How coronavirus will affect the value of your business if get a divorce  

How coronavirus will affect the value of your business if get a divorce  
Photo by Keren Levand on Unsplash
Jo Hawkins
Jo Hawkins
Hawkins Family Law

Coronavirus itself will not impact your assets, such as businesses and property, it is the potential economic fallout in terms of the value of shares and the property market that could cause problems.

The asset value will still need to be determined either by agreement or by the Court and thereafter those assets will be apportioned between the divorcing parties by agreement or court order.

We spoke with Hawkins Family Law, expert divorce law specialists to find out what happens to assets when you are going through a divorce in a pandemic.

How does the current financial climate impact the value of my business?

The value of the shares in your business, or if you are in a partnership or operating as a sole trader the value of your share of your business, will very much depend on the nature of the business and how the pandemic has affected the business over the last 18 months or so.

Your management accounts for the last 12 months will provide a reality check for you on how things have been affected and an initial discussion with your accountant may also assist, depending upon your industry.

Some businesses have thrived and seen growth over the last 18 months, and this will be clear from their balance sheets and profit and loss statements, which in turn will gear what the value of any shareholding or interest might be.

Other types of businesses, especially in the travel and hospitality arena, have seen a decline in profits made due to the lockdown of everything non-essential. Others may have held their own with the assistance of government funding and be looking at trading out of any fall in profit.

What happens if my business is now worthless due to the Coronavirus?

Assessing why you think your interest in your business is worthless will be key. Just because you have had a poor year does not necessarily mean the business is worthless – it may be that the business will recover and certainly any valuation carried out will assess not only the value now but the value also moving forwards.

Evidence here is going to be key, and we would always recommend that the parties look to instruct a single joint expert (generally an accountant) to prepare a report considering the value of the parties’ respective interests and what the future looks like.

The Court will then assess the evidence and any questions asked of the expert to determine whether in fact the business is now worthless or not. Certainly, the Court cannot make this assessment without the experts’ report. The expert will also look at the liquidity in the business (if any). In other words, what capital could the business raise that could then be used by the parties and what the tax implications of withdrawing any funds from the business would be.

The Court will not seek to destroy any business particularly, as often the business is the sole or main income provider for the family, which is why these reports are so valuable as they provide factual information.

How are businesses valued now?

It is crucial that evidence of the value of the business is available in divorce court hearings. This is generally obtained by both parties, instructing an expert to provide a single joint report.

This evidence together with any other financial evidence will then be used by the judge to reach his or her decision as to how the finances should be divided taking into account the factors laid down by the Matrimonial Causes Act 1973, what is fair and what meets the parties’ respective needs.

When you have a business, or property assets, we would always advise taking advice at an early stage so that you can be prepared for reaching a financial agreement whether directly or with the assistance of a Judge, arbitrator, or mediator.

Our expert divorce family lawyers are available to provide further clarity and advice on everything related to divorce and the current climate.

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About Jo Hawkins

Jo Hawkins is the MD of the nationally recognised niche family law practice, Hawkins Family Law, which was established in 2001. With practices in Buckinghamshire, Hertfordshire & Oxfordshire, she specialises in all things divorce, financial matters, and child agreements.


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