A businessman facing divorce after 20 years of marriage has been advised that his company could form part of the financial settlement, even though his wife has never worked in the business.
Mark started the packaging company before the couple married and has since built it into a firm employing 14 people. His accountant estimates it may now be worth about $2 million.
He said his wife worked part-time and took on more of the parenting when their children were young, while he took the financial risks involved in growing the company.
However, she believes the business should be considered when the couple’s assets are divided. Mark said he was concerned because most of his wealth was tied up in the company and he did not have $1 million in cash to pay her.
“I want to be fair, but how can someone who has never worked in my business have a claim on its value?” he asked.
Money educator Vanessa Stoykov discussed the case with family law barrister Tahlia Ferrari on her Money Dilemmas vodcast.
Ferrari said there could be ways to reach a divorce settlement without forcing the company to be sold or placing its future at risk.
“You don’t want to kill the goose that lays the golden egg,” she said, warning that the collapse of the business could leave everyone worse off, including Mark’s wife.
One possible approach would be for Mark to retain the company while his wife received a larger share of other assets, such as the family home or superannuation.
That would involve assessing the couple’s finances as a whole rather than automatically splitting each individual asset equally. Ferrari said she had never had a client lose their business as a result of a family law matter, although each case was different.
Stoykov also stressed that contributions to a marriage were not measured solely by income or work in a company. Raising children and managing the household while one partner developed a business could also be recognised.
The first step, she said, should be an independent valuation of the company, preferably conducted by a valuer agreed by both parties. An accountant’s estimate may not account for liabilities and other factors affecting the business’s value.
The couple were also urged to consider the cost of prolonged legal conflict. Ferrari said legal fees in such cases could range from several thousand dollars to more than $700,000, depending on the complexity of the dispute.
Stoykov said Mark should obtain specialist legal advice, understand the available settlement options and attempt to negotiate rather than allowing the dispute to escalate.
“We need to set you up for the rest of your life, and this decision really matters,” Ferrari told her.
Stoykov said the case highlighted the need to consider both partners’ contributions when a marriage ends: one had built the business, while the other had helped build the family.
