It is not uncommon that one spouse will seek a share of the other spouse’s business assets on divorce.

But this raises at least two questions: how do you go about valuing the share, and how can the share be realised, given in particular that an immediate sale of the business is not possible, as that would deny the business-owning spouse their source of income.

The recent case FT v JT provides an illustration how these issues may play out in practice.

The case concerned a husband’s financial remedies application, in which he sought a share of the wife’s business.

Valuation issues

There were a number of issues relating to the valuation of the husband’s interest in the business.

The primary issue concerned the concept of ‘matrimonial property’.

The property that is to be divided between the parties on divorce is, generally speaking, limited to the property acquired during the marriage, through the joint efforts of the parties to the marriage. And for these purposes the marriage is usually considered at an end when the parties separate.

Thus property acquired after the separation will usually be ‘non-matrimonial’, and therefore will not be included in the ‘pot’ for division.

The date of separation can therefore have a considerable bearing upon the outcome of any financial remedies claim.

In FT v JT the parties were in dispute as to the date that they separated. The wife claimed that it was when the husband left the former matrimonial home in August 2020, and the husband claimed that this was a trial separation, and that the true date of the separation was when the wife issued divorce proceedings in March 2021.

The area of dispute was that the wife’s business had significantly increased in value after August 2020, as a result of her own endeavours. She therefore sought to limit the husband’s interest in the business to a half share of what it had been worth in August 2020.

After considering the evidence the judge concluded that the parties had permanently separated by the end of August 2020.

Having reached this conclusion, and bearing in mind the increase in the value of the business after August 2020, the judge found that 35% of the value of the wife’s present business interests (whatever that may be) could be said to be matrimonial, and 65% non-matrimonial.

But as we will see, that was not the end of the matter of valuation.

Realising the share

It was clearly accepted by both parties that the husband would not be able to receive his interest in the business until such time as it was sold. The court could not order an immediate sale, as that would deprive the wife of her source of income.

The husband would therefore retain a share of the business.

But this raised another issue. It could be argued that if the husband’s interest in the business had an ascertainable value now, then this should be the limit of his entitlement, and any growth beyond that figure should belong to the wife alone. The wife therefore sought to have a cap put upon the value of the husband’s interest.

The judge did not accept that a cap would meet the husband’s needs, in particular his housing needs. Instead, he decided that the husband’s share should be subject to a sliding percentage.

The husband would have to be able to meet the needs of the parties’ children as and when they are with him, until such time as the youngest child reaches 18, in 2038. After that date, the husband’s needs would be reduced.

Accordingly, the judge ordered that the husband’s share in the business would be 17.5% (i.e. one-half of 35%) in the years up to and including 2038, and 10% thereafter.

Whether this “sliding scale” approach to valuations will be used in future cases involving business interests remains to be seen.