ADVICE
Divorce
established by the House
of Lords on the basis that, just
because one party did not
actively earn the wealth within
a relationship, this should not
penalise their contribution
towards the marriage and
the family.
In Charman vs Charman
(2007), the court considered that
all the assets built up during a 27year marriage had to be taken into
consideration, including a £68
million dynastic trust. Starting
from the principle of equality,
Mrs Charman sought 45% of the
marital assets (valued at £131m),
arguing that her contribution
to the marriage - including
bringing up two children enabled Mr Charman to build his
phenomenally lucrative career.
The judge awarded her £48m, one
of the largest awards ever made
by an English court. Mr Charman
appealed the decision, arguing
that his special contribution to
their assets and the fact that the
dynastic trust should be excluded
should result in his wife receiving
no more than £20m. The Court
of Appeal upheld the original
decision, stating that equality had
to be the court’s guiding principle.
However, some judges believe
that the pendulum has swung too
far in the other direction, and are
calling for pre-nuptial agreements
to be legally enforceable.
In a further development,
two out of three judges in a
case heard before the Court
of Appeal last year (Prest vs
Prest) declared that company
assets should be protected
by the ‘corporate veil’ and
thus should be excluded
from financial settlements
in divorce proceedings. This
judgment was reached on
the basis that a company is a
distinct legal entity, separate
from its shareholders - even
if all the shares are held by
one shareholder. However,
the Supreme Court has just
handed down its judgment and
has closed off this potential
loophole by confirming that
the principles of family law
supersede company law,
and that company assets
can be taken into account
when arriving at a financial
settlement.
PRE-NUPTIAL AND POSTNUPTIAL AGREEMENTS
So, what can business owners
do to protect the assets of the
business? One option is certainly
to give serious consideration to
a pre-nuptial or, more rarely,
post-nuptial agreement. These
will detail what will happen
financially if the marriage ends.
These agreements provide
greater certainty for the
husband and wife, and for other
shareholders involved in the
business; indeed, it would be
prudent for all business owners
to treat pre-nuptial agreements
as an active part of their wealth
protection planning.
Although pre- and post-nuptial
agreements are not legally
binding in the UK, they have
achieved a degree of traction
It is
true to say
that most
people
would not
consider prenuptials to
be romantic.
However, as
a means of
protecting
a business,
they must be
considered
following a case in 2010
(Radmacher vs Granatino),
heard before the Supreme
Court, when the judge upheld
a pre-nuptial agreement when
determining the financial
settlement. Of course, these
agreements will only have
any relevance in court if they
are entered into freely and
willin