Unique Divorce Issues For Executives And Shareholders

The higher the value of assets owned in a marriage, the more complex divorce issues can become, making property division quite a challenging undertaking. When an executive in a company decides to divorce, there are business as well as personal issues that must be addressed.  How the executive’s divorce will affect the business can be of great concern to other executives and shareholders.

Will the divorce upset the ownership balance of the company? Will the divorce affect the business competency of the executive? Business owners and companies that think ahead have determined legal solutions to try and maintain ownership stability within the company and keep divorcing executives focused on job performance. Divorces involving company executives require understanding an executive’s compensation package and how to properly divide business assets. For competent representation in a high net worth divorce in Colorado, contact the experienced family law attorneys at Johnson Law Group by calling 720-445-4444 today.

What Colorado Law Says About Property Division in Divorce

Property in the state of Colorado is divided equitably between spouses in a divorce. The legal concept of equitable division does not mean that each spouse gets exactly half of everything, rather that each spouse gets an equitable share of the overall marital property.

Under Colorado Law, the following is a non-exclusive list of factors to be considered in determining the most equitable way to divide property in a divorce.

• Length of marriage
• What each party brought to the marriage
• Contributions to the marriage by each party
• Age and health of the parties
• Support by one party for the education and career development of the other
• Earning capacity of each party
• Desirability of awarding the family home to the parent with physical custody of the children
• Amount and duration of support payments to be made
• Other economic circumstances benefiting either party
• Tax consequences
• Agreements made between the parties before or after marriage

If you are curious what assets will be considered marital assets in your divorce, contact an experienced Colorado family law attorney at Johnson Law Group today.

Executive Compensation and Business Ownership

Divorce issues for executives and shareholders are made more complex due to the executive’s compensation and ownership interest in the business. Executives typically receive a lot more than just a salary. Additional compensation can be provided in the form of supplemental benefits and incentives to induce better performance and company loyalty.

An agreement between a business and an executive will set out the specific details of the compensation arrangement but some of the common provisions that might be included are:

• Base pay
• Bonuses
• Stock, stock options, restricted stock, stock appreciation rights
• Health and life insurance
• Deferred compensation
• Retirement package
• Executive perks

How Executive Divorce Can Affect a Business

Executives are hired and well-compensated because it is thought that their efforts will have a great deal to do with the success of a business. Anything negative that happens to the executive can translate into negative results for the business. Therefore, when executives divorce, there are three main concerns for businesses and shareholders.

• Material change in business ownership - If the bulk of a couples’ wealth is tied up in the stock of the company, the executive may have to sell or transfer ownership of the stock to the non-executive spouse as part of an equitable distribution. This can effectively alter control of the business by decreasing the decision-making authority of the executive.
• Distracted from business operations – Divorce is rough on families and it is not at all unreasonable to expect that dealing with divorce proceedings would have a tendency to distract an executive. An executive too focused on an impending divorce might not be giving the required attention to the needs of the business.
• Business judgment affected – If an executive’s personal wealth is significantly reduced by a divorce, the executive might tend to become more or less risk-averse when evaluating opportunities for the company due to concerns about the personal situation.

When executives of publicly held companies divorce, the public perception of how the divorce will affect the company can result in increases or decreases in a company’s value. Thus, executives going through divorce often try to keep the proceedings as private as possible to help maintain stability and continuity in the business.

Agreements that Can Affect the Business Ownership Interest of an Executive in Divorce

Anticipating divorce may not be very romantic, but it can help avoid some of the complex property division issues when one party is an executive and shareholder in a business. The following agreements will limit a non-executive spouse’s ownership interest in the executive spouse’s business.

• Shareholder or operating agreements – The business owners can prohibit stock transfers, allow the stock to be repurchased by the other stockholders, or prohibit the non-executive spouse from exercising any management powers.
• Pre-nuptial agreements – The non-executive partner can agree prior to the marriage not to claim any ownership interest in the business if the couple divorces.

Getting the Right Legal Help When Divorce Involves an Executive

When an executive is getting divorced there can be complex legal and financial issues that have to be sorted out. Business documents must be reviewed to find out what is owned, when it is owned, and whether it can be divided or transferred. Taxes are a big consideration when splitting up executive compensation in a divorce. A lot of money can be lost if the tax implications are not understood before property is divided or sold.

The complexities of property division create unique divorce issues for executives and shareholders that require knowledge of executive compensation and sensitivity to the effects divorce might have on a business. At Johnson Law Group, our practice is dedicated to representing persons going through a divorce in the state of Colorado. Our experienced attorneys have decades of experience handling complicated divorce issues. Contact the legal team at Johnson Law Group at 720-445-4444 today to schedule your appointment.

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