Will I Lose My Business in a Divorce?

Five questions business owners commonly ask

For many business owners, the company is not simply an entry on a financial statement. It may represent years of work, provide the family’s income, employ staff and require substantial cash reserves to continue trading.

It is therefore understandable that business owners facing divorce often worry about what will happen to their company. Many fear that their spouse will receive half of the business or that it may have to be sold.

Neither outcome is automatic.

The court must consider the business as part of the parties’ overall financial circumstances. However, it will also recognise that shares in a private company are very different from cash in a bank account. The outcome will depend on the history of the business, its value, the income it produces, its working-capital requirements and what settlement can realistically be funded without causing unnecessary damage.

1. Can my spouse take half of my business?

There is no automatic rule that your spouse will receive half of your shares.

When deciding financial claims on divorce, the court looks at all the circumstances under section 25 of the Matrimonial Causes Act 1973. This includes each party’s income, property and financial resources, their needs, the length of the marriage and the contributions they have made to the family. Contributions include looking after the home and caring for children, not simply earning income or working in the company.

A business established or substantially developed during the marriage is likely to be treated as matrimonial property. This can be the case even where only one spouse owned the shares, worked in the company or made the commercial decisions.

The position may be different where the company was established before the marriage, inherited or received as a gift. The Supreme Court confirmed in Standish v Standish [2025] UKSC 26 that the sharing principle applies to matrimonial property, rather than non-matrimonial property. Matrimonial property will normally be shared equally, although the court retains a broad discretion and non-matrimonial assets can still be taken into account where necessary to meet needs.

A business which pre-dates the marriage is not necessarily excluded altogether. The court may consider the business’s value at the start of the relationship and how it developed during the marriage. It will also look at whether family money was invested and whether the spouses treated the business as part of their shared financial arrangements.

There is no single calculation that applies to every case. Sometimes expert evidence will help distinguish the matrimonial and non-matrimonial elements. In other cases, a broader assessment will be more proportionate.

2. How will the business be valued?

Private businesses can be particularly difficult to value.

There may be no ready market for the shares, profits may fluctuate and the company’s success may depend heavily on the continued involvement of its owner. Two accountants can also arrive at very different figures depending on the assumptions they use.

In Versteegh v Versteegh [2018] EWCA Civ 1050, Lord Justice Lewison explained at paragraph 185 that private-company valuations are difficult because there may be no obvious market, profitability may be volatile and an opinion-based valuation is of a different quality from cash.

Where valuation evidence is necessary, the court will commonly direct a single joint expert, usually a forensic accountant. The expert does not act for either spouse. Their duty is to assist the court, and expert evidence may only be introduced with the court’s permission where it is necessary to resolve the proceedings.

The expert may be asked to consider the company’s maintainable earnings, assets, liabilities, working capital, borrowing capacity and likely tax consequences. They may also advise on how much income or capital can safely be extracted.

Not every business requires an extensive valuation. Some owner-managed consultancies, professional practices and service companies may have little saleable value apart from their assets and the income generated by the owner’s future work. It can be misleading to place a substantial capital value on future income. It is even more problematic to then rely on that same income to fund ongoing maintenance.

The court, rather than the accountant, ultimately decides what weight to give the valuation.

3. Is money in the company available to divide?

A limited company is legally separate from its shareholders. Its money, stock, premises and equipment belong to the company, rather than personally to the business owner.

That does not mean the court will ignore company resources. It will look at what the shareholder can realistically receive through salary, dividends, repayment of a director’s loan account, borrowing or another lawful extraction.

However, the company’s bank balance is not necessarily surplus cash. Money may be required to pay employees, purchase stock, meet tax liabilities, satisfy lenders or manage seasonal fluctuations.

This distinction can be critical. A company may appear to hold £300,000, but only a fraction of that sum may safely be withdrawn. There may also be substantial tax consequences before company money reaches the shareholder personally.

In Martin v Martin [2018] EWCA Civ 2866, the Court of Appeal emphasised that liquidity can require specific evidence and analysis. The court should not simply order a substantial payment and leave the business owner to work out how to extract it. In that case, the Court of Appeal replaced a £20 million payment with four annual instalments of £5 million.

