When there is a breakdown in a genuine domestic relationship, be it marriage or de facto relationship, there is also a breakdown of trust between the parties. What could have been a thriving business (or company) during the relationship, at the breakup of the relationship may have suffered from the slings and arrows of outrageous economic realities. This could be increased competition, increased fees for supplies, a break in supply chains, and as of late, natural disasters, be it fire or flood. Alternatively, it could be because one party is syphoning funds at a horrendous rate to another account or acting recklessly in an effort to destroy and devalue the business. Let’s know more about why do we need to have the business valued by an expert.
The Expert cannot be independently appointed by either party. Why, you may ask, simply it goes back to those issues of mistrust between you and your ex. And the fact that one party may ask the Valuer to “do them a favour”. Unfortunately, if the valuer is not familiar with the family law process, they may take sides to assess the value of the asset in favour of the person who is engaging them.
The next question you will ask is, “How do you achieve independence from the Valuer?”. The process is to offer a panel of at least three experts in their chosen field. This panel of Valuers, including their qualifications and professional fees are sent to your ex-partner, and they are asked to choose from the panel. Also, the cost of the Valuer is usually shared equally between the parties. Again, this is to avoid bias as both parties are financially invested in the outcome. A joint letter of instruction is then drafted and signed by both parties (or, their lawyers) engaging the Valuer.
The joint letter of instruction needs to be clear to allow the Valuer to assess the business as to its value, if it was sold, or if it is to be transferred to one party in exchange for cash or real estate to the other. We can also ask for a valuation of plant and equipment, real estate, rent, remuneration and what type of tax consequences could be involved if the business was sold or transferred to one party.
The Valuer will need to know if there is only one business or company, or a complex array of entities, whether it is a family group, involving lots of family members, or a spouse who has the majority interest, or a business trading with other people or entities, which are not part of your family dynamic and the breakdown of your relationship.
The Valuer will need access to all the financial records pertaining to the business, including Self-Managed Super Funds. The Valuer will make a report based on his/her findings. The time it takes to make the report will depend on the state of the books and whether the financial information required is provided in a timely manner, or whether the ex-spouse will procrastinate in providing information to the Valuer to delay the process.
Once the Report has been prepared, either one party or both may not be happy with the findings. However, the Report is independent and because of the reputable firms that we do engage in these matters, usually cannot be argued against.
Expert Reports are not just required for the valuation of businesses and companies. In Family Law, we use a variety of experts for parenting matters as well as valuing, real estate, furniture, jewellery and chattels which form part of the property pool. The common denominator for the engagement of all Experts is that there are two people who disagree and cannot trust the other’s opinion.
To discuss the issue of valuations further, or any other matter, please call our Gold Coast Family Lawyers and Logan Family Lawyers for free family law advice on 07 5679 8016.