Deal with Business Structures in Divorce Cases

It is now commonplace that a corporate or business structure will fall to be dealt with by the divorce courts in financial remedy matters as a resource of one or both of the parties under section 25(2)(a) Matrimonial Causes Act 1973 (MCA 1973). When considering a fair outcome, the court must first establish the value of the business interest before it is able to decide how the asset is treated in the eventual settlement.

In certain cases, professional valuations are essential but following Moylan, J in H-v-H [2017] EWCA Civ 1306 where he likened them to no more than a chimera where they should be used as guidance rather than rule, their usefulness to the court is limited to help the court test the fairness of the proposed outcome. Fairly sweeping when we consider the costs of a valuation which can run into tens of thousands.

This principle by definition extends to when is it sensible to value and when is it not? A rule of thumb is that sole traders, cash businesses, minority shareholdings in quoted companies and businesses that generally yield income only may not benefit from a valuation. If in doubt, a forensic accountant will help in the decision-making process.

Experts have many valuation methods including discounted cash flow (where there is minority shareholdings), assets (such as property investment/management companies) or earnings (where the company is trading it is necessary to establish future maintainable earnings and assess how much a prospective purchaser might pay). More : https://www.lawyer-monthly.com/2019/03/how-to-deal-with-business-structures-in-divorce-cases/