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The long-running storyline of Alice and Chris Carter’s marital problems in The Archers provides a wealth of cautionary tales for farming clients and their families. Although the recent cooperation appears to have solved the question of who is to look after Martha, we will explore some of the issues that have been covered over the last few months by the nation’s much-loved radio soap opera. We start with the issue of raising finance to buy out the divorcing family member’s share.
The wider family
A divorce or separation often has knock-on implications for the wider family, and this is particularly the case amongst farming families, where often parents, offspring, siblings and more are involved in the running of the farm. It is often the case that farm assets and family life are intertwined in a complex way and extracting a spouse or partner from the set-up can be complex and costly, both financially and in terms of farming continuity.
It is no surprise therefore that for Brian Aldridge, Alice’s divorce is a huge worry in terms of safeguarding the future of the farm. The agreement over arrangements for Martha does not solve the financial risk to the farm.
Business assets
When deciding division of finances on divorce, the Court takes into account all assets, income, liabilities and pension. This includes business interests, partnerships, shareholdings.
One critical issue which has to be assessed for partnerships is whether the land, dwellings and buildings are partnership assets or whether they are owned by one or more of the partners and simply made available for use by the partnership, either on a tenancy or under a licence. In the former case the value of the underlying land, dwellings and buildings is likely to increase the overall value of each partnership share significantly, whereas in the latter case, it is only the value of the tenancy or licence which will form part of the partnership assets. Depending on the terms of that licence or tenancy, this may be worth very limited amount.
In the context of a farming company, a similar assessment needs to be made to establish whether the company owns the land and buildings or whether individual members of the family own the property and have granted a tenancy to the company. As with partnerships, the difference between these structures will impact considerably on the value of the shares held by the divorcing family member.
Fair outcome
The Court’s aim is to achieve a fair outcome, with an equal division of assets being the starting point. The Court can make orders in relation to a party’s shareholding in a business and can order a sale of a shareholding if required. The same applies to a partnership share in a farming partnership.
This is important for farming families, because if a sale of assets is the only way of funding a financial settlement, this can have a huge impact on the running and financial viability of the farming business.
Brian has been alive to this and has looked at whether Alice’s shareholding could be bought out by Debbie, Adam or his husband in order to limit the impact on the farming business as a whole. Sadly, for Brian, so far Adam and Ian have rejected this idea. Other options may include taking out a loan to fund the settlement or finding another investor who could buy into the business; neither are easy options, and much will depend on individual circumstances.
Advice:
Families are encouraged to seek early legal advice if a family member is considering divorce – keeping a separation as amicable as possible and reaching an agreement by consent can provide for creative solutions to ensure that there is as little disruption as possible to the farm business.
For more information, please contact Sarah Green.
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