resources once financial needs have been met, then further thought will be given as to how this will be distributed.

When deciding whether the assets can fairly be divided in a way that allows for a clean break between the parties, the value of the business, and any cash that might reasonably be extracted from it, will be amongst the factors taken into account. This means that neither spouse can make any further financial claims on the other once they are divorced. Alternatively, if there is insufficient capital available to fund this, it may be that the income produced by the business will continue to fund maintenance payments from one spouse to the other.

At Jones Myers, we have a number of clients involved in such situations and we always recommend that those clients who aren’t yet married, but who are in business together, draw up a pre-nuptial agreement.

A pre-nuptial contract has a provision that allows assets such as a business – which can have been acquired, started up or inherited – to be included within the agreement. This means that the parties can agree how the business should feature in the financial issues to be resolved upon a future separation or divorce. However, the agreement must be drawn up with consent of each party, who each have the benefit of legal advice, full mutual disclosure, and a reasonable time prior to the proposed marriage – otherwise the court may well discount it.

Ultimately, nobody wants to kill the ‘golden goose’ and destroy a family’s main source of income, so the end result has to be fair to both parties, with the interests of children taking a priority.

Do you think Form E should be reviewed? Should there be a time restriction on the listing of assets? Would you consider signing a pre-nuptial agreement?

If you have any questions or concerns about your divorce and are worried about how your assets should be divided, please call us on 0113 246 0055, leave us a comment below or drop us an e-mail.

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