James F. Ogorchock's NH Legal Perspective: How to avoid ex-spouse becoming your business partner
If the issue is dealt with before a divorce commences, steps can be taken to prevent a disgruntled ex-spouse from becoming an unwelcome business partner.
If a business has more than one owner, it is critical that there be a shareholder agreement or some other mechanism that restricts the transferability of an owner's interest in the business. Owners can agree to require assent of all or most of the other owners before any transfer of an ownership interest can be effectuated. If there is a non-divorcing owner he or she will not be a party to the divorce and therefore a court could not order a divorcing owner to transfer an ownership interest to the non-owner spouse without improperly affecting the rights of third parties. (If the only two owners are the divorcing spouses, such as a husband and wife medical practice, this type of agreement is not likely to be effective.)
Another mechanism to keep a business out of a divorce is to require all owners to execute a buy-sell agreement that requires an owner who wishes to transfer an ownership interest to first offer to sell the ownership interest to the other owners of the business. Again, this allows the other business owners to buy out the divorcing owner's share to avoid being in business with someone they did not select.
For years, New Hampshire courts have recognized the validity of properly executed prenuptial agreements. More recently, the New Hampshire Supreme Court confirmed that it will recognize properly executed postnuptial agreements as well. By using these agreements, whether before or after marriage, parties can agree to exclude a business interest from the divisible marital estate.
NH Legal Perspective is a bi-weekly column sponsored by Sheehan Phinney Bass + Green PA. This column does not provide legal advice. We recommend that you consult an attorney for specific guidance on legal questions.
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