How to Protect Your Business During Divorce?

Going through a divorce can be an extremely stressful and painful affair. Besides the emotional turmoil, the end of a marriage can leave you with numerous problems to be addressed. The legal proceedings required simply add to the woes of the individuals involved. And things get even worse when a business is involved. The last thing you would want is to see your laboriously built business being treated as a joint marital asset, or worse losing it entirely to your former spouse. Though the fate of businesses after divorces varies on a case-to-case basis, it would be in the best of your interests to take proactive measures to protect your business in the event of a separation, no matter how improbable it may seem to you at the moment.

Here are some strategies that can help you safeguard your business assets during a divorce:

Sign a Prenup

A prenuptial agreement is a legal contract that a couple signs before marriage. This contract spells out how the assets are to be split among the two if the marriage ends in a divorce. This is one of the best advisable strategies to secure your business should your marriage end up dissolving. A prenup helps prevent ownership disputes over your business and any other assets that you own. If you missed out on signing a prenup before your marriage, you always have the option of a postnuptial agreement after you are legally married. 

Though prenups are widely gaining recognition in the UAE and across the world, there is a stigma attached to them. An individual emphasizing the need to sign a prenup may give his/her partner a sense of a lack of trust in the relationship. It is important to see prenups in a varied context. Consider the example of a life insurance policy. We do not pay for life insurance waiting to die. Rather, we do it so that our loved ones receive the necessary support after we pass away. Similarly, a prenup must be seen only as a measure to avoid disputes in the worst-case scenario. It is key to note that this legal document is only implemented in the event of marriage dissolution, and a successful marriage would mean that a prenup is never triggered. With that being said, it is however important to note that this agreement can be contested during a divorce and does not guarantee that your business assets will be safeguarded. It is advisable to seek professional legal advice in the UAE while drafting prenups and also to better understand how these work. 

Buy-Sell Agreements

A divorce can be even more messier if it involves a business that is jointly owned by both. While the division process for assets such as bank accounts can be straightforward, it is not the same when it comes to jointly owned businesses. This is where the need to have buy-sell agreements arises. These agreements clearly outline what is to happen to your business interests in a jointly owned venture after a partner divorces, passes away, or exits the venture. 

Update Your Will

It is necessary to amend your UAE Will after a divorce. If not amended, a Will can entitle your ex-spouse to ownership of your business assets even if you don’t wish for it. This can possibly impact your intentions of distributing your estate amongst your other family members. A Will that is updated will prevent any possible claims from your ex-spouse over your business assets from being successful. Moreover, you can amend a Will to include your new partner if you go on to marry again. 

Legal Inz is a UAE-based law firm that offers end-to-end assistance with estate planning, Will writing as well as prenuptial and postnuptial agreements.