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Divorce – what every business owner needs to know

Palmers Solicitors Business News, Family Businesses, Library
Divorce – what every business owner needs to know

January has traditionally become synonymous with a spike in couples seeking to end their marriage after the strain of putting on a united front over the festive period.

Relationship experts blame the upturn on the stress of trying to live up to a perfect ‘chocolate box’ Christmas, especially during a period of relationship difficulties.

In January 2017, Relate received a 24 per cent increase in calls to their helpline compared with the average month, and counsellors are preparing for a similar peak this year.

If the worst comes to the worst and there is a separation or divorce then splitting a couple’s assets is less than straightforward if one party is the owner of a business.

Here, Surjit Verdi, an Associate in our Family Law team, explains what every business owner in this situation should be aware of:

“During a divorce or the ending of a civil partnership all assets come under scrutiny. Questions relating to the value of the business, the income it is able to produce, including whether in fact, it should be producing more, will all be asked and the outcome of this assessment will be highly influential when deciding an equitable financial settlement.

“It is worth considering the following:

  • A pre-nuptial agreement or post-nuptial agreement can help to limit claims against a business
  • Wherever possible, do not mix your business assets with your private assets
  • Weigh up the pros and cons of involving a spouse or civil partner in your business. Although it can be beneficial for tax purposes, your spouse or partner could have a greater legitimate claim to contributing to your business’ success in the event of relationship breakdown
  • Shared business ownership with a third party can be beneficial in the event of divorce. If a business is wholly owned by a divorcing spouse, the courts will treat it  like any other asset but if the enterprise is jointly owned with other shareholders or partners a court will be less willing to jeopardise the livelihoods of the other business parties

“This is a complex area of family law and it is important to obtain specialist legal advice to properly protect your business interests.”

For help and advice on all aspects of divorce including advice for business owners, please contact us.

Divorce rates increase for first time in seven years

Palmers Solicitors Business News, Family Businesses, Family Law, Divorce & Children, Library
Divorce rates increase for first time in seven years

New research from the Office of National Statistics (ONS) has revealed that, for the first time in seven years, the number of couples divorcing is on the increase.

The rate has increased from 8.5 to 8.9 per thousand married people – reversing the downward trend since 2009.

The most common duration of a marriage is now 12 years, which is up slightly from 11.9 years in 2015 and 11.4 years in 2009.

The average age of divorcees has also increased since 1985, when couples were typically in their mid-30s, to around 46 years of age for men and 43 years for women.

The number of so called silver-splitters is also on the rise with 9,848 men aged over 60 divorcing last year, which is up from 8,697 and 6,128 women over-60 ending their marriages, up from 5,554.

The ONS reveals that 61 per cent of marriages were ended at the woman’s request, with ‘unreasonable behaviour’ the most commonly cited reason.

Despite the spike in divorces last year, the rate is still less than a peak seen in 2003.

The data also provides details on the breakdown of same-sex relationships. In 2016, there were 112 divorces of same-sex couples in 2016 – only the second year that this has been possible – with 78 per cent involving female couples.

Meanwhile, a separate research study has suggested that divorce which runs in families could be due to a genetic predisposition.

Although it is widely accepted that children of divorced parents are more likely to become divorced themselves, compared with the offspring whose parents stayed together, it had been presumed that this was due to nurture not nature.

However a new joint study, carried out by Virginia Commonwealth University (VCU) and Lund University in Sweden, has found evidence that adopted children do not necessarily behave in the same way, leading researchers to suggest that divorce might in fact be in the genes.

Surjit Verdi, a family law expert with Palmers, said: “The latest statistics from the ONS may just be an annual blip. A number of commentators have tried to explain why 2016 saw a slight increase in divorces – with some even blaming Brexit, claiming that rows between spouses over their voting intentions may have led to increase marital tensions.

“Regardless of whether the relationship breakdown is due to Brexit or even, as the new study suggests it may be genetic, it is important to seek specialist legal advice so that issues relating to finances, property and any children from the relationship, can be resolved equitably.”

For advice on all aspects of family law including separation agreements, divorce and financial settlement agreements, please contact us.

Confidence up among family firms but some doubts persist

Palmers Solicitors Business News, Family Businesses

More than half (57 per cent) of UK family businesses have seen their prospects improve during the last 12 months, according to new data from the Institute for Family Business (IFB).

A greater proportion – 62 per cent – feel even more confident about the next five years, the research says, but many feel barriers still exist when it comes to trading overseas.

Almost three-quarters (71 per cent) of family businesses say they have been exporting for at least 15 years, with most trading with EU nations. Those who have no experience, however, report a number of reservations. They cite a lack of knowledge as the key restraint, with insufficient advice coming from government agencies.

Mark Hastings, director general of the IFB, said he was ‘encouraged’ by the news of boosted confidence, but he added: “It is concerning that family businesses still feel they do not have the right support needed to make the move abroad, particularly when there is such a wealth of resources and information available to firms in the UK – many of which are completely free to use.”

Listing business mentors as a way to bridge the gap in knowledge, he said: “It is about finding a solution that works and firms should ensure they thoroughly research the different tools available to help them in their efforts.”

