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Wise Up To Break Up - 6 Family Law Advice Tips for Business Owners

Charles Brown, head of our Family Law department at Miller Samuel, has written an article recently published in Business First magazine.

Businesses, particularly SMEs, are often owned jointly by spouses, civil partners or co-habitants. The latter category are not married or in a civil partnership, but live together as man and wife.

So if you are a business owner and are considering placing your company into joint names with your spouse, civil partner or co-habitant, we would urge you to be wary and take proper advice, including Family Law advice, before doing so.

Here are some top tips for protecting your business:

1. Stay in control

If you are gifting your spouse, civil partner or co-habitant shares in a company, make sure you retain control of the business.

This can either be by ensuring that you hold the majority of shares, or alternatively by ensuring there is a shareholders' agreement that allows you to retain control of the business.

2. Create a nominee company

If you and your spouse are the only two principles in the business, create your own nominee company and make that company a shareholder or a partner in the business. As you own the nominee company, you are effectively two out of the three principles in the business and therefore always able to form a quorum to hold a meeting.

In the event of relationship breakdown, your estranged partner can never then prevent the business from making decisions simply by staying away from a meeting and rendering it inquorate.

3. Keep your dividend payments separate

Irregularities over dividend payments can come back to haunt people. Do not have your partner's dividends paid into your own bank account. This is something that can be exploited by the other side following separation.

4. Draw up a written partnership agreement

If you are in partnership with your spouse, civil partner or co-habitant, ensure that there is a proper written partnership agreement. While avoiding this may save legal fees in the short term, it will almost inevitably cause problems in the event of separation.

A written partnership agreement can be used for a number of things. For example, it can limit your partner's ability to withdraw income or capital from the business or to dissolve the partnership. It can also limit their interest in the partnership. This is the same situation as a shareholder agreement for a limited company.

5. Avoid interim interdicts

If you think your relationship could be in trouble, you should lodge caveats with the relevant courts. The purpose of a caveat is to allow you to receive advance notice of any application for an interim interdict, particularly one which might limit your ability to run the business.

Such interim interdicts can cause serious problems, and it could be the case that it has been granted on the basis of one party's unfounded concerns. It is always possible to have an interim interdict recalled, but you are in a much stronger position if you are able to oppose its granting in the first place – and you will only be able to do that by lodging a caveat.

6. Plan ahead

You can enter into a personal Minute of Agreement with your spouse, civil partner or co-habitant – recording what is to happen to their share of the business should you separate. This can be done by way of a prenuptial or postnuptial agreement. In other words, such an agreement can be entered into either before or after marriage or the commencement of a civil partnership.

As there are many different actions you could take to prepare your business for the event of a relationship breaking down, it is important to seek proper advice before entering into joint ownership with a spouse, civil partner or co-habitant.

Contact our Family Law Solicitors, Glasgow

For more information or advice on joint partnership in business, including Family Law advice please contact us on 0141 221 1919.

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