Divorce when you own a business: the time in between

Separating or divorcing when you own a business, property or shareholdings opens an in-between period, from the decision to the final settlement, in which the assets keep working while almost nothing is decided. Questions about the assets, documents and deadlines go first to your family lawyer, to the notary where there is one, and to your tax adviser. What stays in your hands is to draw up an inventory and a calendar, stay discreet with staff and the market, make no commitments to your children about a division that does not yet exist, and take no irreversible step, such as selling, restructuring the company or moving abroad, before your advisers have examined it.

In this article

1. What changes when a separation involves a business?
2. Why does everything seem to need deciding at once?
3. Your lawyer and the notary come first
4. What do employees notice before anyone says anything?
5. What the market reads between the lines
6. How do you talk to your children when there is a business involved?
7. What no settlement covers
8. What should you avoid deciding during a separation?
9. What you can prepare now
10. Frequently asked questions

What changes when a separation involves a business?

A separation has two dates everyone knows: the day it is decided and the day the settlement is signed or the court rules. Between them lies a stretch of time that appears in no file, can last many months and in which life does not stop: payroll to run, orders to deliver, children to take to school, board meetings to hold.

When there is a company, shareholdings or property, that time becomes complicated in another way, because the assets have a life of their own: employees, banks and clients who are not part of the separation and yet depend on how it unfolds.

Anyone living through this period carries three clocks at once. The clock of the proceedings, set by the lawyers and the court. The clock of the business, which stops for no one: the year-end accounts, the renewal of a credit facility, a negotiation half concluded. And the family clock, with its school terms, holidays and celebrations that this year nobody quite knows how to organise. Each adviser watches one of those clocks; only you hear all three strike together.

In many families with significant assets, the line between business and private life was never drawn, because there was no need. The family home belongs to a company, the family drives company cars, you have stood surety for one of the company's loans, and shares were spread across the family when the company was founded. None of this is unusual in a family business, but now each point becomes a question: who owns what, who decides, what can still be used and who pays in the meantime. People are intertwined too: the company's accountant has done the family's tax returns for years, and your assistant runs both diaries.

Sooner or later, someone asks what the business is worth. Whether it has to be valued, and under which country's law, is for your lawyer to assess. If a valuation is needed, experts will ask for accounts, contracts and forecasts, and you will hear figures that do not match the one in your head, because nobody looks neutrally at half a lifetime's work. Your part is to provide the information and keep to yourself what that figure stirs in you.

Why does everything seem to need deciding at once?

The first weeks arrive loaded with questions that seem to allow no delay: where to live, what to say at home and at work, what to do about the accounts, whom to call first. Together they suggest that your whole future will be decided within a month.

Part of that urgency is real: court deadlines, bank deadlines, tax obligations, transactions in progress with a signing date. Such deadlines can be checked, a professional knows them and they fit in a diary; their place is your lawyer's and tax adviser's offices, not your sleepless nights.

The other part comes from within: the wish for it all to be over, the need to show you are still in control, the fear of losing what took so long to build, sometimes guilt. That urgency has no date, so it never runs out: as soon as one decision is taken, another appears that seems just as pressing.

A single question is enough to tell them apart: what, specifically, would be lost if this decision waited a few weeks? If the answer has a date and a name, a deadline, a signature, a renewal, the urgency is real and belongs with your advisers. If the answer is “nothing, but I can’t bear it any longer”, what is pressing is not the decision but the state in which it would be taken. Our note Haste is a signal explains why that difference matters so much to us.

Under that pressure two opposite temptations appear, and it helps to know which one is yours. One is to sign whatever it takes to make it stop. The other is to touch nothing and let the business and the house carry on as if nothing had changed, waiting for a better moment. They look like opposites and share one thing: in both, exhaustion decides.

Your lawyer and the notary come first

Everything with legal or tax consequences goes through your advisers before you decide anything, and before it reaches us. Where there are significant assets, there is not one adviser but several, each with a distinct role.

Your family lawyer

Your lawyer represents you and defends your interests in the proceedings and the settlement. Where there is a business, it helps if they have experience of separations involving company assets or work closely with a corporate colleague. And there is an awkward question worth asking early: can the lawyer who has looked after the family's affairs for years now act for you? Ask it directly. The same goes for an accountant who serves both company and family.

The notary

If your company or property sits in a civil-law country such as Spain, Germany or Austria, the notary is a public official bound to impartiality: in Spain and Germany, for example, marriage contracts and transfers of shares in a limited company require a notarial deed. The notary represents neither side but explains to everyone signing what they are signing. In England or the United States, the role is far narrower. Where there is a notary, the originals of earlier deeds, from the company's articles to old powers of attorney, are often in their archive; ask for a copy of any deed you signed and cannot find, and let them and your lawyer decide what needs reviewing.