BJ Chong, of Palmers’ family business team, said: “It is great news to hear that most family businesses are in a better position than they were 12 months ago and I fully endorse the IFB’s suggestion that seeking the advice of knowledgeable parties is a great way for firms to move forward. It’s where Palmers comes in. We can offer clients a range of services that encompass not only the challenges they face but their aims for the future. To hear more about what we offer, and our understanding of the specific issues faced by family businesses, please contact us.”

Succession is an opportunity, says family business expert

Palmers Solicitors Business News, Family Businesses, Library

The succession process in family businesses should be seen as an opportunity rather than a threat, says an expert in the sector.

In a recent blog for Premierline Business Insurance, Professor Alfredo de Massis, Director of the Centre for Family Business at Lancaster University Management School, argued that disruptive innovation – innovation that creates new markets and reshapes existing ones – can go hand in hand with succession planning.

He said: “An ideal time for this form of innovation is during the succession process, when the range of goals actively pursued by members of a family business is maximised.

“This can, of course, lead to tension with an urge to smooth things over, but this tension can actually be used positively as an opportunity to change. Succession is the opportunity, not the threat.”

Although the process of succession planning can trigger change and new opportunities, it can be a challenging time for family firms, particularly when there does not seem to be a clear solution and conflicts or disputes arise as a result.

At Palmers, we are experienced in working with family businesses and can provide expert, objective advice to help family members in identifying a way forward and to structure their involvement in the business, including by creating agreements or family charters clearly setting out respective roles.

For more information about our services to family businesses, please contact BJ Chong.

Planning for the future is a family affair

Palmers Solicitors Business News, Family Businesses, Library

Research suggests that almost 100,000 smaller businesses – including many family-run enterprises – will close their doors for good in 2015.

In 2013, a survey published by the Department for Business, Innovation & Skills found that nine per cent of small and medium-sized enterprises (SMEs) anticipated that their business would close over the next five years.

With around 5.2 million SMEs in the UK, according to the Federation of Small Businesses, that equates to 468,000 firms shutting down in that time, the equivalent of 93,600 each year.

The figure suggests that a great many family business and other SMEs are failing to plan ahead for the time when they want to call it a day, despite the fact that UK demographics suggest a significant number are led by baby boomers in their 50s and 60s, who are likely to be thinking seriously about retirement in the next few years.

The issue is a particularly significant one for family businesses. According to research carried out by the Family Business Institute in the US, about 30 per cent of family and businesses survive into the second generation, 12 per cent remain viable into the third and only about three per cent continue into the fourth generation or beyond.

Starting succession planning as far ahead as possible before the owner’s desired exit or retirement date is a good place to start to ensure the business’s survival, to allow consideration of issues including who will take over the enterprise, whether they have the right skills, or need to develop these, and the most appropriate structure and governance arrangements.

A lot depends on how many people will have an interest in the business or be actively involved in running it on a day-to-day basis, with different options for structuring the business including:

  • ownership and control rests with one person
  • ownership and control is shared between a limited number of people, all actively involved in running the business, but whose interest in it may vary
  • there are multiple owners, some active in the business and others who are not directly involved but who draw dividend income from it.

While the nature of family firms sets them apart from enterprises where those owning and running them have a less “intimate” relationship with the business and each other, they remain commercial organisations and current and future leaders need to be hard-headed about the way they operate.

There are a range of options for putting the governance of a family business on a more formal footing, to help avoid the risk of damaging disagreements and disputes. These will vary depending on the structure of the business but could include partnership agreements, shareholder agreements, family charters, trusts and manifestos.

Every situation is as unique as the business itself and it can be tough for family members to step back and take an objective look at what’s best for the business, which is the key consideration.

At Palmers, we are experienced in working with family businesses and understand the challenges involved in succession planning. We can provide expert, tailored advice to assist in the planning process, clarify different types of governance arrangements and provide ongoing advice as the business moves forward. For more information, please contact BJ Chong.

Family businesses ‘worth billions to Britain’

Palmers Solicitors Business News, Family Businesses, Library

A new report has revealed the key contribution that family businesses make to the UK economy.

Research by Oxford Economics for the Institute for Family Business (IFB), published on 17 December, reveals that:

  • the UK has three million family businesses, providing 9.4 million jobs – 39 per cent of UK private sector employment – generating a quarter of GDP and paying £102 billion in tax each year;
  • family firms turnover an estimated £1.1 trillion annually, 32 per cent of total private sector turnover.;
  • an extra 30,000 family businesses have been created since 2010
  • more than one in ten large companies and nearly half of all medium-sized businesses are family-owned; and
  • family-run businesses make up over three-fifths of all private sector firms.

Welcoming the new research, IFB director general Mark Hastings said: “Family business is the backbone of our economy. This new research reveals just how vital family businesses are for the UK economy.

“I hope to see policy makers more openly recognising the strategic importance of the family business sector in rebalancing our economy.”

The IFB is urging the government to boost growth in the family business sector by introducing more alternatives to bank lending for business finance. It is also wants the Enterprise Investment Scheme rules to allow family businesses to invest in new family start-ups, which is currently prohibited, which it says would foster entrepreneurship and boost innovation in the sector.

At Palmers, we are experienced in working with family businesses and can provide tailored advice to help them plan for growth, to strengthen internal governance and for smooth transitions of ownership between generations.

Our expertise includes succession planning, shareholder and partnership agreements and family dispute resolution. For more information, please visit our website or contact BJ Chong.

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