Family businesses are an integral part of the economic health of Scotland, and in light of the COVID-19 pandemic, it is more important than ever that we as professional advisers, assist our clients in overcoming their legal and practical problems.
Providing robust solutions to our clients’ complex legal issues throughout their lives, involves meaningfully collaborating across professional disciplines and creating a systemic approach to advising clients. In this article, we look at some of the biggest challenges family businesses face - what happens when family circumstances change as a result of major life events?
Under the law in Scotland, family business interests will typically only be regarded as ‘matrimonial property’ if they were set up or acquired after marriage or Civil Partnership. However, if you or your spouse owned a business before you were married, any increase in the value of this business may be regarded as matrimonial property. The law in this area is complex, and you will require the collaborative input of several experts to ensure you get the advice you need.
In many cases, the divorce of a shareholder or business owner in a family business can be very disruptive. As part of the divorce proceedings, there are likely to be numerous requests for information about the profitability of the business, and its distribution history.
If a divorcing spouse has shares or ownership of the company or business, it is likely the family will wish for the business ownership to be transferred and returned to the family. However, there will be significant negotiation between the parties’ financial experts and legal teams.
The best way to protect a family business from the effects of marriage and divorce is to enter into a prenuptial or postnuptial agreement. Such an agreement can set out clearly what will happen to the family business in the event of divorce, or even how the business is to be run throughout the marriage. You may require the input of specialist advisers to help you map out what should happen in the event of one partner’s death, or how the business should be treated in the spouses Wills.
Suffering a death in the family is difficult at any time, but if you are involved in a family business, this can cause added stress and difficulty. How the business will be dealt with, managed and owned following a death in the family depends greatly on how it was set up in the first place.
The ownership of the business will also be influenced by whether the deceased left a Will, who they left their share in the business to, and whether the beneficiary wishes to maintain ownership and involvement in the business. Death in a family business can create some very complex legal matters which require the input of business law specialists, tax experts, specialist Wills & estates lawyers, and financial and business advisors.
If this article has been of interest to you, you may wish to read other recent Family Business Insights by Murray Beith Murray here.
Murray Beith Murray was established in 1849, as advisors for generations of clients, committed to our values of integrity, expertise and trust. This aim and these values continue to this day as does our commitment to be here when you need us.