Your tax adviser and a corporate lawyer

Each way of dividing or reorganising assets has different tax consequences, and working them out before anything is signed is your tax adviser's job. A corporate lawyer will read the articles, any shareholders' agreement or family charter, documents that may not have been opened since they were signed and that sometimes provide for exactly this situation. And if you or someone in your household is unwell, the first person to know should be a doctor.

Take your questions to each of them in writing. They are nearly always the same:

• what I may and may not do with joint accounts and assets while the proceedings last;
• which business decisions I can go on taking as usual and which I should discuss with you first;
• which dates are firm and which only look it;
• which documents you need and where they should be kept;
• what I should not sign, announce or move in the meantime.

If Lex Fati becomes involved at any point, it is alongside all of them and never in their place. How that works in practice is set out in “Do you work with lawyers or advisers?”

What do employees notice before anyone says anything?

A great deal, and sooner than you think. Hours change, doors that were always open stay shut, calls are taken in the corridor, and an appointment with a notary appears in the shared calendar. In a company where everyone knows everyone, that is enough.

Employees do not need to know what is happening to notice that something is, and where there is silence, they interpret. Their question is rarely personal and nearly always practical: whether the company will be sold, split or change hands, and what will become of their jobs. Meanwhile the best of them start listening to offers, because they receive the most.

Your private life is your own. What your staff need to know is what affects them, and only once it has been decided. Between saying nothing and confiding in people, there is a middle way: a short, true sentence for the few people others will ask, such as your assistant or the finance director. Something like: “There is a personal matter under way; if anything changes in the company, you will hear it from me.”

That sentence only works if it is true and you stand by it. Do not announce stability you cannot vouch for, or changes not yet decided, and do not make anyone on the staff your confidant: that person depends on you, and what you tell them puts them in a position they did not choose.

Then there is a technical side almost everyone forgets. Company email, the shared calendar, the server and company phones are seen, or can be seen, by more people than you imagine: the IT team, an outside provider, whoever covers during the holidays. Anything that belongs to the separation, from correspondence with your lawyer to draft agreements, is better kept out of them.

What the market reads between the lines

Outside the company, a change in the life of the person who runs it is almost always read as a signal about the business. The bank wonders whether the person standing behind the debt will change; major clients, whether the company will be the same a year from now; competitors, whether this is the moment to approach your clients or your people. None of those readings needs to be true to have an effect.

Some signals travel through formal channels. A change of directors is recorded in a public register, from the Mercantile Registry in Spain to Companies House in the United Kingdom, and some people follow those filings closely. Certain loan agreements also contain change-of-control clauses; your lawyer can tell you whether yours do. Any corporate move, however small, is best made knowing who will see it.

Informal channels are faster: a remark over dinner with friends who are also clients, a word in confidence to a supplier, a conversation at the golf club. In small sectors, what is said on a Friday is known by Monday. If you have a public profile, the press comes into it too, and there your first point of contact is your lawyer.

The most useful thing is to have a version ready for the outside world: short, true, the same for everyone, and used only when someone asks. In the market, a separation usually weighs less than the impression that nobody is at the helm.

Then there is the circle of people who know because they have to: lawyers, notary, tax adviser, bank, perhaps a valuer. You may ask each of them who else in their firm will see your affairs; we answer the same question in “Who will know about my case?”

How do you talk to your children when there is a business involved?

Children notice before they are told, at any age. What changes with age is what is at stake for them, and in families with a business, adult children often have more than an opinion: a job in the company, shares, an expectation about the future.

With younger children, the legal side has its own channel: where they live, how time with them is shared and who pays for what are settled in the proceedings or by agreement, and your lawyer will explain how. Everything else is in your hands: when you tell them, in what words, and which parts of their routine can stay the same.

With adult children the difficulty is different. Without anyone asking, they may feel obliged to take sides, and the company gives them occasions to do so: a meeting, a shareholders' vote, a position. What you can decide is not to make them your confidants or referees and, as far as it depends on you, to keep their place as your children apart from their place in the business.

A common temptation in this period is to compensate. Offering a son the management ahead of time, telling a daughter the house will be hers, talking about the shares they will receive. It is done to reassure, sometimes out of guilt, and almost always too soon, because it allocates, in words, assets whose division has not yet been decided. What a child is told in those weeks is remembered for years and is hard to take back.

What no settlement covers

A settlement divides assets, organises timetables and sets amounts, but it does not divide a history. Many family businesses were born in the same years as the family, sometimes at the same kitchen table, and separating also means looking differently at the work that has accompanied that life.

And there is the loneliness. For someone who runs a company, a separation is never entirely private: in your town and your sector, you are also the business, and for a while you will feel that everyone is watching to see how you are coping. Friends tend to be shared, the family takes sides even when it would rather not, the staff cannot be your confidants, and your advisers, however good, deal with files, deadlines and figures. Our note No one to talk to describes it: the more visible someone is, the fewer people they can speak to freely.

