Divorce or relationship breakdown can have a major impact on the financial stability of a family run brewery. Mark Chanter, a senior consultant in the family team at law firm Stephens Scown LLP, explains how to minimise the chances of divorce or relationship breakdown having an adverse impact on your business.
Family Run Brewery
These days there are numerous small family and other breweries where having to buy out somebody’s shares or interest would be very difficult and have a major impact on the financial stability of the business and affect long term planning.
A way to deal with this issue or minimise the impact, is to have an agreement that either specifically deals with what happens in the event of a breakdown or puts such assets out of the discussion. These days you can do this by having a cohabitation agreement, a pre nuptial agreement or a post nuptial agreement.
Pre Nuptial Agreement
A pre nuptial agreement sets out what will happen to assets on divorce. Importantly it has to be signed up to four to six weeks before the big day.
Post Nuptial Agreement
A post nuptial agreement is similar, except it can be entered into once you are married. So, if you had no idea you were going to set up your own brewery when you got hitched, you can always review the situation later on.
As for a cohabitation agreements, they simply deal with unmarried couples and you can regulate both the arrangements within the relationship and on break down or just on breakdown.
Protect the Business
Typically, such a document looks to put certain assets outside the pot when it comes to distribution on any breakdown, so whether you have been in a brewery family for generations or it is just your dream business, you can say that the business or its assets cannot form part of the settlement. This is done to minimise the risk of the business having to be broken up or saddled with a lot of debt.
If you are living together and you have a cohabitation agreement in place, it is a binding contract like any other type of contract and is enforceable as such. If you are married, the Court always retains the right to vary any agreement on a needs basis, but, and this is the crucial point, the Court does not start from what it would normally do when deciding how to divide the assets, rather it starts from the terms of the agreement and adjusts it appropriately. The effect is that even if the Court does not agree with the terms you reached, it will not rip up the agreement. Instead, it will use it as a starting point, and it can make a large difference to the final outcome.
I have dealt with a situation recently where there was a small brewery where a younger family member had recently been given shares in the business. He had entered into a post nuptial agreement before doing so. The Judge made clear that his wife had been fully aware of the plans in relation to the shares in the brewery and in the circumstances the Judge completely ignored their value when it came to dividing up the assets. There is no certainty this will happen in every case, but it is always worth considering when you are going to acquire an interest in the family business, or you create your own unique business.