When considering the division of assets between separating couples, one category that may need to be considered is the value of any family business(es).
It is important that any valuation is undertaken properly in order to reach a fair and reasonable settlement.
Panay Vassiliou of Kangs Solicitors considers aspects pertinent to the valuation of family businesses.
We appreciate the considerable stress and anxiety experienced by separating couples throughout such a difficult period, especially when issues regarding the family business need to be agreed.
Our Family Law team can be contacted for an initial no obligation discussion at any of our offices detailed below:
Family Business Valuation | Kangs Division of Family Assets Solicitors
One, or both, of the parties may trade as a company, sole trader, a partner in a partnership or within an LLP.
Where both parties have separate trading interests, valuations of both businesses may well be necessary.
Whilst this article focuses upon the valuation of a company, similar considerations apply to the other forms of trading outlined above.
The valuation of a Family Business asset is very different to valuations of other matrimonial assets, such as the family home, where the starting point is an equal division between the parties.
Where a Family Business asset falls to be valued, courts adopt the reasoning that such a valuation should be regarded as no more than a broad guide.
In the cases of Miller v Miller and McFarlane v McFarlane, the courts commented that a business valuation is ‘often a matter of opinion on which experts differ’ and ‘a thorough investigation into these [experts’] differences can be extremely expensive and of doubtful utility’.
The purpose of a Family Business valuation is to assist the court consider all aspects of the division of assets in order to ensure a fair outcome to both parties.
Instructing an expert
- The usual practice is to instruct an independent accountant experienced in the business sector concerned.
- It is imperative that the expert is comprehensively and accurately instructed to ensure that he is in a position to consider the current value of the company.
General Methods of Valuation
- When determining the valuation, consideration will be given, inter alia, to the nature of the company’s assets, its revenue and comparisons with the market value of similar companies.
- The approach employed will also consider the business/ market sector in which the company trades.
Discrete Issues to be considered
Regard must be had to:
- the commercial standing of the company,
- whether or not either party wishes to retain the company in order to provide an income,
- the possibility, desirability and practicality of a sale of the company,
- pertinent wishes of either party following the divorce.
- The liquidity of the company may be an issue where one party seeks a financial payment from the company in circumstances where the party retaining it cannot, for example, sell valuable assets in order to raise cash as this would prevent the normal operation of the company.
- Where one party retains the company and is required to pay a lump sum to the other, calculation of that amount will very much depend on all the circumstances including any valuation of the company reached, as described above, other assets of the parties and other important considerations such as the requirements for child(ren) maintenance.
How to Contact Us | Kangs Family Law Solicitors
We appreciate that many relationship breakdowns lead to a period of considerable stress and anxiety, particularly so, when financial issues also need to be agreed between the separating parties.
Our team will work proactively with you in an effort to secure an early favourable financial settlement whenever possible.
We welcome new enquiries by telephone or email.
Alternatively, we are happy to arrange an initial no obligation meeting via telephone or video conferencing.
For initial enquires please contact: