How to Protect Your Business Assets During a UK Divorce

Protecting your business interests and assets during a divorce in the UK may be possible, but it requires careful planning and consideration and an understanding of how the courts make decisions in such situations. In one landmark case concluded in 2024, HO v TL [2023] EWFC 215, a wife was awarded £7.7m in a divorce settlement involving a large family business (a hotel chain). In this case, the marital assets of the couple were insufficient to meet the needs of the wife, resulting in a claim in the High Court for a larger share. The judge reached this decision based on the long duration of the marriage, the contributions of both parties during the marriage, and the fact that the wife used much of her pre-marital wealth towards the family finances. In this article, we will look at the practical measures you can use to protect your business assets in the event of divorce.

How can I protect my business assets from divorce proceedings?

There are various legal tools that you can use to protect your business in the event of divorce proceedings. It is important to consider that the courts have ultimate discretion when awarding a financial divorce settlement. As such, any measures that you employ cannot be guaranteed to protect your pre-marital or marital business interests. Some of the ways that you can protect our business assets during a UK divorce include:

• Nuptial agreements
• Shareholder agreements
• Family trusts, and
• Separating business from personal finances

Nuptial agreement

If you wish to protect your pre-marital business interests, it is important to consider entering into a pre or post-nuptial agreement with your new husband or wife. While nuptial agreements are not legally binding, they will be taken into consideration by the courts during divorce financial settlement proceedings. Their contents will help the judge overseeing the matter understand the mutual understanding and motivations of both parties regarding what would happen to any pre-marital assets in the event of separation, including a business (or businesses). For example, you may wish to include a clause stating that you wish some or all of your business assets to be protected for any children from your previous marriage.

Shareholder agreement

A shareholder agreement is a legal agreement between company shareholders setting out their relationship and how shares are owned and protected. A clause can be added to the agreement stipulating that the transfer of shares to the other party upon divorce should be restricted. As a result, this prevents the business or a share in the business from being transferred to the other party without the agreement of the shareholders.

Family trust

By placing your business assets into trust, you are, in the eyes of the law, no longer the legal owner. This is because a trust is a separate legal entity. The trust is then legally owned and managed by a trustee on your behalf as beneficiary. There are various types of trust, each with its own purposes and benefits, including nuptial trusts, intergenerational trusts, and offshore trusts. Again, it is important to bear in mind that trusts don’t make your business assets invisible. The courts have a wide discretion to include the trusts within in marital finance settlements based on the intention of setting up the trust if the assets of the trust have been used to maintain the lifestyle of the family, the length of the marriage, and the financial needs of both parties. 

Separate business from personal finances

If it is clear to a judge that your business has been used for the personal use of the family, it is more likely to be included in a divorce financial settlement. For this reason, it is important to keep your business completely separate from your new family and its finances. By keeping a clear boundary between the two, there is less chance that business assets will be viewed as marital property. It is advisable to speak to your accountant about how you can separate your business and personal finances as a means of protecting your business interests in the event of divorce. 

Final words

As we have emphasised throughout this article, none of these measures provide a ‘cast iron’ guarantee that your business assets will be protected following divorce or dissolution. The courts will always have the ultimate choice when deciding on a financial award following separation. By working with an experienced family law Solicitor, you can better understand the options for protecting your business and how these can be implemented in a manner that increases the chances of them being valid and effective. 

For a free consultation regarding protecting your business assets in the event of divorce or dissolution in the UK, please call us on 0208 300 6666.