Family Law

Ways to minimise the Impact of Separation on Your Business

Ebenezer Elliott (17 March 1781 – 1 December 1849), an English poet wrote, “What is a communist? One who hath yearnings for equal division of unequal earnings.”

 Irish law does not establish a right to a “clean break”. However, it is a legitimate aspiration. Many couples (to include married, civil partners and cohabiting adults of 5 years or more or 2 years where the parents of dependent children) personal and business lives are intertwined and they are desirous in a legal separation and/or divorce of commercial certainty.  This may be facilitated by having already put in place, inter alia, a shareholders agreement, partnership agreement, co-ownership agreement and business plan provisions to ensure succession of management in the event of the termination of their relationship and/or death/disablement.


In many cases couples own valuable business property and/or run a business together intended to provide an income for them. Typically one party will rely on (and wish to continue to rely on) the other’s expertise to run and develop the business and are desirous to put in place an arm’s length “clean connection” structure between them that is tax effective and binding. One option to consider is a Joint Venture Agreement stipulating agreed terms to include, inter alia, specified yearly income to be drawn from the business by each party, the percentage interest in the business to be retained by each party, business expenses, etc.

Parties should refrain from engaging in minatory conduct and execute a confidentiality agreement at the outset to obviate any reputational damage that may occur to the business. Both parties are essentially feeding from the same trough and best endeavours should be used to resolve matters in a common sense collaborative manner. Whilst some couples succeed in effecting their separation on a consent basis through availing of the free State run “Family Mediation Service”; other couples have no alternative but to have recourse to the courts.

Concepts such as beneficial ownership become familiar to the couple whereby whilst the legal title to an asset may be vested in one party and/or a company the party who provided the funds is the “beneficial owner” of the asset and entitled to it in law as a result of the presumption of resulting trust (which may be rebutted). Parties may decide to use a joint accountant, such as their previous company accountant, with both solicitors having full access to him and the assistance of financial experts in ascertaining the possibility of the parties generating value out of the assets in which they had an interest and the possibility of debt reductions in respect of the parties’ indebtedness. The rights of creditors must also be catered for in the valuation of available assets process. The resolution of family law proceedings through a provision which (on its face) might reduce the security of creditors in a bankruptcy, may have the effect of staving off bankruptcy or where the parties may improve their asset holding ability to the benefit of the creditors in any eventual bankruptcy. The banks are more willing to facilitate funding a party and/or his/her business to ensure its survival only after the disposal of the family law proceedings, resulting in the type of certainty, which enables the bank to plan for the future and afford the necessary credit.


Banks are now reluctant to loan monies to facilitate one party buying out the other party’s share of a business and access to cash can be a real problem for separating couples. Whereas previously parties may have met their maintenance and “proper provision” financial obligations through, inter alia, purchasing an annuity for the dependent party for his/her lifetime (which said annuity shall increase annually in accordance with the CPI), investing monies in a pension fund to be made available to the dependent party when he/she reaches the age of 65 years these options may no longer be feasible.

Many family run businesses in Ireland currently continue trading and stave off bankruptcy and liquidation by paying the normal trade creditors and putting the banks on the long finger. Due care and consideration should be given to the implications of bankruptcy and NAMA legislation for provision in manifest insolvency cases where the businesses cannot continue without the support of the banks or, in the event of the takeover by NAMA of much of the debt, the support of NAMA.

The benefit of any encumbrance free assets of the family and/or business could be transferred to the party exiting the business or alternatively an unencumbered property could be charged to secure maintenance and/or in consideration of their share of the business. Where assets are held subject to a trust, the trust could be amended to name the dependant party as a beneficiary to facilitate that party eventually taking a vested interest in the asset(s).


Consideration must be given to the inherent value of any personal guarantees given by either party to include the terms of the guarantee contract itself which, in most commercial cases, require the guarantor not to reduce its assets below a certain level.


It may also be appropriate to make a division between the parties in respect of “speculative gains” of any business investments. In previous cases the courts have reasoned that to cut one party off completely would be potentially damaging to his/her health by making him/her emotionally insecure and would also engender a propensity to continuously litigate this grievance, either directly or by proxy.

 Given that the only two certainties In life are death And taxes parties should ensure that the appropriate tax liability indemnities are put in place with regard to the business activities and the activities under any trust (up to the date of a party’s removal as beneficiary under the Trust) and ensure they draft a new will to reflect their changed circumstances.
Legal Disclaimer

This article is intended to describe the subject in general terms. As such, it does not attempt to cover every issue which may arise in relation to the subject. It does not purport to be a legal interpretation of the statutory provisions and consequently, responsibility cannot be accepted for any liability incurred or loss suffered as a result of relying on any matter published herein.