It is well recognised that a marital or relationship breakup can have a major impact on a business. Below are some of the key issues to consider,if you own or have an interest in a business, and are contemplating or have separated from your de facto partner or spouse.
Family Law Property Division
The first point to appreciate, is that your business interest can and will be considered as “property” in family law proceedings. The extent of that interest, the value ascribed to that interest and the manner in which it is treated in any property settlement, are often the critical issues that need to be considered and resolved. Furthermore, the following matters are to be addressed:
• What are your likely entitlements? Your former spouse’s entitlements?
There is no legal requirement that parties split their assets equally upon separation in Australia. The assessment of entitlements in Australia is a highly discretionary exercise involving the consideration of multiple factors that takes into consideration the “financial and non-financial contributions” made by each parties to the “acquisition, conservation or improvement” of the property of the parties.
It is important that advice of entitlements is taken from competent and suitably experienced lawyers, as that would then form the basis of negotiations and proposals for resolution.
• How do you separate your matrimonial home from the business? Who will continue living in the matrimonial home? Would the matrimonial home have to be sold or can any mortgage be refinanced? If mortgages are paid, who will pay the mortgage?
• Is your spouse or de facto partner involved in the business? Who will retain the business after the breakdown of the relationship? Are there steps that need to be taken to protect the business? E.g. Can either of you sign on any business accounts? Can either of you draw down on any line of credit? Does your spouse or de facto partner hold a power of attorney or enduring power of attorney from you? Would your spouse or de facto partner be able to sell or dispose of any business assets?
• If your business or business interest is not to be sold, how will the business or business interest be valued?
• Does your business involve other third parties?
How would the breakdown of your relationship affect your dealings with your fellow shareholders/directors or business partners?
• How would any proposed property division be funded? Are there sufficient assets and or cash flow to fund the exit of your spouse or de facto partner?
• What are the tax consequences of a property division? It is important that appropriate advice is taken from your accountants and lawyers, and as early as possible. E.g. There are capital gains tax and stamp duty concessions that may apply to certain transfers which are in accordance with the Family Court Orders (which may be obtained by consent and not necessarily litigated) or a Binding Financial Agreement.
• Do you have an estate and or business succession plan? What effect would your separation have on your estate and business succession plan?
Spousal or de facto maintenance
• Does your spouse or de facto partner have independent income of their own? Are you liable for any spousal or de facto maintenance and if so, how will it be funded? Would any such liability have an effect on your business?
Family Law Process
• How do you discuss settlement options with your spouse or de facto partner?
• What is your Duty of Disclosure and what information and documents are you required to provide to your spouse or de facto partner?
Parties in Family Law disputes are required to provide “full and frank disclosure” of all matters relevant to their income, expenses, assets, liabilities and financial resources.
• How do you ensure that the Family Law process is managed effectively with minimal impact on the operational requirements of your business?
• Are you prepared to be “generous” to achieve a quick, amicable and costs effective resolution with your spouse or de facto partner?
• How promptly do you need a resolution taking into account your business plans? Family Law property settlement negotiations and litigation can take years to resolve. The effect of a lengthy protracted process can have disastrous effect on a business.
HHG Legal Group understand the impact that a Family Law separation can have on a business and are committed to working closely with your accountant, financial planners, tax advisors and other professionals (as required) to structure an effective resolution that best meets your objectives, and is in your best interests. We are committed to achieving prompt, effective and commercially practical property settlements for our clients. As a strategically-placed, full service, mid-tier law firm providing both personal and business services, we are uniquely qualified to offer these services covering the needs of individuals and their businesses. The dedication and passion that drives HHG Legal
If you would like further information in relation to this matter or other legal matters please contact our office on Freecall 1800 609 945 or email us now.
*This information serves as a general guide and does not constitute legal advice. It is based on our research and experience at the time of publication. Please consult our knowledgeable Legal Team for any specific inquiries or advice relevant to your circumstances, as the content may not have been updated subsequently.