staying in business after divorce

It has hit the news that Bill and Melinda Gates are getting a divorce but have decided to stay in business together. In this article, we look at what to do when you want to stay in business with your former spouse.

Bill and Melinda Gates’ announcement this week that they intend to divorce because they believe they can no longer “grow together as a couple” shows that the mega-rich are not always acrimonious in divorce. They have asked for privacy while they work out their settlement to divide their wealth, Bill’s alone being estimated at $124 billion according to Forbes.

No pre-nup – the implications

Although Bill Gates was already a billionaire when they married back in 1994, the couple did not enter into a pre-nuptial agreement and so his pre-existing wealth is not protected from being shared. Under State law, their property will be shared equally between them after their long marriage, under the community of property regime, akin to how it might have been treated in the UK (in the absence of any pre-acquired wealth which might be ring-fenced if kept separate).

Arguably, when you have as much money as the Gates’, protecting a proportion from being shared is less important, particularly when their philanthropic commitments have meant they have pledged to give away half their wealth to charity. However, it is a reminder of the profound effect a pre or post nuptial agreement can have on the outcome of a divorce (in the UK): changing the starting point from an equal division of assets built up during the marriage partnership to the terms of the agreement, assuming it was properly prepared.

The main tasks for their legal teams will therefore be valuing all of the assets they have and assessing the tax implications of transferring those between them to be able to agree the division.

Staying in business together after divorce – what you need to know

The Gates’ decision to uncouple but remain in business together is one which is increasingly common among separating couples who find, sometimes after a long marriage, that they are good at running a business together but not so happy in their personal relationship anymore.

The Gates’ have several business interests as a couple and individually but plan to continue to run their charitable Foundation for years to come.

In the UK, where a divorcing couple wish to continue to run a business either in partnership or as shareholders, we draw on support from our corporate team to ensure that formal partnership or shareholders’ agreements are put in place. We also review the constitutional documents of any company to regulate the ongoing business relationship post-divorce once their financial claims as spouses are dismissed.

It may also involve an adjustment in commercial property ownership. This is crucial given that commonly very little is recorded formally to regulate their business relationship while they have been running it as a married couple and there is always a risk that they could disagree in the future.

Nailing down intentions for the future business relationship is key to minimise scope for future costly litigation post-divorce. There are also significant tax issues to consider when a divorce involves business interests and early specialist advice is key.

If you are considering staying in business with your partner after divorce, please get in touch with our Family team.