Entrepreneur in divorce: consequences for business
Almost 40 percent of marriages end in divorce. This percentage is even higher among entrepreneurs. A divorce can have consequences for the progress of the business. For instance, half of the value of the business in a divorce will accrue to the future ex-partner, if no agreements are made about this. And this needs to be financed.
Before 2018, people married in a community of property by default. This means that, in principle, all existing and future assets and debts of the partners fall into the community. In that case, both partners are entitled to half the value of the business.
For marriages concluded after 2018, the limited community of property applies. In principle, premarital (business) assets of the partners do not fall into the community. In contrast, all (business) assets accumulated during the marriage do fall into the community of property, unless agreements are made about this.
If an entrepreneur marries, it is advisable to have a prenuptial agreement drawn up. This can regulate which assets will belong to the matrimonial community of property and which will not. In principle, by entering into a prenuptial agreement, one protects the company’s assets.
It is also wise to draw up prenuptial agreements if you start a company during the marriage. During the marriage, it is advisable to check whether the agreements laid down in the prenuptial agreement still correspond to the current state of affairs within the marriage. If they are no longer adequate, the prenuptial agreement can be amended.
It is possible to exclude any community of property in the prenuptial agreement. This is also called ‘cold exclusion’. There are then no common assets to divide.
Beware of settlement clauses
But beware: prenuptial agreements are no guarantee that the value of the company will not be affected in case of divorce. This is because prenuptial agreements often include a so-called “periodic settlement clause”. This means that spouses will annually share the excess income saved with each other. It is rare that partners actually settle during the marriage. This can result in one partner still having to pay part of the value of the business to the other partner.
Importance of business continuity
A divorce affects the day-to-day running of the business and financially. Should the value of the business have to be settled after the marriage ends, it will have to be financed. This may affect the business and sometimes the continuity of the business may even be compromised.
Prevention is better than cure
It is important to think carefully about (the content of) prenuptial agreements both before and during the marriage. Check what consequences the absence of prenuptial agreements will have for your company and whether the company can financially cope with possibly paying a (large) amount to the other party. An entrepreneur does well to prepare for these questions.
Do you have questions about the impact of divorce on your business? Then contact one of our lawyers by mail, telephone or fill in the contact form for a free initial consultation. We will be happy to think along with you.