Divorce and protecting your business with a post-nuptial agreement

For entrepreneurs, divorce can be a costly concern especially as their spouse could be entitled to claim against the assets and income of the business, regardless of their input into it.

Helping to protect the assets of business owners who have worked hard to build up their commercial concerns, the pre-nuptial agreement is a familiar concept. While not as well used in the UK as overseas, in recent years the pre-nuptial agreement has grown in popularity, particularly since the court in Radmacherv Granatino clarified that great weight would be placed on the existence of a pre-nuptial agreement in a dispute about finances on divorce.

More recently, the High Court considered the value of a post-nuptial agreement, entered into by parties after their marriage has taken place to regulate their financial affairs. Various events trigger such agreements – marital fall-out with potential reconciliation, an inheritance, or a party foreseeing a business opportunity and making their fortune.

In the case in question the husband had made billions for a private equity company and had been handsomely rewarded. The parties married in 1995 in California and the husband’s £150million wealth had accrued squarely during the marriage. His wife cared for the children and home, allowing him to concentrate on business.

In October 2000 the parties entered into a post-nuptial agreement, the reason for which was never clear. Pursuant to this, on divorce the wife would be entitled to £46million, just under one-third of the assets.

The litigation was bitter. The husband offered the wife £5million, ten per cent of her entitlement under the agreement. The judge was moved to comment that he and the husband were not even on the same planet in their thinking. The wife’s position was that a clause in the agreement gave her the right to seek additional financial provision on divorce and that, as the wealth was generated during the marriage, assets should be equally divided. The judge agreed and the wife received an award of £72.3million.

Does this undermine the value of these agreements for business owners? Potentially not.

Although the wife got more than her strict entitlement this may be because the agreement itself gave her the right to seek more. It is, of course, better to have an agreement in place and parties entering marriage with assets or real prospects of accruing them should consider a pre-nuptial agreement well in advance of their wedding.

A version of this article appeared in the East Anglian Daily Times on 14 April 2015.

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Nicola Furmston is a solicitor specialising in the family field at Barker Gotelee, Solicitors in Ipswich.

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