How to protect your limited company on a divorce

Businesses, including shares held in a limited company, form part of the assets to be distributed on divorce. They are a central part of financial proceedings and discussions when a divorce takes place.

It could happen to your company. You could be the main shareholder. Your business and your company could be adversely affected by the consequences of a divorce.

How do you go about protecting your limited company when a divorce takes place?

1. You could enter into a Prenuptial Agreement prior to the marriage. Although prenups are not yet legally binding in court, during the last five years they have been given increasing weight by the courts provided that the guidelines laid down in the higher court cases are followed. You could specifically exclude your limited company and your business from any claims by your spouse. Provided that the guidelines set out in the higher court cases are followed you may be able to protect your business.
2. If you are already married then, with the agreement of your spouse, you could enter into a Postnuptial Agreement, protecting the business including the limited company from claims by your spouse.
3. If you wish to protect your business from claims by your spouse then it is important that you do not appoint your husband or wife as a Director in the business or give them any shares in the business as it would be much easier for them to claim a share in the company following the divorce.
4. Do not secure the matrimonial home against company debts as this would increase the likelihood of your spouse making a successful claim against the business.

Although legally you and the limited company are regarded as separate entities, this does not stop the court from transferring shares held by you in the company to your spouse.

Clearly it is important to take independent legal advice from a specialist family lawyer as soon as possible if you wish to avoid potential claims by your spouse against your limited company.

Please contact our Leeds based Family and Divorce law department for further information on prenups on 0113 320 5000 or by email to @email.