Rainscourt Family Law Solicitors

Business valuations and divorce

The issue of how to deal with a business and business valuation on divorce is dealt with in a newly published High Court case of SK v TK*.

The husband had establish a very successful business during the marriage, of which he was a majority shareholder.

He tried to argue that an equal division of the matrimonial assets was not appropriate, because (i) he had made a special contribution due to his business success, (ii) he would be taking on the risk laden assets by retaining the business and (iii) he made made a pre-marital contribution through his excellent work.

The answer to these submissions from the court was a resounding no.  “There must be no bias in favour of the money-earner and against the home-maker and child-carer” said the court. An equal division of the entire matrimonial pot was the correct answer in the case.

That being so, if the Husband was to retain the business, and the matrimonial pot was to be divided equally, it fell to the court to determine the true value of that business.  Three accountants had been engaged to do a business valuation for divorce purposes: “The Single Joint Expert, Lesley Howe’s final position was that the company had a gross value between £10.5 million and £12.2 million.  Peter Smith, for the Wife, gave a range of values from £9.39 million to £11.04 million.  Sally Longworth, for the Husband, valued Limelight at £8.277 million.”  The judge analysed the assumptions made by the experts and concluded the true value was £8.897 million, reminding everyone that the valuation of the business was not science, but an art.

The task before the court was to then produce a list of assets, incorporating the Husband’s shareholding value of the company in his “column” and ensuring that exact equality was achieved, with each party to retain just over £9 million.

*SK v TK [2013] EWHC 834 (Fam)

 

 

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