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In marriage and common-law relationships, the value of your business may be appraised and divided on separation, where the parties cannot agree on terms of division. In exceptional circumstances, the court will appoint a business administrator to handle the business, or shares will be given to the spouse who does not have legal title to the business and who is owed a payment. This can have a significant impact on your business’ reputation as you will not be in complete control of your business.
To avoid assigning control of your business to an administrator, domestic agreement(s) or a shareholder agreement can go a long way in shaping how your business will be managed in the event of a marital breakdown. When your relationship breaks down, the following legal options may be available for protecting your family business:
- Kitchen table negotiation – spouse to spouse negotiations in which spouses can agree to their own terms without the use of lawyers;
- Collaborative practice – multilateral negotiations in which each spouse retains a collaboratively trained lawyer to enter into no-court discussions with the help of other professionals as needed;
- Mediation/Arbitration – out of court negotiations in which the parties meet with either a mediator or arbitrator to reach terms of separation, with or without a lawyer present;
- Traditional 4-way negotiation – parties and their lawyers engage in 4-way discussions in an effort to reach agreement on terms of separation, failing which one party may initiate a court proceeding; or
- Litigation – either party may initiate divorce proceedings at court, triggering the court process and requiring parties to make court filings on public record.