While it is important to have a business plan and processes in place for when you need to take time away from the business, there is one area that many of us are guilty of not planning for, and that is divorce. It can be confronting to consider that you need to plan for the end of your happy marriage; however, there is more to it.
On average, one in 10 employees a year will divorce, what we don’t know is how many marriages break up where there is a family business involved. In some countries, there is a groundswell movement to have divorce and separation acknowledged as life events that will require Human Resource departments to develop a policy around it. What we do know is that for anyone going through a separation or divorce, composure, perspective and the ability to compartmentalise different facets of a person’s life is needed. Often, in reality, this is actually one of the hardest things to put into practice.
It is almost impossible not to carry separation or divorce into the workplace. It affects productivity and potentially poor decision-making; when this is our own marriage, it comes with its own unique set of challenges. While it might feel like a negative subject, there are reasons for having a ‘Contracting Out Agreement’ [prenup] written and in place. Having one drawn up when you and your partner are both in a good place is accounting for changes that cannot be foreseen or anticipated. It is discussing the worst case in advance and ensuring finances are handled the way you both intend, during and after marriage. Having one does not mean you don’t trust your partner. Instead, it means you are both invested in long-term success.
Where you are a partner in business with someone else, have you considered and planned for the fact that the business could be subject to division in the case of divorce?
Where a business or company is involved, a prenup should cater for the prior agreement of the business continuing with minimum disruption to all parties (other owners, staff and clients) or the sale of the business using a formula/methodology agreeable to all parties.
Contracting Out Agreements, sometimes called Section 21 Agreements or prenup, is a legal contract normally signed before marriage that covers the distribution of assets in the event of divorce. They protect the assets of both parties that each held before entering the relationship and can also protect assets that build up during the marriage. This means a couple can continue to run individual businesses and accumulate assets independently of each other as well as together. Prenups are not just for people getting married, they apply to de facto relationships equally.
Reasons why couples in a family business, own business, or business partnership enter into prenups:
- Protection for your business when in business together: Being able to mutually agree in advance on how the business side of things would be managed with a prenup in place in the event of divorce is beneficial. If needed, it can then be actioned without conflict and minimal emotion. It also delivers:
- A clean, simple and less painful process that can be followed without argument or contradiction.
- The removal of potential third parties who could otherwise steer outcomes.
- Reduced disruption to the business as tension associated with arguments and heightened emotions that would usually escalate from how to manage the business in the divorce has already been accounted for.
- Lessened business continuity risk, which in turn can help maintain the value of the business and/or the assets within it. This ensures the value of the business is better protected.
- Protection for a business partnership: When two or more people own a business, for each to have a prenup with their business shares written in ensures that should the worst happen, the business will be exempt from division. This limits the potential impact on the business and other partners, where if there was not one, the business shares could become subject to division in the divorce.
- Standard legal protection: One or both parties believe their relationship to be long-term and want to protect their respective assets.
- Second marriage: One of you is marrying again and wants to limit any loss of assets should things go wrong.
- To protect children from previous relationships: Blended families can be complicated, but a prenup lets one or both parties specify what happens to their property when they die while providing for the surviving partner. This is in conjunction with a will. Without a prenup, the surviving partner may contest a will to claim a significant portion of the deceased partner's property, leaving much less for the children.
- To clarify financial rights:A couple, regardless of their wealth, may wish to legally agree their rights and responsibilities during their relationship.
- Minimise disputes if there is a separation:Prenups can clearly outline how property is divided upon the relationship ending.
Benefits of having a prenup:
- A prenup can resolve the most significant economic issues that would exist if there was a divorce.
- You can potentially avoid long court battles as you have already decided on the financial side.
- It accounts for changes that you either cannot foresee or anticipate.
- Both of you are on the same page when it comes to the financial side and who came in with what. You will also have had a broader financial discussion that could extend to retirement and estate planning.
- You have together created your own arrangement and consciously decided how you want to share property with your partner.
- In the example of there being multiple shareholders, each will want to ensure that a new shareholder (to replace the person departing or selling shares) cannot be introduced without their prior agreement. The agreement in such a scenario might stipulate that the shares in the business owned by the departing co-owner/shareholder must first be offered to existing shareholders. Adding to that would be a pre-agreed formula for calculating the value of the shares.