A business owner who says that company reserves must be retained should be ready to support that position with solid evidence. This will usually include accounts, forecasts and input from the company’s accountant. Equally, the other spouse is entitled to investigate whether cash described as essential working capital is genuinely required.

4. Will the court transfer shares or force a sale?

The most common outcome is for the business owner to retain the company.

The other spouse may instead receive a greater share of the family home, savings, pensions or other assets. Where there are insufficient non-business assets, the owner may pay a lump sum immediately, by instalments or at a later date.

A forced sale is possible, but it is not usually the court’s first choice. Selling a viable trading company may remove the income upon which both parties and their children depend. It may also affect staff, creditors, customers and other shareholders.

The court can also transfer shares to the non-owning spouse. This is less common because it can leave former spouses financially connected after divorce and may give the recipient a minority shareholding with limited control, no guaranteed dividend and no obvious market.

Lawyers sometimes refer to an in-specie division of shares as “Wells sharing”. The relevant authority is specifically the 2002 Court of Appeal decision, Wells v Wells [2002] EWCA Civ 476; [2002] 2 FLR 97.

The principle is that one spouse should not necessarily receive all the secure assets while the other is left with all the uncertain, illiquid and risk-laden business assets. In the case of Martin, the Court of Appeal explained at paragraphs 92 to 95 that a private-company valuation does not automatically carry the same weight as cash or the matrimonial home. The overall settlement must fairly balance liquidity, risk and potential future reward.

In the case of Versteegh, the Court of Appeal identified three broad possibilities: fix a value, sell the asset or divide it in specie. Where any valuation would amount to little more than a guess and a sale is inappropriate, a share transfer may be the only workable option. In those circumstances, it can provide a practical way to achieve fairness without disrupting the business. Nevertheless, the court should approach such orders cautiously because of the importance of achieving a clean break.

The company’s articles of association and any shareholders’ agreement must also be reviewed. They may contain transfer restrictions, pre-emption rights or valuation provisions which affect what can be implemented.

5. What should I do when separation begins?

Early preparation can make a substantial difference.

A business owner should continue to operate the company properly and avoid making unusual changes merely because divorce proceedings are anticipated. Significant dividends, reductions in salary, transfers to connected companies or major new expenditure are likely to attract questions unless there is a clear commercial explanation.

It is sensible to gather the recent accounts, management figures, forecasts, tax information, director’s loan account records, share documents and any shareholders’ agreement. Having these materials ready makes it easier to explain the business’s position and respond to any questions that arise. These documents will help identify whether a valuation is required and what questions any accountant should be asked.

Before agreeing a settlement, it is important to understand:

• whether the proposed payment is affordable;
• how it will be funded;
• what tax will arise;
• how much working capital must remain in the business; and
• whether the arrangement will affect lenders, shareholders or employees.

The strongest settlement proposals tend to be those which recognise both parties’ claims while remaining commercially workable. An agreement which looks fair on paper but cannot be funded may only create further litigation.

How Garner & Hancock Solicitors can help

At Garner & Hancock Solicitors, we advise directors, shareholders, partners, professionals and owners of family and owner-managed businesses when dealing with financial arrangements on divorce.

Our team can assist with identifying the matrimonial and non‑matrimonial elements of a business and assessing whether an expert valuation is proportionate. We also help prepare the questions for the accountant and examine any claims about working capital and liquidity.

We also advise on practical settlement structures, including offsetting against property or pensions, staged lump sums, deferred payments and arrangements linked to a future sale. Where company documents, third-party shareholders or tax issues are involved, we can work with the relevant corporate and accounting advisers to ensure that the proposed settlement can actually be implemented.

Obtaining advice at an early stage can help protect business continuity and prevent unrealistic proposals. It also improves the chances of reaching a fair settlement without prolonged court proceedings.

To discuss how your business may be treated on divorce, contact Shavin Fernando, Associate Solicitor, or a member of the family law team at Garner & Hancock Solicitors.

This article provides general information about the law in England and Wales. It is not legal advice and should not be relied upon as a substitute for advice about your particular circumstances.

Written by Shavin Fernando, Associate Solicitor at Garner & Hancock Solicitors