Business Assets in Divorce

What Counts as a Business Asset

Form E, the financial statement both of you complete, voluntarily or in financial remedy proceedings, asks whether you are a sole trader, a partner in a partnership, or a shareholder in a limited company, with a separate page for each business you have an interest in.

For each one it wants the nature of the business, your partnership share or shareholding against the total shares issued, when the next accounts are due, any sums the business owes you through a director's loan account or partnership capital, your estimate of the value of your interest and its basis, and your estimate of the capital gains tax payable on a disposal now.

The documents Form E asks you to attach are:

• business accounts for the last two financial years, for each interest you disclose
• anything supporting your estimate of value, such as an accountant's letter or a formal valuation, which Form E says is not essential at that stage
• your last tax assessment, or an accountant's letter on your tax liability, for the income section
• management accounts where the coming year's income looks significantly different

A limited company is a separate legal person, so what it owns belongs to the company and not to its shareholder. Prest v Petrodel Resources Ltd holds that section 24 of the Matrimonial Causes Act 1973 reaches only property a party is entitled to, in possession or reversion. Where the company holds something on trust for the shareholder spouse, that can be transferred.

Matrimonial or Non-Matrimonial Property

Section 25 of the Matrimonial Causes Act 1973, which governs financial settlements in England and Wales, sets the framework. The court weighs all the circumstances, giving first consideration to the welfare of any child of the family under 18, with particular regard to each party's resources and earning capacity, needs, the standard of living before the breakdown, ages and length of the marriage, any disability, contributions including caring for the home or family, and conduct it would be inequitable to disregard.

In Standish v Standish, decided on 2 July 2025, the Supreme Court held that the sharing principle applies to matrimonial property and not to non-matrimonial property. Matrimonial property is what comprises the fruits of the marriage, reflects the marriage partnership or is the product of common endeavour. Non-matrimonial property is typically brought into the marriage, or received by gift or inheritance, and legal title does not decide the question.

A business built before you met is therefore not shared as a matter of course, though it can still be called on to meet needs. Non-matrimonial property can become matrimonial through matrimonialisation: the parties, over time, treating the asset as shared. A transfer of shares between spouses to save tax will not normally show that.

Where a company was founded before the relationship and grew through it, what part of today's value is non-matrimonial is a broad evaluative assessment, not an accounting exercise. Martin v Martin treats a straight line apportionment from the date the company started as one legitimate approach among others. If you signed an agreement about the business, see prenuptial and postnuptial agreements.

Valuation, Evidence and Common Problems

A valuation is not automatic. Part 25 of the Family Procedure Rules requires the court's permission to put expert evidence before it, applied for no later than the first appointment and stating whether one person could report for both of you. Rule 25.11 lets the court direct a single joint expert.

In Miller v Miller; McFarlane v McFarlane the House of Lords observed that valuations are often a matter of opinion on which experts differ, and that investigating those differences can be extremely expensive and of doubtful utility. Martin v Martin confirms that valuations of private companies can be fragile and need to be treated with caution.

The problems that come up most often are these:

• the last accounts are out of date, or show assets at book value
• a minority shareholding that nobody outside the family would buy
• goodwill that depends on one person staying in the business
• a director's loan account, an asset in your hands and a liability in the company's
• agreements restricting who a share can pass to
• tax and the costs of sale, which cut what a disposal really releases
• disclosure that does not add up, covered on our hidden assets and non-disclosure page, or money leaving the business, which may call for a freezing order

Form E carries a statement of truth and a duty to the court to give full, frank and clear disclosure. A failure to give full and accurate disclosure may result in any order being set aside.

Ways a Business Interest Can Be Divided

Section 24 allows a transfer or settlement of property, so shares or a partnership interest can move between you, where the company's articles or the partnership agreement allow it. Section 23 allows a lump sum, which the court can order to be paid by instalments, can require to be secured, and can order to carry interest on what is deferred. Alongside a lump sum or property adjustment order, section 24A lets the court order a sale, but only of property in which one of you has a beneficial interest, so it reaches your shares and not the assets the company owns.

In practice that produces four broad shapes:

• one of you keeps the business and buys the other out, usually by instalments funded from profits, dividends or borrowing
• an offset, where the owner keeps the business and the other takes more of the house, the savings or the pensions
• a transfer of shares, so the non-owner keeps a stake, which rarely suits people who must then deal with each other
• a sale of the business or a shareholding, where there is a realistic buyer

Offsetting is not simply arithmetic. In Wells v Wells the Court of Appeal held that sharing is achieved by a fair division of both the copper-bottomed assets and the illiquid and risk laden assets, so one party should not keep all the cash while the other carries all the risk.

Where the wealth sits inside a company, Prest also confirms that a spouse's control of it and ability to take money out bear on their resources under section 25, which can affect a lump sum or spousal maintenance. Section 25A requires the court to consider ending financial obligations as soon as is just and reasonable, and a clean break is harder where payment depends on future trading.

How the Process Works

1. We map the business on paper first: the structure, your role, the shareholding or partnership share and the last two years of accounts.
2. Both of you complete Form E with the accounts attached, then answer each other's questions on what is missing.
3. You try to settle out of court. You must attend a meeting about mediation before applying to the court to decide, except in certain cases, for example where there has been domestic abuse.
4. If you agree, the terms go to the court as a consent order, which is what makes them binding.
5. If not, the application goes in on Form A to your local financial remedy court: a first appointment, a financial dispute resolution appointment, and a final hearing if you still cannot agree.
6. Any valuation is dealt with by permission at or before the first appointment, and the court can direct a single joint expert.
7. The order is drafted so the business can keep running, with payment timed to what it can produce and enforcement available if it is not paid.

If abuse is part of your situation, say so early: it affects the mediation requirement in step 3. If you are in immediate danger call 999, and the National Domestic Abuse Helpline is 0808 2000 247.

When Legal Advice Is Especially Important

Advice matters most where:

• the business existed before the marriage, was inherited or was built with family money
• most of the wealth is in the company and there is little cash to divide
• you are a minority shareholder or one of several partners and cannot act alone
• you are married to the owner and have never seen the books
• the accounts have moved sharply since you separated
• you both work in the business and one of you will have to leave it
• income is drawn as dividends rather than salary, which affects how your resources are assessed, with child maintenance worked out separately
• the business, or a fellow shareholder, sits outside England and Wales, which we cover under international family law

How RakLAW Solicitors Can Help

Our family solicitors work from 42 Shad Thames in Southwark, a short walk from Tower Bridge, with Tower Hill, London Bridge and Bermondsey the nearest stations. The first 15 minutes are free.

We map the business interests, prepare or test the disclosure, argue the matrimonial and non-matrimonial split, and negotiate a structure the business can carry. Related pages sit on our money and financial settlements hub, including the family home and high net worth divorce.

Court fees are listed on the GOV.UK court fees page, and a valuation carries the accountant's own charges. RakLAW Solicitors does not offer legal aid; our charges are on the family law fees page. Call 0203 345 2000 or book an appointment. RakLAW Solicitors is SRA regulated, SRA number 8007405.