Protecting the family business from divorce is a key concern for business owners and families because the business is often not just an “asset” but a livelihood. For many, it isn’t an abstract number on a balance sheet but salaries, rent, school fees, mortgages and often, (with farms particularly) three or more generations’ work. Changes to the business structure because of divorce, particularly at the wrong time, or the need to heavily borrow can strain cashflow, force job cuts, derail growth plans and destroy something several generations have strived to build for the benefit of their future bloodline.
Those most at risk are business owners who haven’t planned ahead. No prenuptial or postnuptial agreement, no shareholder agreements, and blurred lines between personal and business finances. Family businesses without clear structures, founders whose wealth is tied up in the company, and those entering second marriages are especially vulnerable. When everything is intertwined and undocumented, a divorce can pull the business, the family, and everyone’s financial security into the fallout.
Why are family businesses vulnerable during divorce?
In England and Wales both parties have a duty to provide full, frank and clear disclosure of their assets to the other and to the court so that the full financial landscape is clear. Once the assets have been computed, it is then a case of dividing the assets so that the needs of the parties are met (as the court’s primary focus). The Court is not particularly concerned as to whose name is on the paperwork and the focus is on fairness and meeting both parties’ needs. Any business interests are disclosable and are often the parties’ main or sole asset. If there is not much else to divide, it may be that the parties’ needs have to be met with recourse to the business.
The risks are sharper when the business is family-run, inherited, or jointly owned. Suddenly you’re not just dealing with two spouses, but parents, siblings, and sometimes children whose futures are tied to the company. Shares might be inherited from previous generations and that can lead to a sense of injustice when there is a risk that this could be shared. Joint ownership or heavy involvement by both spouses can lead to rows over control, management, and who stays or goes.
On top of that, business assets are often “on paper” rather than in cash form – you can’t easily sell a machine, a client base, or goodwill to fund a settlement without harming the business itself. Valuation disputes (“what is this actually worth?”) and liquidity problems (“how do we pay a fair sum without sinking the company?”) can drag out negotiations and pile pressure on both the business and the family at exactly the moment everyone is least emotionally equipped to handle it.
What strategies can help protect a family business before divorce?
Protecting a family business from the fallout of divorce really should start long before anyone is talking about separation. Prenuptial and postnuptial agreements, when done properly, don’t have to feel cold or unromantic – they’re a way of being honest about what the business is, what it means to the wider family, and how both people will be treated fairly if things go wrong. They can ringfence shares, set expectations around future growth, and recognise non-financial contributions, so there’s less shock and bitterness later.
All of that only really works, though, if someone is willing to look at the structure while things are calm. Proactive reviews of the business setup and asset planning – especially before marriage, big investments or succession steps can make the difference between a messy scramble and a controlled, mostly predictable process.
What happens to business value during financial disclosure?
Assessing what a business is worth generally means bringing in an independent expert – often a forensic accountant or specialist valuer to look at the accounts, assets, debts, and trading history, and come up with a figure the court can work with as to what the business is worth. They won’t just look at what’s in the bank today, but also the underlying value of the company to include the assets, the profits, and the level of risk. Inevitably, that raises awkward questions about goodwill (how much of the value is really tied to you personally), how easy it would be to extract money without damaging the business, and what part of any future earnings should realistically be seen as part of the matrimonial pot that is shareable on divorce.
The challenge is that a business can appear valuable on paper while being tight on cash in practice. A valuation that reflects long‑term potential doesn’t automatically mean the company can release funds quickly or without strain. Understanding the commercial context, highlighting genuine liquidity constraints, and exploring practical settlement structures such as staged payments or offsetting other assets (i.e. one spouse getting more equity from the family home as opposed to the business) is a crucial part of structuring a settlement that meets the parties’ needs whilst preserving the business so far as possible.
A well‑drafted prenuptial or postnuptial agreement can set out exactly how the business will be treated if the marriage ends, so you’re not scrambling later to value shares or argue over what’s “matrimonial.” By agreeing the rules in advance, both sides avoid the uncertainty, cost, and disruption that come with dividing assets in the middle of a divorce.
Can a spouse claim shares or control in the business?
The court’s preference is to try and separate the parties financially whilst preserving the business so far as possible. If a clean break between the parties can be achieved, that should be done but that is not always possible. In theory, the court can order a transfer of shares, a sale of some or all of the business, or ongoing maintenance funded from business income, but judges are usually cautious about disrupting a functioning company if there are other ways to meet needs.
What options are available to reach a fair settlement without damaging the business?
A fair settlement that keeps the business intact does not always require judicial involvement. It is often advantageous to avoid the court process if possible and use processes that give both sides more control. Negotiation, mediation, and private FDRs create space for calm, commercially‑minded discussions where the focus isn’t on “winning” but on finding a structure that meets needs without destabilising the company. These routes allow you to shape solutions like staged payments, offsetting, or income‑based arrangements that a Judge might not have the time or flexibility to craft. Alongside that, these processes also ensure confidentiality in the wake of transparency being rolled out through the family courts.
How Stephens Scown can support clients navigating divorce involving business assets
We are used to dealing with the complexity that comes with business‑heavy divorces and as a firm we work closely with our private wealth and corporate specialists, so clients get a joined‑up strategy that protects both personal security and the long‑term health of the business. Early advice is especially important for high‑net‑worth and international clients, because cross‑border assets, trusts, and corporate vehicles can become far harder to manage once court proceedings have started. Getting ahead of the process means the team can shape the narrative, preserve confidentiality, and put protective structures in place before options become more limited.
If you need advice about this topic please get in contact with our Family Law team.