Divorce Issues

Divorcing co-owners – If you co-own an enterprise, too frequently a co-owner’s divorce can impose various threats upon your own interests. When a co-owner’s interest constitutes community property, the asset can become a major point of contention between the divorcing parties. It opens the door to several disruptive possibilities. For example, a previously uninvolved spouse might obtain some amount of ownership interest. In turn, the new separate interest could have voting rights – various participation rights – accounting rights – access to books and records – shareholder meetings – possibly board meetings. Furthermore, when the value of the divorcing co-owner’s interest becomes a hotly litigated matter – and the experts start pouring out the testimony about how much the business is worth – all that evidence can at some future time affect the business and your own interests in it.

A child’s divorce – Precisely the same concerns in the event one of your children or grandchildren has acquired any sort of ownership interest in the business. A descendant’s divorce ushers in additional circumstances and pressures – sometimes the family of the descendant’s spouse becomes a strong and disruptive influence with regard to the ownership interest.

It is often prudent to consider how to control such disruptive influences before they spring into existence. There are many ways to reduce the effects of a transferred ownership interest. There are ways to block transfers to a co-owner’s former spouse. Because all the options will involve a contract – a private law made binding and enforceable on even uninvolved persons – the provisions must be carefully constructed. After all, those same provisions will become binding upon you. By deliberately, purposefully exploring the possibilities and the ways to handle such events it becomes possible to impose controls, conditions and limitations if such events ever arise.

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