Family business owners have traditionally been in a difficult situation with divorce. A family business that was passed down to children was vulnerable to big losses if marriages in the next generation broke down. Ex-partners could potentially walk away with a substantial share of an established family enterprise, and there was very little that could be done to prevent this. Even if pre-nuptial agreements existed, these could overruled in many instances.
Inheritance
A recent high profile divorce case of Radmacher v Grantino upheld the terms of the pre-nuptial agreement, setting a new precedent which has important implications for family business owners. Katrin Radmacher and Nicolas Grantino had signed a pre-nuptial agreement before their marriage in 1998, providing that neither party was to benefit from the other on any subsequent divorce. Before and during the marriage Ms Radmacher inherited over £100 million from her family’s paper company, while her husband left his £325,000 p.a. City post to take up research studies at Oxford.
Fairness
The Supreme Court found that Mr Grantino should be held to the terms of the pre-nuptial agreement, emphasising that the key to any financial settlement is fairness.
For a pre-nuptial agreement to be binding the parties must enter into it voluntarily, before the wedding, and must each make full financial disclosure and have independent legal advice. If a pre-nuptial agreement meets these criteria, then the Court will only disregard it if it would be unfair to hold the parties to it.
Beneficial changes for family business owners
This ruling does not mean that pre-nuptial agreements are absolutely binding on the Courts, but that they will now be given considerable weight. It is good news for owner-managers who want to pass land or business shares onto their adult children, as it reduces the risk of these assets being lost to the family in the event of a divorce.
If you would like further clarification, or to discuss pre-nuptial agreements, then our Family team would be happy to help. Call Vicky Daniell on 0117 9069480.
