Collaborative Divorce for Executives and Business Owners

Natalie Boutet of the Globe and Mail (https://www.theglobeandmail.com/business/careers/leadership/article-getting-divorced-your-business-may-be-a-moving-target/) outlines below why collaborative divorce may be a good option for executives and business facing a dissolution of marriage action:

“In a divorce, for high net-worth individuals with established businesses, the financial situation for both spouses can be complicated, with more at stake. But a rapidly growing startup can be equally problematic as valuations can turn into a moving target.

However, perhaps the most challenging situation, in terms of both its personal and financial implications, is when spouses are also business partners – where the exit of one can have a major impact on operations.

Ideally, spouses proactively prepare themselves upfront through marriage and shareholder agreements, in order to protect the business should divorce, or even unexpected death, occur. But while divorce is never easy, there are other ways to minimize the negative impact on both the individuals involved and their business.

For example, recent research from the Canadian Research Institute for Law and the Family (CRILF) shows that couples who avoid the courts and opt for alternative legal processes such as collaborative law and mediation benefit from shorter average timelines and lower legal fees over litigation. When comparing the various processes (collaboration, mediation, arbitration and litigation), collaboration was the most cost-effective ($6,269 on average for low-conflict disputes), coming in at about half the cost of litigation at $12,395. A similar gap holds true for high-conflict disputes, where the estimated average collaboration costs were $25,110 compared with $54,390 for litigation.

If the matter ends up in court, the couple’s personal affairs and business financial statements become public records. In addition, they may end up spending more to obtain business valuations if there is no trust between the parties because the non-owner spouse will often question the validity or integrity of the business valuation commissioned by the business owner.

A well-managed collaborative process can provide faster results and privacy. Financial statements and the agreement reached by the couple remain private.

Another advantage is that a collaborative process uses Harvard’s “interest-based negotiation” as opposed to other processes that use positional bargaining. In collaborative negotiations, the couple are encouraged to select a neutral financial adviser who will perform the valuations on behalf of the team in an unbiased manner, saving the couple the stress and cost of multiple valuations.

The collaborative process is gaining in popularity such that the federal government’s recent proposed amendments to the Divorce Act include an obligation on the part of family law lawyers to advise their clients of collaborative negotiations.

The faster the family can get through this process and re-establish their personal lives, the faster people can get back to more normal productivity levels.”

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If you are a business owner or an executive, and the above article regarding the benefits of collaborative divorce resonate with you, contact a collaborative divorce attorney to discuss your rights and which divorce option may be best for you and your family.

By: Angela Lennon, collaborative attorney at Koenig│Dunne, PC, LLO. Contact Angela at www.koenigdunne.com or (402) 346-1132.