Key Takeaways
- Business interests are property: Court includes company ownership in the asset pool under the Family Law Act 1975—your directorship doesn’t offer protection.
- Valuation is complex: Courts use independent valuations to assess business worth, including goodwill, future income, debts, and director contributions.
- Control and agreement matter: Options like selling the business, buy-outs, or continuing joint ownership depend on shareholder agreements and personal circumstances.
- Staff, clients, and stability: Communication strategies and exit plans are essential to minimise business disruption during proceedings.
- Get expert advice early: Engage a cross-disciplinary team, such as family lawyers, forensic accountants, and business advisors, to manage valuation, taxation, and negotiation.
Business Ownership Counts as Marital Property
In Australia, company shares are considered assets just like real estate or superannuation. Even if structured through a private limited company, a shareholder’s stake—who is often a director—is included within the net property pool under section 79 of the Family Law Act.
This means the business can’t be sidelined from negotiations, even if one partner wasn’t actively involved. It’s vital to understand that claims are based on value, not management role or directorial title.
Understanding Business Valuation in Divorce & Property Settlement
Dividing a company starts with establishing its worth fairly. Courts often insist on the appointment of independent valuers or forensic accountants to assess:
- Asset base and debts – balance sheet, equipment, and liabilities
- Revenue & profitability – current income and forecasts
- Goodwill – reputation, brand, customer relationships
- Director contributions – financial and non-financial effort
- Ownership structure – partnerships, shareholders, and trust arrangements
This value becomes part of the combined estate and is subject to division. If valuation is contested, expect significant legal and accounting costs.
Depending on its complexity and the nature of the business, family law valuers may use one or a combination of methods to arrive at their opinion of value, including:
- Future maintainable earnings
- Discounted cash flow
- Net tangible assets
- Market comparison method
- Goodwill (personal and business)
Valuers will also consider a discount on account of lack of control in a family business.
Business Resolution Options
Company directors and shareholders facing divorce usually encounter three main scenarios:
1. One spouse buys out the other
The retaining party pays a settlement to keep full control. This often requires refinancing or redirecting other assets.
2. Sell or liquidate the business
The company is sold, and proceeds divided. This only works if the business can operate independently of individual involvement.
3. Continue joint ownership
Both remain as directors/shareholders. This demands outstanding conflict resolution skills and strong governance—staff and clients depend on business stability. Courts will only consider this structure for well-established businesses with strong management and detailed shareholder agreements in place.
Pre-existing Binding Financial Agreements or shareholder agreements can help reduce uncertainty and conflict.
Managing Business During Divorce
Divorce impacts more than just finances—it affects day-to-day operations:
- Staff morale: Directors need to communicate a stable plan early to avoid uncertainty and loss of confidence.
- Client confidence: Visible internal turmoil may result in lost contracts or customer churn.
- Exit strategies: What happens if one director resigns or wants out? Plans should be in place before conflict escalates.
A clear operational plan, backed by legal and financial support, helps preserve business value throughout the separation process.
Secure Legal and Financial Expertise
High-stakes divorces require professionals with complementary expertise:
- Family lawyers to navigate the property settlement process
- Forensic accountants and business valuers to assess company value and financial history
- Tax advisors to optimise settlement structures and mitigate CGT or other liabilities
- Business advisors to evaluate cash flow, refinancing needs, and settlement structuring
These experts work together to structure outcomes that protect both business interests and personal financial security.
Final Thoughts
Directors and shareholders undergoing separation face critical financial crossroads. Your company is likely a significant marital asset, and how it’s valued and divided will impact both parties’ futures. You can protect its value—and your livelihood—by getting expert advice early, understanding the non-financial impacts, and negotiating thoughtful, legally binding agreements.
Taking proactive steps now can preserve your wealth, your business, and your ongoing professional legacy.
If you would like to discuss your Family Law matter with an expert, please contact me for a confidential consultation. My team and I are highly experienced in such matters.
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