- It can provide speed and efficiency of the process whilst minimising emotion through argument or holding of different viewpoints/positions.
- A prenup can also protect you from having to pay each other’s debts e.g. student loans, while also protecting financial assets and inheritances.
If you are already married or in a de-facto relationship, it is never too late to create a prenup; doing so during marriage is termed a postnup. The same reasons and benefits apply to creating one.
Reasons for entering into a postnup:
- You talked about a prenup but never got one.
- You are looking to buy or start up a business together or on your own.
- One partner has become financially irresponsible. Racking up debt, gambling without your knowledge – if irresponsible one suggests they sign that the other party won’t be responsible for the debt.
- It can actually save the marriage, as financial stress from one person’s poor financial decision-making is no longer a financial burden to the other person.
- A postnup protects children from a previous marriage.
- Something has changed financially. This could be one of you who has inherited money and wants to protect it. It can also be in the case of one purchasing or starting up a business.
- You maybe already have a prenup and want to add an inheritance postnup.
What is your agreed business plan in the case of your divorce?
At Equal Exes, we do see couples who are in business together or where one of the couples will have a business separate from the marriage. Separating is an emotional and difficult time, without having to think about how you will have to continue to work together in a business while continuing to make decisions together. Your relationship will have changed from an intimate one to purely a business partnership/relationship and that of a co-parent [If relevant]. This is why it is a good idea to plan ahead with a ‘Rules of Engagement’ policy. The document should allow you both some breathing room to continue to work in and on the business until bigger decisions are final.
Creating a ‘Rules of Engagement’ document could include the basics of treating each other with kindness and respect to both agreeing not to disparage each other in front of staff
A Rules of Engagement policy can include:
- The basics of agreeing to treat each other with kindness and respect.
- Agreeing not to disparage each other in front of staff.
- Documenting who is responsible for what areas of the business and what each of your roles and responsibilities are.
- A communication plan that encompasses how your roles cross over day to day and how you will communicate e.g. is email and an app such as WhatsApp the best strategy?
- Include a ‘Delegating of Authority’ document and consider what that should look like.
- Do you both undertake communication coaching to ensure you continue to respect each other?
- What is the current financial sign-off process for day-to-day and bigger business purchases and decisions, and does this allow for good business decision-making?
- A business mentor or impartial person you both trust who would help you navigate major business-related decisions?
When you are developing a Rules of Engagement document, also include a ‘Delegated Authority’ agreement/policy. This is beneficial where one of the business partners is on holiday or unable to work for any reason.
A Delegated Authority agreement/policy should include:
- An agreement on what decisions would require agreement from both parties.
- The decisions can be made unilaterally by the partner running the business, who would need to make the executive decision.
- To remove any grey areas, include agreed business expense amounts that do not require sign-off from both business owners.
For both policies, it is crucial to keep them updated as the business expands or changes. You both wouldn’t want to go to the expense of having them created to then find, when you one day need them, that they are out of date in terms of business size, turnover staff numbers and locations or offices.
When it comes to business financials, also consider the following:
- If one owns the business and the other only works in the business with no ownership involvement, how is this person paid? Are they being paid fairly for the hours they put in and in the same cycle as other employees?
- If only one of you works in the business, is the business owner drawing a fair salary?
- Maintaining good financial records is crucial. Do not use the family bank account for business-related purchases and vice versa.
Other considerations to take with you are:
- Remember to be assertive while fair and not submissive in all dealings with your ex.
- If you would usually meet in person when it comes to a discussion, it is OK to do these over the phone rather than face to face.
We recommend the BIFF method when it comes to communicating:
- BRIEF: Respond only to the portion of the communication that requires a response and use as few words as possible.
- INFORMATIVE: Provide necessary factual information only without including judgment or opinion.
- FRIENDLY: Ensure your reply is friendly rather than hostile – include please, thank you, and you’re welcome.
- FIRM: Sound confident, and don’t ask for more information if you want to end the back-and-forth.
------
Bridgette Jackson has been a member since 2021
To book a 15-minute complimentary call with Bridgette Jackson, Divorce Coach and relationship Coach at Equal Exes, click here go to.
While it is important to have a business plan and processes in place for when you need to take time away from the business, there is one area that many of us are guilty of not planning for, and that is divorce. It can be confronting to consider that you need to plan for the end of your happy marriage; however, there is more to it.
On average, one in 10 employees a year will divorce, what we don’t know is how many marriages break up where there is a family business involved. In some countries, there is a groundswell movement to have divorce and separation acknowledged as life events that will require Human Resource departments to develop a policy around it. What we do know is that for anyone going through a separation or divorce, composure, perspective and the ability to compartmentalise different facets of a person’s life is needed. Often, in reality, this is actually one of the hardest things to put into practice.
It is almost impossible not to carry separation or divorce into the workplace. It affects productivity and potentially poor decision-making; when this is our own marriage, it comes with its own unique set of challenges. While it might feel like a negative subject, there are reasons for having a ‘Contracting Out Agreement’ [prenup] written and in place. Having one drawn up when you and your partner are both in a good place is accounting for changes that cannot be foreseen or anticipated. It is discussing the worst case in advance and ensuring finances are handled the way you both intend, during and after marriage. Having one does not mean you don’t trust your partner. Instead, it means you are both invested in long-term success.
Where you are a partner in business with someone else, have you considered and planned for the fact that the business could be subject to division in the case of divorce?
Where a business or company is involved, a prenup should cater for the prior agreement of the business continuing with minimum disruption to all parties (other owners, staff and clients) or the sale of the business using a formula/methodology agreeable to all parties.
Contracting Out Agreements, sometimes called Section 21 Agreements or prenup, is a legal contract normally signed before marriage that covers the distribution of assets in the event of divorce. They protect the assets of both parties that each held before entering the relationship and can also protect assets that build up during the marriage. This means a couple can continue to run individual businesses and accumulate assets independently of each other as well as together. Prenups are not just for people getting married, they apply to de facto relationships equally.
Reasons why couples in a family business, own business, or business partnership enter into prenups:
- Protection for your business when in business together: Being able to mutually agree in advance on how the business side of things would be managed with a prenup in place in the event of divorce is beneficial. If needed, it can then be actioned without conflict and minimal emotion. It also delivers:
- A clean, simple and less painful process that can be followed without argument or contradiction.
- The removal of potential third parties who could otherwise steer outcomes.
- Reduced disruption to the business as tension associated with arguments and heightened emotions that would usually escalate from how to manage the business in the divorce has already been accounted for.
- Lessened business continuity risk, which in turn can help maintain the value of the business and/or the assets within it. This ensures the value of the business is better protected.
- Protection for a business partnership: When two or more people own a business, for each to have a prenup with their business shares written in ensures that should the worst happen, the business will be exempt from division. This limits the potential impact on the business and other partners, where if there was not one, the business shares could become subject to division in the divorce.
- Standard legal protection: One or both parties believe their relationship to be long-term and want to protect their respective assets.
- Second marriage: One of you is marrying again and wants to limit any loss of assets should things go wrong.
- To protect children from previous relationships: Blended families can be complicated, but a prenup lets one or both parties specify what happens to their property when they die while providing for the surviving partner. This is in conjunction with a will. Without a prenup, the surviving partner may contest a will to claim a significant portion of the deceased partner's property, leaving much less for the children.
- To clarify financial rights:A couple, regardless of their wealth, may wish to legally agree their rights and responsibilities during their relationship.
- Minimise disputes if there is a separation:Prenups can clearly outline how property is divided upon the relationship ending.
Benefits of having a prenup:
- A prenup can resolve the most significant economic issues that would exist if there was a divorce.
- You can potentially avoid long court battles as you have already decided on the financial side.
- It accounts for changes that you either cannot foresee or anticipate.
- Both of you are on the same page when it comes to the financial side and who came in with what. You will also have had a broader financial discussion that could extend to retirement and estate planning.
- You have together created your own arrangement and consciously decided how you want to share property with your partner.
- In the example of there being multiple shareholders, each will want to ensure that a new shareholder (to replace the person departing or selling shares) cannot be introduced without their prior agreement. The agreement in such a scenario might stipulate that the shares in the business owned by the departing co-owner/shareholder must first be offered to existing shareholders. Adding to that would be a pre-agreed formula for calculating the value of the shares.
