A forensic accounting case study
In matters where the value of a business is too uncertain or speculative, or there is significant disparity between the value of copper bottomed assets and business assets, we understand that is it common for a Wells Order to be made and for both of the divorcing parties to retain an interest in the business.
We have been involved in valuing businesses where the judge has made just such an order.
Whilst a Wells Order may solve the problem of, in the extreme, valuing the un-valuable, this approach does not provide the parties with a clean break and could leave the weaker shareholder feeling powerless in respect of their business interests.
Let’s set the scene
A husband has a business in which the wife has little to no involvement and, as is commonly the case, little understanding. Following the divorce settlement, she is left with an interest in the company.
While this approach ‘shares the risk’ in respect of the value of the business, the wife may find herself in a precarious position with no ability to control this value (as a minority shareholder). The wife may be appointed as a director but, even given the additional powers associated with this role, she may lack the experience to undertake it. As a director the wife is able to have more of a say in the running of the company but she also has to continue
to engage with the husband and has fiduciary duties.
A practical solution?
A smart person understands their limits and knows when to ask for help.
“Always be the dumbest person in the room”
Roffe Swayne has been appointed by the wife in a case such as the above to safeguard her interest and take her place as director. Our business advisory partners have the experience and understanding to interrogate the financial information and challenge other board members where appropriate, such that the wife can be confident that her interest isn’t being damaged or depleted and she can move on with her life.
With the vast array of experience within the firm we are even able to add value in our role as director so that the company can also benefit from our appointment.
This article was originally published in Forensis Autumn 2020.
For more information
For more information on valuations, please contact either:
Kate Hart or Jessie King, or call us on: