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Spring Clean Your Business: Make Decisions With Your Head, Not Your Heart

Posted: 24th April 2017

Good business and tax planning decisions do not always go hand in hand with good family law advice. We are often consulted by clients who, at the end of their relationship, find that the seemingly sensible business decisions they made during happier times come back to bite them. There are a number of potential consequences in Scots law when love and business are mixed.

If your business or personal relationship changes, here are some factors to consider:

• Conversion of assets into matrimonial property – Where an asset owned prior to a marriage or civil partnership changes form during a marriage, the resulting asset becomes matrimonial property and may end up “in the pot” for division on divorce or dissolution. Family law advice should be considered prior to restructuring business interests.

• Spouses, civil partners or cohabitees as business partners or shareholders – It may not be possible to insist on the immediate removal of a spouse, civil partner or cohabitee from their position as business partner or shareholder at the end of a relationship. Shareholders may continue to have the right to receive dividend payments, and contractual arrangements may also have an impact on the way in which aliment (support between spouses/civil partners) is dealt with.

• Spouses, civil partners or cohabitees as office holders – Likewise, the removal of a spouse, civil partner or cohabitee from their position as office holder in a company may cause difficulties and lead to compensation claims against the business.

• Spouses, civil partners or cohabitees contributing to the business – Where this occurs, either by way of a contribution of finance, time or effort, there is the potential for a financial claim to be made on divorce/dissolution/separation (or death, in the case of cohabitees) under the Family Law (Scotland) Acts of 1985 or 2006.

What can be done by way of protection?

• Review family circumstances before making any business changes

• Enter into agreements as protection. Brodies offers advice on pre-nuptial, post-nuptial and cohabitation agreements. These can save worry, time and expense and lead to more certainty in the event of a subsequent relationship breakdown.

For more information, contact Shaun George at Brodies LLP.

Business Comment

Business Comment is the Edinburgh Chamber of Commerce’s bi-monthly magazine. It provides insight on Edinburgh’s vibrant business community, with features on the city’s key sectors, interviews with leading figures and news on new business developments in the capital.
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