Is a postnuptial agreement part of your family business succession plan?

Much of this wealth is tied to family businesses, prompting retiring parents to carefully consider how to secure their legacies. One key concern is the impact of divorce or civil partnership dissolution on the family business, and how financial settlements could disrupt its future.

Samantha Sinclair, Head of Family at Ware & Kay Solicitors, explains: “Business owners often have contingency plans for various issues, but few consider the devastating effects a divorce could have. It’s rarely addressed until it’s too late.”

With 41% of marriages ending in divorce before their 25th anniversary, business owners are increasingly looking for ways to protect their businesses, especially if a child is in an unhappy marriage. A postnuptial agreement is one way to safeguard the family business.

What is a postnuptial agreement?

A postnuptial agreement is a legal contract between spouses, signed after marriage or civil partnership, outlining how assets will be divided in the event of divorce. While it does not override the court’s authority in financial settlements, courts typically uphold postnuptial agreements if they are fair, entered into freely, and both parties understand the implications.

How does it protect the business?

In a divorce, business assets are usually included in the matrimonial settlement. A postnuptial agreement may not fully protect the business but can establish clear terms for asset division, potentially through structured payments to minimise disruption. If both spouses work in the business, the agreement can also address severance terms, restrictive covenants, and protect confidential business information.

A well-structured postnuptial agreement reassures family members, safeguarding the business and promoting stability for its future growth.

Independent legal advice is essential

For the agreement to be enforceable, both parties must receive independent legal advice. If one party cannot afford this, the business or proposing party can cover the costs, but the legal advisor’s duty must lie with the individual seeking advice.

How we can help

If you are considering a postnuptial agreement as part of your family business succession planning, we can guide you through the process. Contact Samantha Sinclair at York (01904 716000), Wetherby (01937 583210), or Malton (01653 692247), or email [email protected].