What happens to "Prime" business assets on divorce?
- AuthorKaren Johnson
Amazon’s founder and CEO, Jeff Bezos, last week announced on Twitter that he and his wife of 25 years, Mackenzie, were “parting as cherished friends” and “divorcing after a long period of loving exploration and trial separation”.
Mr Bezos has a reported wealth of $137 billion, with the couple owning a number of properties in America. However, it is understood that the main asset is the 16% shareholding that Mr Bezos has in Amazon.com, a company which he founded following his marriage to Mackenzie.
The news raised questions as to the future of Amazon amidst concerns that any divorce settlement might ultimately impact adversely upon the company.
This case looks to be the largest divorce settlement/order in history and, whilst it is to be decided in the States as this is where the couple lives, it raises important questions as to how the courts deal with business interests on divorce.
In England and Wales, when a couple is divorcing, the court gains significant powers in relation to addressing the financial issues arising as a result of the divorce. In particular, the court is looking to distribute the assets built up during the course of the marriage in a way which is fair, taking into account the following details;
- the needs of the children (which are considered to be paramount)
- the party’s needs
- earning capacities
- length of marriage and,
- conduct and contributions
Business interests are an asset which need to be taken into account and, in the case of a long marriage where “by their joint efforts over many years, his directly in the business and hers indirectly at home”, a couple “have built up a valuable business from scratch” there are likely to be strong arguments for there being an equal sharing of the value of the business (White v White  2 FLR 981).
However, the arguments in relation to the business can be extremely complex, not least at the initial stages in identifying the extent and valuation of the business interests, but also addressing the actual remuneration received from the business and the uncertainty of future earnings. There may also be arguments by the spouse with the business interests that their contribution to the growth of the business is such that they should receive a greater share, as well as issues surrounding the non-disclosure of relevant information and attempts to hide behind the corporate veil.
A court is unlikely to support the break-up of an established business which is currently supporting a family. In terms of the income that it produces, and if there are sufficient non-business assets, it may be inclined to offer the non-business owing spouse a greater share of the non-business assets. However, the court must also be careful to have regard to the nature of the assets being divided and be careful to avoid a position which leaves one spouse with all the risk-laden assets, whilst the other spouse retains the secure assets, such as property or cash savings.
If money is to be raised via the business, care and advice will need to be taken to help ascertain the most appropriate and tax efficient way to do so.
In suitable cases, expert advice is likely to prove invaluable. However, such advice is costly and it is equally important to weigh up the benefits to be obtained in securing that advice against the costs that are likely to be incurred.
Although the news of their separation and divorce has only recently been announced publicly, it has been reported that the negotiations resulting from the separation have been ongoing for a long time, and are continuing, as their advisers seek to grapple with the case’s complexities.
Whether a business is big, small, or somewhere in the middle, and whether you are seeking to protect this asset or seek a share of it, legal advice is absolutely imperative. At Birkett Long LLP our divorce and separation solicitors have extensive experience in dealing with all types of business interests and will be sure to work with you to safeguard your interests.
For a free, no obligation 15 minute telephone consultation to discuss your needs, please do not hesitate to contact one of our divorce and separation lawyers. I am based in our Colchester office and can be contacted on 01206 217305 or firstname.lastname@example.org.