According to the Office for National Statistics (ONS) the divorce rate in England and Wales is almost 20 per cent lower than it was a decade ago, but although it may be declining, it’s still one of the most common reasons that clients come to us in need of counsel.
Divorces can range from the truly amicable to the bitterest of tussles, but either way, if the divorcing couple own a business together the complications are magnified tenfold.
With SME businesses often owned by dynamic entrepreneurial partners, relationship breakdowns can deal a devastating blow to the couple on a personal level, and wreak havoc on the business and the family livelihood.
However, when couples have poured years of hard work and energy into building up a business and turning it into a success, their shared passion for the company can mean that they decide to keep it going.
If a couple decides to divorce, but remain partners in business heres our ten step guide to keeping calm and carrying on:
1. Do not press the self destruct button!?
Remember this business is your livelihood and even if one party ends up pulling out as part of a later settlement, it may be a much-needed financial stream from which spousal maintenance or child maintenance is paid.
2. Speak to the professionals
It is important to instruct a solicitor who can provide you with appropriate commercial guidance. A solicitor can draft a shareholders agreement which accurately divides the ownership of the business between you and your spouse according to factors such as historic levels of investment, contribution to the business. This will need to be carefully threshed out by your legal team and can be a very contentious and inflammatory issue. This should also include a buyout provision in the event that the business relationship fails and the business ultimately must be divided.
Read more about couples who are also business partners:
- 6 tech companies founded by married couples
- Secrets to founding a company as a married couple
- From traveller to vendor: One couple’s story of searching for the perfect accessories
3. Draw up new partnership agreements and redefine company ownership
This is a practical and sensible step to take and should give each party the option to leave the business in the future as it grows and changes. It should also accurately reflect the level of responsibility and input that each party has in the business. This is a complicated area of the law and sound legal advice at an early stage will help both parties to achieve the most equitable outcome.
4. Remember to try and keep things as civil as possible
Avoid getting into arguments and saying things in the heat of the moment which could have long-standing, harmful repercussions for the future of your business and family life.
5. Try and ensure that the business carries on running efficiently and as profitably as possible in the interim period
During this difficult time, do not draw battle lines through the business cooperation is key you need to be committed enough to your business to put its needs above any emotional pain you may be suffering.
6. Present a united front to customers
Clients will back off if the atmosphere is too toxic, or if they think you’re a sinking ship. Never take out your feelings on the staff, or try to rally support and get them to take sides. Obviously they will find this extremely uncomfortable and this could result in a loss of key personnel.
7. Compartmentalise your lives
Divorce is one of the most stressful experiences life can throw at you. In order to try and combat this somewhat, create divisions between legal, financial and emotional issues. This will help you not to blur the lines between familial issues and workplace problems. In order to stay at the top of your game and keep your business running as successfully as possible, you need to stay focused and deal as rationally and dispassionately with the day to day running of your business.
8. Hire a mediator with a financial background
This can be very helpful, particularly in the early stages of a divorce. They will provide an unbiased, professional sounding board for issues which you and your ex-partner are going through and will be able to provide a helpful perspective into any issues you might be experiencing and help you set the course for a positive working relationship together.
9. Take a break
If you can take a short holiday and get away, it’s a good idea to do so after the divorce initially goes through to allow emotions to die down and give both parties a chance to recover from what is a traumatic process, no matter how amenable the split has been.
10. Redefine your relationship and create barriers between your work and personal lives
Its wise to clearly outline your roles and responsibilities at work and ensure you dont end up micromanaging each other, which can be draining and lead to negative, emotional interactions which can be damaging for the business.
Paul Hunt is a senior associate at Kirwans.