Charmaine Hast, Head of the Family Team discusses how divorce affects the world of investment.
In the brave new world we live
in, should investors be acutely conscious of the repercussions of
divorce? The co-founder of ASOS, Nick Robertson, needed
to sell 1.3million of his shares in ASOS in order to pay his
ex-wife a £70million divorce settlement.
When parties get divorced and assets are reflected on the
balance sheet, shares in a company would usually be reflected as
liquid assets. It would be the choice of the owner of the
assets to decide how to make payment of the divorce award, just as
it is a matter for the receiving party, on how to spend their
In high net-worth divorces the wealthier party is unlikely to
have sufficient liquid assets to satisfy a judgment which would not
involve liquidating assets. If there is a particular asset which
the wealthier party would want ring-fenced because of the impact a
sale of that asset would have for the family that is a matter which
would need to be addressed when the matter is argued. This is not
to say that a court would take cognisance of such a request however
it is highly unlikely that a court would consider the impact that a
sale of that asset would have on other shareholders in the entity.
More pressing would be any prejudice that would be suffered by the
children of the family, or the parties themselves, if their
remaining shareholding is adversely affected. It is not
uncommon for certain shares of the shareholding in companies to be
held as assets for example in a children's trust or an
educational trust. A plummeting share price would in these
circumstances adversely affect the assets held for the benefit of
As there is an obligation on the court in terms of statute to
impose a clean break, extensive time to acquire the settlement
amount is not likely to be contemplated when there are assets that
can be disposed of by the wealthier party. A scenario where the
payment is made over an extensive period of time is usually
unacceptable even if payment of the instalments are fully protected
in terms of the court order. There is after all a High Court
judgment which does in certain circumstances assist the paying
party from resiling from payment by instalments. In essence the
court takes a sensible approach by imposing a clean break as soon
as is practically possible so that both parties can get on with
their lives without having to continue to be involved in payments
by an instalments regime.
Although it is sad that the share price for
co-shareholders can be affected, as is the present case with Nick
Robertson, the wealthier party to settle divorce orders with
substantial lump sums, have tragically been seen in recent years to
sell properties that have been in the family for generations.
Choices like this can require a balance between the emotional and
the practical, which in the emotional fraught arena of divorce
litigation, is a bitter pill to swallow.
Perhaps going forward, for parties who find themselves in
the same position as the co-founder of ASOS, one should be
arranging one's affairs in deference to co-shareholders. The
divorce process would likely have taken place over a period in
excess of one year and the liquidation of assets could have been
structured and put into effect during that period. Perhaps in the
litigation arena he may have believed that having funds available
to pay may not have served his case well?
This article was first published in Spear's on 21 June
2016. To view the article on the Spear's website, please click
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A well-meaning friend, relative or even a carer of a deceased person may take what they believe are helpful steps to tidy up a deceased’s affairs in the days following their death to pave the way for those who will carry out the administration of the estate.
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