While the idea of a pre-nuptial agreement may not seem romantic, it can be a vital tool for protecting your business in the event of a divorce. For entrepreneurs and business owners, the risks of not having such an agreement far outweigh the discomfort of discussing finances before marriage.
Here are some key reasons why you should consider a pre-nuptial agreement:
Protecting Your Business
Without a pre-nuptial agreement, your business could be treated as a matrimonial asset and subject to division during divorce proceedings. This could lead to financial instability or even the forced sale of the business.
Establishing Clarity
A pre-nuptial agreement sets out clear terms on how assets, including business interests, would be divided. This can help avoid lengthy and costly disputes if the marriage ends.
Safeguarding Stakeholders
Your business may involve employees, partners, or investors whose livelihoods and interests could be impacted by the financial fallout of a divorce. A pre-nuptial agreement helps ensure the business’s continuity and stability.
Encouraging Transparency
Entering into a pre-nuptial agreement fosters open and honest discussions about finances at the outset, which can strengthen trust and understanding in the relationship.
Legal Status of Pre-Nuptial Agreements in the UK
Pre-nuptial agreements are not legally binding in the UK, but they are increasingly recognised and upheld by the courts, provided they meet certain criteria. These include:
- The agreement must be entered into freely and without duress.
- Both parties must receive independent legal advice.
- Full financial disclosure must be provided by both parties.
- The terms must be fair and reasonable in the circumstances of the case at the time of enforcement.
- The agreement should be executed at least 28 days before the date of the marriage.
- Reviewing the agreement throughout the marriage but especially when there has been an important change, such as the birth of a child or inherited wealth etc.
Key Case Law
The landmark case of Radmacher v Granatino [2010] UKSC 42 significantly increased the weight given to pre-nuptial agreements in the UK. The Supreme Court ruled that courts should uphold a pre-nup where it is fair to do so. This decision has made such agreements a more reliable method for business owners to protect their assets.
Conclusion
A pre-nuptial agreement might not be the most romantic gesture, but for business owners, it’s a sensible and proactive step. By securing your business assets, you can focus on growing your enterprise with peace of mind, knowing you’ve taken a powerful step to safeguarding its future. Please contact Karen Brennan, Partner and Head of Family to discuss pre-nuptial agreements in further detail.
The information provided in this article is provided for general information purposes only, and does not provide definitive advice. It does not amount to legal or other professional advice and so you should not rely on any information contained here as if it were such advice.
Wright Hassall does not accept any responsibility for any loss which may arise from reliance on any information published here. Definitive advice can only be given with full knowledge of all relevant facts. If you need such advice please contact a member of our professional staff.
The information published across our Knowledge Base is correct at the time of going to press.
