Ringfencing business or inherited assets

A Court of Appeal case has made it easier for a business owner to ring fence business assets, or either spouse to ring fence inherited assets.

The starting point in divorce settlements is 50/50, but this is not the finishing point.

Mr Jones, who started work at the age of 15 as a marine engineering apprentice, built a career in the North Sea oil and gas industry and now lives in a castle near Aberdeen.

Before the couple were married, he spent 10 years expanding a specialist gases business supplying the oil industry. At the time of their divorce proceedings in 2007, Mr Jones sold the company for £32m, which netted him £25m.

The case centred on how much the husband’s business was already worth when the couple married in 1996 and how much could be excluded from the divorce settlement.

The original judge ruled that 60 per cent of the value of the business – or £15m – had been built up before the marriage. He ruled that 40 per cent of the sale proceeds were available to be split equally between the couple, and awarded the wife £5m

Mrs Jones contested the settlement, claiming she should be paid £10m. The decision was overturned after she took her legal fight to the Court of Appeal.

Lord Justice Wilson, found that the valuation of the business built before the marriage should be adjusted downwards to be £9m rather than £15m. This reflects “passive growth” as rising markets pushed up the value of the business.
The Court of Appeal noted that the FTSE All Share Oil and Gas Producers Index had seen a percentage increase of 116 per cent between 1996 and 2007.

Leading lawyer Rodney Hylton-Potts said

‘There is some relief for wealthy spouses. Provided there is enough money to meet the parties’ needs, assets brought to a marriage can be ringfenced and not be shared on divorce. But a pre-nuptial agreement was always advisable for wealthy parties getting married.

“Pre-nups” are not legally binding in English law, but the Supreme Court ruled in the case of German heiress Katrin Radmacher that in many cases a pre-nup can have decisive or compelling weight.

Your assets may be smaller than Mr Jones or Mrs Radmacher, but the principles are the same. If you have business assets, or inherited assets, but you want to protect on your divorce speak to the experts – For more information or a free legal opinion telephone 020-7381-8111 (24 hour service) or email [email protected].