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Im a director and shareholder in a limited company. I started…

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I'm a director and shareholder...
I'm a director and shareholder in a limited company. I started the company with my business partner 12 years ago and we each hold 50% of the shares. It looks very much like I'll be getting divorced soon and I want as far as possible to remove my wife's claim on the business. I read somewhere that I look at how we draft/amend the company's Articles of Association to limit the ways in which the shares can be transferred or valued such that my wife would be unable to make a claim on my shareholding in the company. I've downloaded a copy of the Shareholders Agreement from this website but its not immediately obvious whcih clause offers the protection I'm seeking. Thanks
Submitted: 8 years ago.Category: UK Law
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6/28/2010
Solicitor: Senior Partner, Solicitor replied 8 years ago
Senior Partner
Senior Partner, Solicitor
Category: UK Law
Satisfied Customers: 13,330
Experience: 30 years experience in business law and related topics such as employment law
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I think you are wasting your time. the court will no doubt make an assessment of your means and are not likely to take much account of recently introduced restrictions on transfer - more likely you could end up making a present of value to your business partner but damaging your position in any divorce. Any suggestion that you have altered your assets to defeat your wife's claims will not go down well. you can only alienate value by for example providing that shares could only be sold to your business partner for a nominal sum and could not be transferred on the open market but in any such restrictions can be removed in a small company so a court might just ignore them in assessing value
Senior Partner
Senior Partner, Solicitor
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Experience: 30 years experience in business law and related topics such as employment law
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Customer reply replied 8 years ago
Thanks. Out of interest what are the "recently announced restrictions on transfer" that you allude to?
Solicitor: Senior Partner, Solicitor replied 8 years ago
I said recently introduced and I meant recently introduced by you. the thing is you can put restrictions on transfer in and in some larger companies fro example employee shareholding can only be sold back to the company and can be discounted in value because they are a minority holding.

The best you can do is restrict transfer so that the other shareholder has a preemption right and argue that it is only possible to sell if both agree otherwise the co has no value but that argument is always open to you anyway with a private co.
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Customer reply replied 8 years ago
I wasn't actually primarily concened with sale - more with future earnings - as the company is my sole source of income and we effectively pay ourselves through dividend. If my wife gets half my shares then she'll then get half my future earnings. Is there anyway to protect against that?? (We could of course stop declaring dividend and pay via PAYE instead I guess although that's less tax efficient).
Solicitor: Senior Partner, Solicitor replied 8 years ago
She will not necessarily get half the shares it is merely something that will get taken onto account. As you say you could of course reduce the value of the shares by paying your self a market salary. a court will certainly understand that and that you are entitled to be pad for your work at the market rate. but you would be advised to go and see a matrimonial specialist to get a full picture of what your wife may be entitled to based upon the various factors like length of marriage what the assets are etc.
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