Tuesday, May 23, 2023

Like magic** - business valuations and family court cases

Where a business owned and operated by a couple forms part of the assets to be divided under a property settlement, there are a range of potential issues that can arise.

The case of Ledarn & Ledarn [2013] FamCA 858 provides an interesting insight into the types of concepts that the family court will consider.

The case involved a business that the wife was the general manager of and the husband was the original designer of the core product.

Both parties wanted sole control of the business as part of the matrimonial settlement, and the wife ultimately succeeded.

Some of the key aspects of the decision included the following:
  1. Although there was an independent valuation suggesting the business was worth $8 million, the wife had argued that it was worth '$10 million' to her.
  2. While generally, the value attributed to a business will be that which an arm’s length purchaser will pay, the family court can instead accept a value that one of the parties to the relationship subscribes to it.
  3. The court also took into account the evidence that seemed to suggest that the wife had a much better understanding of the nuances of the business and how it would best operate in allowing her to take full control.
  4. The wife’s request that there be a 5-year non-compete restraint imposed on the husband was however rejected on the basis that given she had significant business acumen, in addition to all of the assets of the business, the prospects of the husband successfully commencing a competing offering were at best remote.
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** For the trainspotters, the title of today's post is riffed from the Coldplay song 'Magic'.

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