Protecting your Business from a Lack of “Wedded Bliss”

Gray Reed
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Richard and Rachel Rich married 30 years ago and enjoyed a tempestuous union ever since. One year prior to their marriage, Richard started up a small computer products company, Orange Computers. During the marriage, Orange Computers’ business skyrocketed after the introduction of their premier line of attractive digital personal assistants. Even after taking his business public, Richard still owned a majority share of Orange’s stock and was believed by the public to be the digital guru responsible for its success.

Then one day, Rachel found Richard in flagrante delicto with his attractive non-digital personal assistant. At first, Rachel was mad – but then, after remembering that she didn’t have a prenuptial agreement, she was glad. After talking to her attorney, Rachel found out that, even though Richard was the sole owner of the majority of the Orange Computer stock, she could be entitled up to half of the increase in value of that stock during their marriage – potentially billions of dollars! Richard’s attorney advised him that, in order to meet his obligations under any settlement, he might have to sell off his stock – enough to remove him as the majority owner and place control of Orange in the hands of the new, unknown stockholders.

Even worse, when word got out about the divorce and Richard’s possible loss of control, the price of Orange’s stock plummeted, wiping out a large chunk of their net worth as well as sending many other tech stocks into a spin. What is Richard to do?

Unfortunately, due to Richard’s lack of foresight he – and Orange, and its shareholders – might have to just grin and bear it. By failing to insist on a strong prenuptial agreement, Richard put his wealth and his company’s future at risk.

Tilting the Scales

This is hardly a new problem. The news is full of stories about millionaires and billionaires whose divorce cases threaten to upend their control of their companies, or the companies themselves.  The owner of a business of any size must be forward looking and anticipate problems. Sometimes, that means preparing for a divorce even before the marriage begins. Securing the advice of a good family law attorney before a marriage can help to ensure that the business – and its owner – emerge from a potential divorce as whole as possible.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Gray Reed | Attorney Advertising

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