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Family law guide
Her husband had run his own limited company for most of their marriage, and he valued it at a figure she knew was too low. She feared that getting a fair business valuation in divorce would turn into a contest she could not afford. Our family law specialists advised her on how a single joint expert works, what to ask that expert, and why cash in the company mattered as much as its value. This is an anonymised account.
A company he said was worth little
The couple had married many years earlier and had two children at school. He was the sole director and owned most of the shares.
When they separated, the company was the largest asset after the family home. His financial statement put a modest value on his shares, based on a short letter from his own accountant. She feared he would keep the company and leave her with very little.
If you are in that position, the worry is reasonable. One spouse usually knows the business far better than the other.
Business valuation in divorce: what the law says
When the court decides a financial settlement, section 25 of the Matrimonial Causes Act 1973 sets out what it must consider. It must have regard to all the circumstances, with first consideration to the welfare of any child of the family under 18. Section 25(2)(a) lists each party’s income, earning capacity, property and other financial resources. A shareholding is property, so the court needs a reliable figure for it.
Disclosure comes first. Section 2.11 of Form E asks each party to describe every business interest and to attach the last two years of accounts. The form says a formal valuation is not essential at that stage. So an accountant’s letter is only a first estimate.
Part 25 of the Family Procedure Rules 2010 controls expert evidence. No one may put expert evidence before the court without permission under rule 25.4(2). The court gives permission only if the evidence is necessary to assist the court to resolve the proceedings, as our guide to Part 25 expert evidence explains. Practice Direction 25D adds that, wherever possible, expert evidence should come from a single joint expert instructed by both parties.
What we advised on the company valuation
First, we advised her not to hire her own valuer. Two opposing reports would double the cost, and the court weighs cost when it decides on permission.
Next, we helped her check his Form E against the company accounts. We noted the director’s loan account, the cash at the bank and a property the company owned. Then she asked the court for permission for a joint expert at the first appointment, with our guidance. Her husband agreed, and the court gave permission.
Under rule 25.12(1), the instructions to the expert go in a jointly agreed letter unless the court directs otherwise. We helped her prepare her questions. The first sought the value of his shares. Others asked how much cash the company could release without harming its trade, and what tax would fall due on that cash.
The cash question mattered because a company can be worth a great deal on paper and still be unable to pay out a large sum quickly.
Written questions to the single joint expert
The report valued his shares well above his own estimate. However, it did not say clearly whether the share value included the surplus cash.
Rule 25.10 lets a party put written questions to a single joint expert, once, within 10 days of the report being served, to clarify it. With our help, she sent two short questions in time and copied them to her husband, as the rule requires. The expert’s answers, which count as part of the report, separated the trading value from the surplus cash.
How liquidity shaped the settlement
He kept the company, and she kept the family home with the children. He also agreed to pay her a lump sum by instalments over a few years, at the pace the expert said the company could bear. Section 23(3)(c) of the 1973 Act allows a lump sum to be paid by instalments, and those instalments can be secured. The court approved the terms as a consent order.
Every case turns on its own facts, so this is not a promise about any other family.
What you can take from this
When a business valuation in divorce is disputed, read the business pages of the other Form E closely, because the first value given is only an estimate. Ask for a single joint expert before paying for your own. Above all, put the cash question in the letter of instruction, since what a company can pay matters as much as what it is worth.
Our guide to family business protection covers the wider issues for business owners and their spouses. See also what Form E asks for, and read how we prepare these success stories.
“Before asking for a full valuation, work out which question really decides your settlement. Sometimes it is what the shares are worth. Sometimes it is how much the company can pay out, and when, without harming its trade. The court only allows expert evidence it considers necessary, so a tightly framed letter of instruction saves money. Also check that the same money is not counted twice, once in the company’s value and again as the owner’s income.”
Garry Steedman, Family Law Consultant, Kabir Family Law
Talk it through with us
If your spouse runs a company and you are worried about its value, you do not have to work it out on your own. A free initial consultation is confidential and carries no obligation. Tell us what you know about the business, and our family law specialists will explain the options open to you.
The legal issue
A wife was separating from her husband after a long marriage. He was the sole director and majority shareholder of a limited company, the largest asset after the family home. His financial statement gave a modest value for his shares, based on a short letter from his own accountant. She feared the figure was too low and that he would keep the company and leave her with very little.
The law this rests on
- Matrimonial Causes Act 1973 s.25(1): the court must have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family.
- Matrimonial Causes Act 1973 s.25(2)(a): the income, earning capacity, property and other financial resources which each party has or is likely to have in the foreseeable future.
- Matrimonial Causes Act 1973 s.23(1)(c) and s.23(3)(c): the court may order a lump sum, and the order may provide for payment by instalments, which may be secured.
- Form E section 2.11: each business interest must be described, with the last two years' accounts and the basis of the estimated value. The form states a formal valuation is not essential at that stage.
- Family Procedure Rules 2010 r.25.4(2) and (3): no expert evidence without the court's permission, which is given only where the evidence is necessary to assist the court to resolve the proceedings. Rule 25.5(2)(e): the court considers the cost of the expert evidence.
- Family Procedure Rules 2010 r.25.11(1) and r.25.12(1): the court may direct that evidence on an issue is given by a single joint expert, instructed by a jointly agreed letter unless the court directs otherwise.
- Family Procedure Rules 2010 r.25.10: written questions may be put to a single joint expert once only, within 10 days beginning with the date the report was served, for the purpose only of clarifying the report, and copied to the other parties at the same time. The answers are treated as part of the report.
- Practice Direction 25D para 2.1: wherever possible, expert evidence should be obtained from a single joint expert instructed by both or all the parties.
- Practice Direction 25D para 3.9: in financial remedy proceedings, permission for expert evidence should be sought as soon as possible and no later than the first appointment, unless the court directs otherwise.
How we approached it
We advised her not to instruct her own valuer, because two opposing reports would double the cost and the court weighs cost when deciding on permission. We helped her check his Form E against the company accounts, noting the director's loan account, the cash at the bank and a property the company owned. With our guidance she asked for permission for a single joint expert at the first appointment, and her husband agreed. We helped her prepare her questions for the jointly agreed letter of instruction: the value of his shares, how much cash the company could release without harming its trade, and the tax on that cash. When the report left unclear whether surplus cash sat inside the share value, we helped her put two written questions to the expert within the 10-day window, copied to her husband at the same time.
The outcome
The expert valued his shares well above his own estimate, and the answers to her written questions separated the trading value from the surplus cash. He kept the company and she kept the family home with the children. He agreed to pay her a lump sum by instalments over a few years, at the pace the expert said the company could bear, and the court approved the terms as a consent order. Every case turns on its own facts, and this is not a promise about any other family.
What to take from this
- The value on the other party's Form E is only an estimate. The form itself says a formal valuation is not essential at that stage.
- Ask for a single joint expert before paying for your own. Practice Direction 25D says that should happen wherever possible.
- Put the cash question in the letter of instruction. What a company can pay out matters as much as what it is worth.
- Written questions to the expert go in once, within 10 days of the report being served, and only to clarify it. Use them quickly.
- A lump sum can be paid by instalments, which can let a business survive the settlement.
Checked and approved for publication by Hannah Overton.
Last reviewed .
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