- It can provide speed and efficiency of the process whilst minimising emotion through argument or holding of different viewpoints/positions.
- A prenup can also protect you from having to pay each other’s debts e.g. student loans, while also protecting financial assets and inheritances.
If you are already married or in a de-facto relationship, it is never too late to create a prenup; doing so during marriage is termed a postnup. The same reasons and benefits apply to creating one.
Reasons for entering into a postnup:
- You talked about a prenup but never got one.
- You are looking to buy or start up a business together or on your own.
- One partner has become financially irresponsible. Racking up debt, gambling without your knowledge – if irresponsible one suggests they sign that the other party won’t be responsible for the debt.
- It can actually save the marriage, as financial stress from one person’s poor financial decision-making is no longer a financial burden to the other person.
- A postnup protects children from a previous marriage.
- Something has changed financially. This could be one of you who has inherited money and wants to protect it. It can also be in the case of one purchasing or starting up a business.
- You maybe already have a prenup and want to add an inheritance postnup.
What is your agreed business plan in the case of your divorce?
At Equal Exes, we do see couples who are in business together or where one of the couples will have a business separate from the marriage. Separating is an emotional and difficult time, without having to think about how you will have to continue to work together in a business while continuing to make decisions together. Your relationship will have changed from an intimate one to purely a business partnership/relationship and that of a co-parent [If relevant]. This is why it is a good idea to plan ahead with a ‘Rules of Engagement’ policy. The document should allow you both some breathing room to continue to work in and on the business until bigger decisions are final.
Creating a ‘Rules of Engagement’ document could include the basics of treating each other with kindness and respect to both agreeing not to disparage each other in front of staff
A Rules of Engagement policy can include:
- The basics of agreeing to treat each other with kindness and respect.
- Agreeing not to disparage each other in front of staff.
- Documenting who is responsible for what areas of the business and what each of your roles and responsibilities are.
- A communication plan that encompasses how your roles cross over day to day and how you will communicate e.g. is email and an app such as WhatsApp the best strategy?
- Include a ‘Delegating of Authority’ document and consider what that should look like.
- Do you both undertake communication coaching to ensure you continue to respect each other?
- What is the current financial sign-off process for day-to-day and bigger business purchases and decisions, and does this allow for good business decision-making?
- A business mentor or impartial person you both trust who would help you navigate major business-related decisions?
When you are developing a Rules of Engagement document, also include a ‘Delegated Authority’ agreement/policy. This is beneficial where one of the business partners is on holiday or unable to work for any reason.
A Delegated Authority agreement/policy should include:
- An agreement on what decisions would require agreement from both parties.
- The decisions can be made unilaterally by the partner running the business, who would need to make the executive decision.
- To remove any grey areas, include agreed business expense amounts that do not require sign-off from both business owners.
For both policies, it is crucial to keep them updated as the business expands or changes. You both wouldn’t want to go to the expense of having them created to then find, when you one day need them, that they are out of date in terms of business size, turnover staff numbers and locations or offices.
When it comes to business financials, also consider the following:
- If one owns the business and the other only works in the business with no ownership involvement, how is this person paid? Are they being paid fairly for the hours they put in and in the same cycle as other employees?
- If only one of you works in the business, is the business owner drawing a fair salary?
- Maintaining good financial records is crucial. Do not use the family bank account for business-related purchases and vice versa.
Other considerations to take with you are:
- Remember to be assertive while fair and not submissive in all dealings with your ex.
- If you would usually meet in person when it comes to a discussion, it is OK to do these over the phone rather than face to face.
We recommend the BIFF method when it comes to communicating:
- BRIEF: Respond only to the portion of the communication that requires a response and use as few words as possible.
- INFORMATIVE: Provide necessary factual information only without including judgment or opinion.
- FRIENDLY: Ensure your reply is friendly rather than hostile – include please, thank you, and you’re welcome.
- FIRM: Sound confident, and don’t ask for more information if you want to end the back-and-forth.
------
Bridgette Jackson has been a member since 2021
To book a 15-minute complimentary call with Bridgette Jackson, Divorce Coach and relationship Coach at Equal Exes, click here go to.