Successful business owners will more often than not have sacrificed a great deal in terms of their personal lives, time and money to build up their empire. The prospect of losing a sizeable portion of their fortune as a result of divorce proceedings is a scary thought.

When a married couple separate they will both be asked by their respective Solicitors to put together information and documentation evidencing all of their assets, income and liabilities. Within this process of full and frank disclosure, the value of a business must be declared. Expert evidence is often required and it is important to appoint a specialist accountant who will be able to justify the figures arrived at in their valuation report in the event of a dispute over those figures.

More recently, I have suggested to clients that not only should the business be valued as at the time of the ongoing court proceedings but a report should also be obtained to reflect the value of the business at the time of the marriage. The reason I suggest this is because there have been Court cases such as that of Jones v Jones where the Court has agreed to effectively “ring fence” the value of the business as at the date of the marriage.  This results in the wife (in this case) only being able to make a claim against the part of the value that was built up during the period of the marriage.

In  Jones v  Jones ,  the husband, Gareth Jones owned Dominion Technology Gases. He was already running this successful oil technology business when he married Victoria Jones. Whilst the divorce proceedings were ongoing, Mr Jones sold the business for £25million. The original trial Judge said that at the time of the marriage, Mr Jones had built up £15million on his own. Deducting the figure of £15million from the £25million that Mr Jones had received from the sale of the business meant that there was £10million left to be shared between the parties. Mrs Jones was therefore awarded £5million.

Unhappy with her award, Mrs Jones appealed. Her award was increased to £8million but this was not because the appeal Judges felt that she should be able to bring a claim against the value of the business as at the date of the marriage. Rather, the Court felt that the true value of Mr Jones’ business at the date of the marriage was in fact £9million. Deducting this from the £25million that Mr Jones’ had received by way of net sale proceeds meant there was £16million to divide between the parties, giving them £8million each.

I cannot tell clients that the value of their business as at the date of their marriage will be protected from a claim by their spouse because each case depends on its own facts. In this case the assets were such that both parties’ needs could easily be met by them each receiving £8million. If the business was small and the only way to meet the parties’ needs was to take into account the whole value of the company, including its value at the time of the marriage, then it is highly unlikely that the Court would allow any ring fencing.

My main advice to successful business owners who are contemplating marriage is to enter into a pre-nuptial agreement. These agreements cannot yet be described as “legally binding” but if they are entered into in the right circumstances with proper legal advice then both the husband and wife can be forced to abide by the terms of the agreement if the Court feels that this will achieve a fair outcome.  Perhaps if they had entered into a pre-nuptial agreement, Mr and Mrs Jones would not have incurred the £1.7million legal bill that resulted from these court proceedings.

Sultan Lloyd Solicitors has the expertise and experience required to advise client’s on all aspects of family law.  If you would like any further information on the points raised in this article, please phone our Birmingham office on 0121 222 8254 to make an appointment with one of our family law team.

Christine Rawsthorne

Sultan Lloyd

3 December 2015