Impact of a divorce when you are a company director
Business valuation and divorce. Divorce is a difficult time. For a company director, in addition to the emotional weight involved, divorce can have an impact on the ownership and management of his or her professional assets (business). The aim of this article is to present the various legal issues and consequences relating to the valuation of the company in the event of a manager's divorce.
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Divorce and business valuation: the impact of the matrimonial regime
The matrimonial regime is the legal framework of the marriage. It defines the rules by which the assets of the spouses will be shared. The matrimonial regime is chosen at the time of the marriage, and can be modified later. In the event of a divorce, the matrimonial regime chosen has an important impact on the value of the assets and on the possible consequences for the business run by one of the spouses.
In France, there are four matrimonial regimes In France, there are four different matrimonial regimes: community of acquests, separation of property, participation in acquests and universal community. All these systems are more or less adapted to a company director and it is important to choose a matrimonial system adapted to his profile. Without it, divorce and the division of the company's value can have a devastating impact on the entrepreneur's assets. We will see how the different matrimonial regimes work and what impacts they can have.
The regime of the community of acquests
The regime of community of property reduced to acquests, also called the legal regime, is the basic matrimonial status, which is the most common. The separation of property is divided into three parts: the property belonging to both spouses and the acquests, known as "common property". Private property is what is owned directly by each spouse at the time of the marriage. The common property corresponds to what is acquired during the marriage (income, property...).
When the legal regime is applied, it is necessary to determine when the business was created, to determine if it belongs to the common property or to the private property. If the business was created before the marriage, it belongs to the spouse's own property. In the event of a divorce, the ownership of the company will remain unaffected by the founder. If the business is created after the marriage, but with the managing spouse's own funds, the business will not be separated. However, when the company is created with the common property of the married couple, the company capital will be separated and divided in two equal parts between the spouses.
N.B.: the legal regime applies in the case where the married couple did not call upon a notary to choose another operating regime for their marriage.
The system of separation of property
The regime of separation of property stipulates that each property belongs either to one spouse or to the other. In this case, there will be no impact of the divorce on the value of the company. The separation of property regime may be more interesting for company directors, because the divorce will not lead to a separation of property, especially professional property.
The regime of participation in acquests
This matrimonial regime corresponds to an in-between regime, halfway between the regime of community of acquests and that of separation of property. Indeed, the separation of property is applied as is during the marriage. However, it is during the divorce that this regime differs from the others. Here, the notary's role is to evaluate the assets of both parties. If one of the spouses has become richer than the other, the latter will owe him/her a debt.
Choosing the participation aux acquêts can be risky for an entrepreneur, if the value of the business has strongly developed during the marriage. In this case, the managing spouse may find himself/herself with a large claim against the other party and with important liquidity constraints.
N.B.: it is possible to exclude professional assets from the equation. In this case, the divorce will have no impact on the ownership of the business.
The regime of universal community
The universal community has the effect of grouping all the assets of the spouses into a single community. Own property is suppressed here. During a divorce under this matrimonial regime, the separation of assets will be similar to that induced by the participation in acquests.
An aside that takes us away from business valuation, but is worth bearing in mind. Couples choosing this regime should bear in mind that, while it mutualizes the value created by the business, it can also mutualize the debts created by the company. Thus, in the event of the company's default, this regime can have a major impact on the couple's overall assets.
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Impact of divorce on the value of the company depending on the legal status chosen
A second element to take into account in case of divorce, besides the matrimonial regime is the legal structure of the company. The consequences of a divorce are different depending on the type of structure and can be taken into account when a manager chooses the type of structure he will create.
Corporate companies: SA, EURL...
The corporate enterprise forms an independent legal entity. This protects the couple because debts and other liabilities are limited to the legal entity that the business represents. This means that they are limited to the company's assets. In the event of a problem, the couple's assets will not be directly at stake.
In the event of a divorce, it is important to know that the company's assets will not be put at risk. Indeed, they belong to the legal person that the company represents. Only the social assets can be separated. The company will not be dismantled in this case. Nevertheless, if the matrimonial regime provides for a separation of assets, it will be necessary to pay attention to the impact of the divorce and of the value of the shares of the company on the professional patrimony of the spouses.
Limited liability companies: EI, autoentreprise...
In the case of a limited liability company, there is no representation by a legal person. This means that the manager directly owns the assets of the company as well as its debts. The debts can thus directly engage the couple's personal assets.
In case of divorce, the assets of the company are engaged, which brings a risk of dismantling if a separation of property is provided for by the matrimonial regime. Moreover, one must be vigilant, because the debts may be owed to the other spouse.
Impact of divorce and business valuation
In the event of a divorce, the professional assets of the manager may be involved. This may be separated, which has a direct impact on the company. In the case of a company with a corporate form, the shares of the company will be shared. In the case of a limited liability company, it is the assets that are committed. It is therefore necessary to know the exact value of the business. Indeed, knowing the value of the company allows to apprehend the separation with more serenity. It also allows you to know the impact of the divorce on the evaluation of your professional assets. In order to evaluate your company and to calculate the impact of the separation, it is advisable to call upon a professional of the company evaluation.
Each year, XVAL consultants carry out several hundred company valuations for managers or notaries in charge of the separation of assets in the context of divorce. Indeed, it should be noted that notaries who do not have the practice of valuing companies rely on specialized consulting firms to obtain a justified value opinion.
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