Asset division - H's company shares of currently low nominal value may be worth a fortune in the future

[freedomlooms]

After years of cheating and emotional abuse I'm (almost) ready to bite the bullet and file for divorce. My main worry is finances and potentially having to uproot our girls by moving to a cheaper area.

H owns a small percentage of shares of the company he currently works for (employee share scheme). The company has not been floated on the stockmarket yet, so the shares only have very low nominal value. There are plans to float the company in a few years' time, at which point his shares may become worth hundreds of thousands overnight.

Would this potential future windfall be taken into account when calculating marital assets? e.g. by agreeing that if/once the shares become valuable, I would receive a certain percentage? Because it's an employee share scheme H would not be able to just sign some of the shares over to me before the company has been floated.

Does anyone have any advice or experience with this?

This is one for the lawyers. However, I'm assuming that possible value can't be taken into account. The business could fold etc.

You surely can’t expect to have an interest in hypothetical assets?

In the same way you wouldn’t want to share any future inheritance or a lottery win with him.

Surely this is part and parcel of divorcing?

thank you both for your replies. @Triangle - that's what I'm trying get my head around. No, of course I would not expect a share of any future inheritance etc. But your example with the lottery win is an interesting one: What if he won the lottery with a ticket that he had bought BEFORE the divorce?

Couldn't you each have 1/2 of the shares now and then benefit in the future?

I'd check with your lawyer about them not being able to be signed over.

@Hollow - that would be the ideal solution (although I'd probably ask for less than 50%), but not possible because it's an employee share scheme - so the shares cannot be transferred to someone else at this stage.

Seriously - the shares are totally hypothetical. See a lawyer, they’ll have seen it all before (and know the legalities).
But - I honestly think you should let it go. How would you feel if, 5 years down the line, he wanted a share of your future windfall?? Cause that’s what the shares are - there’s no guarantee they’ll pay out and he might leave to company before they do.
Divorce is shit. Working out who gets what and how much as the worst. In my opinion the best thing you can do is to work hard for a clean break where neither of you feel short-changed because parents who cooperate will benefit you’re children most.

I'd be interested to know what a solo itor would say. As it's an employee sharesave scheme, presumably at least part of the cost is coming out of family money? Certainly, when Dh was involved in his companyscheme, the cost came out of his salary each month for a set number of months. I wouldn't be surprised if there was one way of ensuring OP is entitled to half the value of shares purchased up to the time she and her dh separated/divorced.

You won't get half of the shares. You will get a value as it is now or when your settlement happens.

Sods law. Been there

Btw. it sucks

@SonEtLumiere

The future value is hypothetical. How do you value them in the future, when there are so many variables? At the minute, they are worth nothing. So there is nothing to share.

There was a case a year or two ago of an eco tycoon whose business took off 20 years after he divorced his wife, I think she was able to claim £300K. Not the same set of circumstances but worth consulting a specialist solicitor about.

Would this potential future windfall be taken into account when calculating marital assets?

How could it be? It's an unknown.

I don't know how it works for divorce, but if you were dividing assets to sell part of a company, the parties would agree on a date and value all the assets of fluctuating value (including shares) on that date - depending on the value it might be that the amount of cash in the transaction needs to be adjusted to reflect the actual value of the shares on that date vs their projected value.

You wouldn't value a house based on the fact it's likely to be worth far more in ten years' time. There has to be a point in time at which the asset is valued otherwise how could you have a clean break?

Not experienced in this area, but I’d say they should be valued as they are now. You can’t get a future value for them as there’s too many variables (and there may never be any value). And if you did, how do you then decide how much if that was earned before the split and how much after (you couldn’t just split based on time that the shares are held, what if the company has some technological advance post split for example that makes it attractive for a takeover).

The shares will be there to lock him in to work so even if hypothetically he was able to sign some over to you, you’re then benefiting from the time he’s locked in after the split. How would you value that and give that element back to him?

Thanks for the replies everyone. I'll follow the advice to consult a lawyer - although I suspect that even among legal professionals opinions may be divided. I'll update on this thread once I know more.

You'll get what the shares are worth at the point you divorce.

You cannot legally go forward and claim more money in future if the shares increase if you are already divorced. You simply arent entitled to them.

This is why there are clauses about things like lottery wins post divorce.

There was a case a year or two ago of an eco tycoon whose business took off 20 years after he divorced his wife, I think she was able to claim £300K. Not the same set of circumstances but worth consulting a specialist solicitor about.

In that particular case, the wife was able to make a claim because they divorced without a consent order. If a consent order had been issued at the time of divorce, she wouldn’t have been able to make a claim later.

If the shares were bought after marriage but before separation then they would be marital.

However there is a very strong argument that the increase in price is not related to the efforts of the parties to the marriage. As such, only the purchase price would be considered marital, not the market valuation. This is simply because a share price increase was not earned as a result of the marriage.

This concept is grey area and applies to pensions too. After all, the interest earned would not exist without the pre-marital sum (for argument sake assuming some was pre-marital)

It is also worth considering the flip side. If shares crashes to zero, then you'd have to pay half the loss.

There was a pension case that was heard in Westminster that concerned this exact subject. Ie how much of the interest is actually marital.

If it's any consolation, I have been the recipient of such shares several times (in different start up companies), and never once have they amounted to much.

@freedomlooms

Sorry OP. Take advice but you are really trying to have cake and eat it. They are shares in a private company and they can control who owns them. They will have been allocated to him with conditions, one of which you might fimd is that if he leaves the company before x date he relinquishes them. You will,probably find he doesn't actually own them, but has a right to buy at a certain price should he wish to exercise the right. A lot of conditions ironically seem designed to circumvent soon to be ex wives claiming. I'm sure it is unintentional

It is theoretical value so suck it up. I know it will be annoying if he becomes rich overnight. Happened to someone in my friendship circle. Fuck was she bitter