That is where a private conversation can have its place, with someone outside your circle, outside the proceedings and with no stake in your decisions. Rarely at the beginning: in the first weeks, when everything seems urgent, the moment belongs to your lawyer, and that is what we will tell you if you write to us then. Later, once the advisers are at work and something else remains open, the first step is an exchange by WhatsApp or telephone with Tony Alcalá, in English.

We listen, assess whether we can contribute anything and answer yes or no, with our reasons. If the answer is yes, we agree before anything starts what we will do, over what period and for what amount, and that amount does not change. The conversation centres on you: what you are deciding, what matters most to you and what life you want when this is over. The whole process is described in “What happens before you accept a case?”

What should you avoid deciding during a separation?

Some decisions are not wrong in themselves yet delicate now: they are hard to undo and taken with all three clocks striking at once. Your lawyer and, where relevant, your tax adviser should examine each one first and tell you whether it can wait for the settlement:

• selling the company, a stake or a property, or accepting an offer that happens to arrive at this very moment;
• restructuring the company, reorganising assets between companies or changing who runs it;
• handing management or shares to a son or daughter earlier than planned;
• buying a home, moving to another country or stepping back from the business;
• announcing to staff, clients or the press anything that has not yet been decided.

Offers deserve a word of their own: they tend to arrive at the worst moment, and in a separation selling can look like the quickest way to close a chapter. Sometimes it is. But a sale decided so as to stop thinking about something reflects the state of the seller, not the value of what is sold.

Decisions with a real date, such as a court deadline, a loan renewal or a signed transaction that has to be completed, carry on with your lawyer and tax adviser. For everything else there is the method of three questions before deciding, which you answer alone, with a sheet of paper.

What you can prepare now

Alongside what is better postponed, there is work in your hands that commits you to nothing: putting things in order. It has four parts, all of which fit in a notebook that should not stay at the office.

The first is an inventory: what exists, where it is, whose name it is in and since when. Companies and shareholdings, property, accounts, insurance policies, pensions, loans and any sureties you have given for company debts, assets abroad if there are any. Do not write down who you think each item belongs to, because that is for your lawyer to determine; note what is on record, with the supporting document alongside.

The second is a single calendar, with the company's dates and the family's on the same page: board meetings, year-end, maturities and negotiations, but also exams, holidays and celebrations. Many clashes of this period can be seen coming on such a page, and hardly any while each calendar is kept separately.

The third is a short list of people: who knows today, who will need to know and when, and from whom they will hear it. It is the simplest tool of discretion, because it turns into decisions what would otherwise happen by accident.

The fourth is the list of open decisions, split into three groups: those with a real date, which go to your advisers; those that can wait without anything concrete being lost; and those better not taken yet. Every week one of them changes group, and seeing that on paper is far better than going over everything in the small hours.

And one question just for you, which needs no answer today: what do you want still standing when all this is over? The business, your relationship with your children, a name, a way of living. The answer will not appear in any settlement, but it orders the decisions of this period better than any urgency.

Frequently asked questions

What happens to a family business in a divorce?

The business keeps running, and what happens to its ownership depends on factors only your lawyer can assess: the rules governing property in your marriage, any marriage contract, which country's law applies, how and when the shares were acquired, what the articles say, and whether a valuation will be needed. Meanwhile, the prudent course is not to change its structure or management until your lawyer and tax adviser have reviewed it.

What should you avoid doing during a divorce if you own a business?

Taking decisions that are hard to undo while the settlement is still open, before your lawyer and, where relevant, your tax adviser have examined them: selling the company or a property, restructuring, or handing the business to the next generation early. None of these is wrong in itself; the timing is what makes them delicate.

Should I tell my employees I am separating?

Not necessarily, and rarely at the start. First decide who should hear it from you before anyone else, usually the person who runs your diary or the accounts, since the others will ask them. If an employee asks you directly, it is enough to say there is a personal matter and that you will tell them yourself if anything changes in the company.

What does a notary do in a separation involving property?

In civil-law countries such as Spain, Germany and Austria, the notary is an impartial public official who authenticates acts requiring a notarial deed, such as marriage contracts and transfers of shares in a limited company; in Spain and Germany, property sales also pass through a notary. Your lawyer defends your interests; the notary explains to everyone signing what they are signing, and can give you copies of deeds you signed.

Who can I talk to about a separation without people finding out?

First, your professional advisers, asking each of them who else in their firm will know about it. For what is not a matter for a lawyer, an adviser or a doctor, a conversation outside all your circles has its place, always alongside them. At Lex Fati, two people know about it, Tony Alcalá and Patty García, and we keep no client file. It starts on WhatsApp or by telephone, and the amount is agreed before anything begins.

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