Business owners in divorce proceedings
Business owners in divorce proceedings face a real problem when trying to estimate their un-physical assets such as the value of a start-up developed by one of the spouses. For example, a start-up developed by the husband before he met his wife might not have been valued at a lot of money at the time of the wedding, but could have been sold after it for hundreds of millions of shekels.
Divorce of a self-employed person is not the same as the divorce of a self-employed person
First of all they are afraid that their spouse will stop the business activity of the company and thus the company will deteriorate and as a result the whole financial situation will be devastated. There is a fear of imposing restraining orders or foreclosure orders on the company, which will result in harm to the proper conduct of the business. There is also a fear of a restraining order when it comes to a company with operations abroad. A restraining order can be devastating for the company’s manager or a senior official if he cannot fly to a country with which he has business ties. Such orders can also damage reputation and good name of the company, when external people, such as suppliers, customers, may think that the interpersonal problems of the couple, are financial problems of the company under the guise of personal problems.
They are worried about how they will pay the other party the half value of the company’s shares, if for example, they do not have available equity and on the other hand they fear that their spouse who does not understand the company’s operation at all will be the actual owner of half of shares. Hence proper management might not be possible due to personal friction.
The passive party can greatly fear that his partner who is at the forefront of the company, such as a manager or shareholder, will smuggle money, disrupt the company reports to reduce its value or suddenly stop working for the company and lead to its collapse.
How to divide?
Start-up before its sale, during its sale, or after its sale? In the case of a short marriage, there is a chance that the court will decide not to divide the business due to the complexity involved, but in any case, any decision may cause one or more parties to feel harmed.
According to similar rulings given in the past, the court will appoint an expert on its behalf who will calculate the share of the relationship from the time the start-up exists. This part will be considered as the joint part of the couple in the business – and it is the part which will be equally divided between the parties.
“If the start-up exists for at least 10 years until it is sold and the couple started their life together about 5 years ago, then only half of its value is expected to be divided between the parties.”
High-tech reputable people are not always aware of the fact that in the event of a divorce, their reputation will be considered the property of the whole family. “This means that when the property and assets are divided between the spouses, the spouse’s reputation is calculated according to their value in the market.”
A couple which has conducted the division of property and considered the reputation of the husband or wife as having a particular value, may now face a new claim for recalculation of the reputation, following the crash of the technology market.
According to her, there is great difficulty in distributing reputation, especially among high-tech people. “Since this is a relatively young industry and updates are happening on a weekly basis, the economic crisis raises or lowers the value of high-tech people in the various industries, and therefore there is great difficulty in calculating reputation.”
In such a case, the reputation of a company owned by one of the spouses must be separated from the personal reputation of the spouse. According to her, it should be examined whether the company’s reputation stands on its own, and if so, should be divided separately.
On the issue of personal reputation, with the help of an appropriate legal advice, it will be possible to negotiate the amount of the portion due to the non-reputable spouse. In any case, if the parties do not reach an agreement, the court will usually be forced to appoint an expert on its behalf who will assess the value of the reputation accumulated from the date of marriage until the date of divorce, in order to divide them equally between the parties.
