News

'Redundancy, Your New Business & Divorce' by Tony Roe
11 June 2009 :: Newbury Business Today

Years ago, a long divorced woman came to see me. Her former husband, was about to get a hefty redundancy pay off. Could she claim any of it? Fortunately for her, though not for her ex-, there had never been any final settlement and she was awarded a sizeable lump sum.

In the current economic climate, many see their redundancy payment as the seed-corn of their new business. So what are the risks of successful matrimonial claims on these payoffs or against the long awaited start up firm, sometimes years after separation?

Being divorced does not mean the financial side has been put to bed. If a matrimonial court has not dismissed the claims between (former) spouses, then they can be pursued at any time by each of them so long as they have not remarried without first making an application for financial relief. Typically, claims made in a divorce petition would still enable the petitioner to trigger such capital claims even after remarriage. Subject to this, there is no time limit on financial claims in divorce although, the longer it is before they are pursued, the harder it becomes due to the risk of injustice caused by delay.

When the courts consider the asset pot and how it should be divided, all capital is included no matter who brought it in or when nor, indeed, in which spouse’s name it is held. However, a judge has an absolute discretion in how he or she treats certain sorts of assets, having regard to all the circumstances of the case, with the first consideration given to minor children. In most cases, the needs of the separated family to re-house themselves will be the key issue and there is little scope to successfully argue that post-separation capital should be ignored.

Where assets exceed needs then, as the Court of Appeal held in the leading case of Charman, whilst the ‘principle of sharing’ applies to all the parties’ property, if certain assets could be said to be ‘non-matrimonial’ there is a better chance of arguing successfully for departure from equality. As the High Court has said, independent effort after separation should be reflected in the division of assets, but only, of course, if there is the scope to do so.

With a redundancy payment invested in a new business but without the certainty of a court order, hoping for the best is not a good option. Specialist advice is required at the earliest opportunity. As the country come out of recession, that modest business may become a PLC and claims could be a lot larger. Who knows?

News Index