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Mitigating the impact of divorce on family-owned veterinary practices

There are many family owned veterinary practices operating throughout the UK (both partnerships and companies). In this economic climate many will have faced challenges to their business and these can be compounded by the stress of a breakdown of a relationship or a marriage.

Sadly it is a fact of modern life that relationship breakdown has become more common. In all cases, an important initial objective, however difficult the personal circumstances, must be to take reasonable steps to safeguard the value of the family practice and not let personal difficulties damage its prospects.

It helps if the parties can overcome emotional issues and deal with the business dispassionately. Professional advice should be sought at an early stage (and it should be borne in mind that incumbent advisers may have a conflict of interest). Family law issues need to be considered in conjunction with commercial, partnership and company issues, as well as the position of any other business partners, shareholders or key employees. Tax and financial advice is also likely to be required.

The impact of the recent UK Supreme Court decision of Prest should also be borne in mind, in which the Supreme Court Justices ruled that the assets of properly constituted Limited Companies are not available for division by the divorce Courts unless the principle of limited liability had been undermined by other arrangements between the parties, such as a trust or the law of agency or potentially if the company were held to be a ‘sham’.

There are a range of resolution orders that the Family Courts are able to make and disclosure of the parties’ financial circumstances (and the financial performance of the practice) will be required as part of the Court process.

It is common for the Family Courts to require a valuation of the practice and specialist valuers should be retained - usually jointly instructed by the parties. When dividing assets it is realistic to expect that, whilst the practice may generate future income, the Family Courts will usually aim to divide matrimonial capital, property and business assets in such a way so as to enable both parties to attain financial independence.

The parties’ circumstances may be such that the practice should be sold to meet the financial changes resulting from divorce but the Courts are able to consider alternative solutions.

Key considerations in terms of settlement will include whether both parties or just one could retain a role and/or share of ownership in the business. Can they continue to work together or is the only option to sell? Can one spouse afford to buy out the other? Could both parties retain an interest in the practice (with one perhaps stepping back from having a day to day role)?

The Court process can cause parties to dwell on points of disagreement but judges will always encourage parties to reach settlement and at least one Court appointment will usually be arranged for this purpose. 

If the parties have found it difficult to reach agreement on essential issues, Mediation often helps to achieve a resolution. Alternatively, a negotiating format called ‘Collaborative Law’ (involving a number of “off record” round-table meetings where the parties can explore creative solutions) can save time and money.

This process is generally considered to be less “adversarial” in nature than the Court process and may be likely to foster a solution whereby both parties can continue to work together. Collaborative Law or any kind of mediation should not be seen as a “soft option” but will only succeed if trust is built. Whatever negotiating format is used to achieve resolution, a Court order which records the agreement should always be obtained so that both parties can enforce the agreement and avoid uncertainty in the future.

Hard as it may be when difficult personal issues are involved, the parties will be best served by taking a well-informed realistic and unemotional view of their options from the start, adopting a business-like approach, backed up by good professional advice, to give the best chance of ensuring that the practice (and its goodwill) is preserved for their mutual benefit.

The above is a general overview and we recommend that independent legal advice is sought for any specific concerns.

For more information please contact Tim Jenkins, Partner

T: +44 (0)1483 252529