“The majority of people don’t really plan well enough for the future,” said Sarah Balfour, Birmingham Family Law Partner at Irwin Mitchell Private Wealth. “We deal with financial situations where people haven’t really thought this will happen to them.”
Businesses can be put at risk by far more personal matters, which is why Balfour urges business owners to plan carefully. “Being in a firm like this where we have such a big and wide ranging business team, there is much more of a focus on acting for people with business interests.”
“It is best to be involved right at the beginning of the story,” said Balfour, “You have to untangle so much, particularly if a couple are in business together or family assets are involved. For example, an up and coming entrepreneur who is doing really well and the business is flying – they don’t necessarily think that in 15 years’ time they might be sitting down talking about whether their current partner will get a share of the business they have built.”
Balfour continued: “As business owners, having to extract that money means implications for the business. How are they going to get it out of the business? Then it’s getting to the bottom of what the business is worth and other things which are massively disruptive.”
Balfour notes the high profile divorce of Asos founder Nick Robertson, forcing him to sell 1.3m shares through a placing with institutional investors last year to fund his £70m divorce settlement.
The judge was asked to decide how much Robertson’s ex-wife Janine should receive after they failed to come to an agreement on the division of shares and property owned by the entrepreneur, which took Asos from a £12m company when it floated on AIM in 2001, to a £3bn company today.
Stories like that of the former Asos chief executive are the stuff of nightmares for entrepreneurs and successful businesspeople alike, but it is not often that they think about the situation early enough to mitigate it.
“This is not going to happen to everyone,” said Balfour, “but on a more moderate level that happens to a lot of people, preparation in any event is therefore key.
“We need to discuss how they want to structure the business; when setting up home with someone, having a cohabitation agreement; how to manage finances, to think about having the right shareholder agreements for instance. Much of what we do centres around providing a sense of stability and knowledge for clients going through that situation when the relationship does break down.
“In terms of planning, the main thing is getting people to think about prenuptial agreements. As advisors now we must be talking about at least the option of a prenup to all our clients but especially the entrepreneurial ones.
“People were sceptical about them in previous years, that they would even have an effect, but the law has moved on massively in the past five years.”
The case of German paper company heiress Katrin Radmacher in 2010 made that clear, after the UK Supreme Court ruled that the Husband should be bound by his prenuptial agreement, giving very strong guidance on how prenups should be viewed.
“It gave people reassurance, and meant that we can be a bit more definite that they will benefit from having a prenup in place,” Balfour said.
Separation and divorce is going to represent a significant change to you and your family, especially if there is a business involved. Irwin Mitchell Private Wealth offer unrivalled guidance and methods to support you whatever the circumstance, help you plan appropriately and make the right decisions at the right time.