Collaborative Divorce for Small Business Owners
by Thacker Sleight
50% of first marriages and 67% of second marriages end in divorce. Despite your best efforts, there is a high likelihood you may divorce during your lifetime. As a business owner, divorce has the same complications of a partnership break up. Beyond the most common divorce concerns that center on children, business owners worry about high legal fees, the financial impact of property settlements, and losing key employees. Collaborative divorce may be the best path to minimize the impact on your company in a divorce.
What is Collaborative Divorce?
Beginning in 2014, when Michigan adopted the Uniform Collaborative Law Act, collaborative divorce became far more common. Recognizing the value of this alternative path to divorce, the Michigan Court Rules were updated to accommodate the more limited court involvement of the collaborative divorce process.
The collaborative divorce process involves several specialized professionals. This includes a neutral, licensed therapist (Divorce Coach), collaboratively-trained attorneys who represent each spouse, a neutral financial specialist to assist in the collection of financial information, business valuation, and property settlement options, and in some cases a child specialist. Through a series of team meetings spouses are assisted by neutral professionals in reaching agreements through interest-based negotiation. This process is confidential, and there are no court appearances except to enter the final Judgment of Divorce. A unique aspect of the process is that divorce professionals can never represent you in a litigation proceeding. That fact is significant because all professionals have the same goal – settlement.
The process is private, so your business and your financial information are protected from competitors.
Collaborative divorce is a confidential process that protected under the terms of a Collaborative Participation Agreement that both spouses sign before beginning the process. This confidentiality is essential, particularly for businesses that have proprietary information that is necessary for a business valuation expert to review, but it is the same information that a competitor would love. Although Protective Orders are commonly used in traditional litigation to protect this proprietary company information, the ability to maintain that confidentiality is often challenging in a divorce proceeding that is decided by a Judge.
Efficiencies are maximized by using one financial expert.
In a traditional divorce that involves a business, usually, each spouse retains an independent business valuation expert. After reviewing the financial information for your company, these two experts complete valuation reports, which are generally geared to support a high value for the expert retained by the non-owner spouse, and a low value for the expert hired by the business owner. Inevitably, through settlement negotiations, the values end up somewhere between those two values. That mid-range value comes at a high cost to both spouses. Rather than spending thousands of dollars in formal discovery and retaining two business valuation experts, in a collaborative divorce, there is one neutral business valuation expert.
The high cost of discovery is avoided, with alternative methods.
Collaborative divorce uses alternative methods to collect information to finalize your divorce. Those methods include the voluntary production of documents requested by a neutral expert, who ensures all information is shared between spouses.
Also, some collaborative divorces may include financial affidavits (not unlike a bank requires for small business loans) and consents to release information from third parties. These can be used by each spouse to ensure full disclosure of assets, debts, and income.
Creative solutions for property settlement and support are reached through interest-based negotiation.
Because of the involvement of a neutral financial specialist and attorneys who have no incentive, but to settle your case, you have a team of experts working with you to develop creative solutions to ensure your business thrives following your divorce.
Creativity may involve developing tiered payment options for property settlements, partial ownership options for a business that may not have the resources to buy out a spouse with restrictions on the spouse’s involvement in operations, or the transfer of certain assets to offset the value of a business.
Emotions are managed with the help of a licensed therapist who is the Divorce Coach.
Divorce evokes a range of emotions in the spouses that mirror the stages of grief. The unfortunate part is that the spouses are often at different stages of grief during the process. A therapist, called a Divorce Coach, leads the session, and assists spouses in resolving their differences and regulating the personalities, communication styles, and emotions throughout the process. Because of this involvement, you have an expert who helps you make informed decisions, unclouded by emotion.
Flat fees are a viable option for this process.
Due to the inherent uncertainty of traditional litigation, divorce attorneys do not generally offer flat-fee options for contested divorce matters. However, because collaborative divorces are based on a structured process, with specific meetings, a flat fee is provided by some collaborative divorce attorneys.