Where marriage and business collide – an unlikely collaboration

9th April 2021

In this day and age, it is virtually impossible for lawyers to work in isolation or exclusively within their own teams. Collaboration is essential, particularly given the ever-increasing complexities of life, particularly family life.

I work closely with my colleagues in our other teams at HCR, with some collaborations being perhaps more obvious than others. Of course, when parties separate or divorce, one can easily imagine the need for help in relation to property issues (from our real estate team), the need to make, update or change a will, given the change in personal circumstances (from our wills, trusts and estates team), or the need to consider the tax consequences and implementation of a proposed financial settlement (from our investigation, regulation and tax team).

However, it is perhaps our collaboration with our corporate and commercial teams which can be easily overlooked. Yet this collaboration is often so important and integral to advising clients at every stage of their relationship.

For example, when someone is starting up a business, consideration needs to be given to their current domestic circumstances and the impact of any change to it. It is increasingly common for my commercial colleagues to liaise with my team with regard to shareholders’ agreements, partnership agreements etc, to ensure that those would remain fit for purpose in the event of a separation or divorce between the partners/shareholders.

Frequently, couples receive advice from their accountants about the tax efficiency of them both being, for example, shareholders in a business, enabling them to pay themselves salaries and dividends.

In a number of situations, the business may have been started a long time ago by one of the parties, with a new partner or spouse being made a shareholder or director after the start of their relationship. Whilst this may have a number of financial benefits, the consequences upon separation and divorce cannot be ignored or disregarded. It can be all too easy to forget during happier times, the impact that a subsequent separation or divorce can have upon all aspects of one’s life, particularly how the position in respect of a business, farm, company, or property will be dealt with on divorce/separation.

As with many things in life, sensible planning at the outset can avoid many difficulties at a later date, minimising future stress, costs and delay. This can be achieved by ensuring that your business documentation is drafted in a way which would assist you in the event of a change in your personal circumstances, rather than simply compound your difficulties at an already stressful time in your life.

Agreements, whether cohabitation, pre-nuptial (before marriage) or post-nuptial (during marriage) are incredibly important and can provide potential solutions/outcomes in a whole range of situations. They are no longer the preserve of the rich and famous. They help with, reduce (or even eradicate) future risk.

We all take many steps, in all aspects of our lives, to reduce, avoid or eradicate risk, from taking care how we cross the road, to obtaining insurance policies and maintaining our homes. We need to apply the same risk mitigation logic to our domestic circumstances; consider the impact of a breakdown in a relationship upon your business, your home and your children.

The collaborative approach adopted at HCR enables us to provide a truly holistic approach to any problems, creatively considering solutions to resolve the matter in the best way for you. Sometimes, it is important to obtain advice not simply as to what you should do, but what you should not.

I had recent experience of this involving a collaboration with my corporate and commercial colleagues. It involved an acrimonious divorce where an issue arose in connection with a limited company. Working with my colleagues, I was able, at an early stage, to advise my client on the appropriate way forward in circumstances where, alongside the ongoing divorce proceedings, separate steps were being taken by the other party in relation to the limited company.

The outcome for the other party was ultimately (but predictably) disastrous. Their misconceived application failed, with the costs to them being over three times more than the benefit they sought by bringing the application in the first place.

This was an excellent example of the importance of both proportionality and of a cost/benefit analysis. Clearly, the benefit to be obtained from the course of action must exceed the costs of pursuing it. Clear advice, strategy and collaboration will ensure that matters are resolved as quickly and proportionately as possible.