5 Essential facts about business valuations in HNW divorces

When high net worth couples face divorce proceedings, understanding how business assets in divorce are valued becomes crucial. Unlike straightforward financial assets, business interests present unique challenges that require specialist expertise and careful consideration by the courts.

Recent research from the University of Bristol reveals that high-profile divorce cases often create misconceptions about how business divorce valuations actually work in practice. Dr Emma Hitchings’ comprehensive study, published in 2023, provides the first nationally representative picture of how divorcing couples in England and Wales handle complex asset division, including business interests.

Why are business assets so complex in divorce cases?

Business valuations in divorce proceedings are fundamentally different from other types of asset division. Legal experts note that “the valuation of private companies is a matter of no little difficulty”, particularly when dealing with privately-owned businesses that lack readily available market comparisons.

The challenge becomes more pronounced in high net worth divorces, where business assets often represent the majority of the marital estate. Although there is no legal definition for a high net worth divorce, according to the Financial Conduct Authority’s classification system, high net worth individuals typically have annual incomes exceeding £100,000 or net assets worth at least £250,000, excluding their primary residence.

What makes business assets different from other marital property?

Unlike liquid assets such as bank accounts or publicly traded shares, business assets present several unique complications. The 2024 Financial Remedies Journal emphasises that courts must consider multiple factors:

1. Illiquidity concerns

Private company shares cannot be easily sold on the open market, creating challenges in determining fair value. Unlike listed companies with established market prices, private businesses require detailed analysis to establish worth.

2. Control and marketability issues

The level of control a spouse has within the business significantly impacts valuation. Majority shareholdings typically command higher values than minority stakes, which may face significant discounts due to limited marketability.

3. Future earning potential

Unlike static assets, businesses generate ongoing income, making their valuation inherently forward-looking and subject to economic uncertainties.

How do courts actually value business assets in divorce?

In England and Wales, the court ultimately decides the value of business interests in divorce proceedings, not the expert valuers. This principle, established through case law and reinforced in recent decisions such as HO v TL [2023], places the final responsibility for valuation with the judiciary. The court can, however, consider expert evidence when reaching a decision.

The court can consider the principle of “offsetting”, when dealing with business assets. This approach leaves the business with its owner while compensating the other spouse through alternative assets. This recognises the practical difficulties of splitting business ownership and the potential damage to business operations that could result from forced sales.

Who decides what your business is really worth?

While courts make final valuation decisions, they rely heavily on expert testimony. Experts, including forensic accountants and business valuers, can play a critical role in providing technical expertise to support judicial decision-Courts typically appoint what’s known as a “single joint expert”, an independent professional instructed by both parties to provide an impartial valuation. If either party does not agree with the valuation provided by the single joint expert, then they would need to apply to the court to potentially instruct their own expert to prepare a report.

Which valuation methods do experts use in divorce cases?

Business valuers employ several established methodologies, each appropriate for different types of enterprises and circumstances. Below are a few examples:

How do earnings-based valuations work in practice?

The most common approach for trading entities involves analysing the company’s earnings capacity. Valuers examine historical financial performance and future earnings potential, applying appropriate multiples based on comparable companies and market conditions. This method works well for established businesses with consistent profit streams.

When should you use asset-based valuation methods?

Particularly relevant for asset-heavy businesses or companies with significant property holdings, this approach focuses on the underlying value of business assets. It may be preferred when earnings-based methods prove difficult to apply reliably.

Why is discounted cash flow analysis so important?

This sophisticated approach projects future cash flows and applies discount rates to determine present value. While theoretically sound, it requires accurate forecasting and appropriate risk assessment, making it suitable only when future cash flows can be estimated with reasonable certainty.

What challenges can complicate business valuations?

Recent analysis in the Financial Remedies Journal identifies several common challenges that arise during business valuation processes:

How do timing and market conditions affect business values?

Business values fluctuate based on market conditions, making the valuation date crucial. The timing of separation, commencement of proceedings, and final hearing can all produce different valuations for the same business.

Can business owners manipulate valuations?

Some business owners may attempt to artificially reduce valuations through various means, including delaying profitable contracts, increasing expenses, or moving assets offshore. The 2023 research highlights how sophisticated business structures can be used to obscure true value, though courts impose severe penalties for such behaviour.

Do minority shareholdings really receive lower valuations?

While accounting practices often apply discounts for minority shareholdings or limited marketability, family courts take a different approach. Recent case law suggests that such discounts may not be applied if the business interest wouldn’t be sold separately from other shareholdings in practice.

How is divorce law changing to handle modern business assets?

The Law Commission’s 2024 scoping report on financial remedies identifies significant concerns about the current legal framework. The report concludes that existing law, based primarily on the Matrimonial Causes Act 1973, lacks the clarity and certainty needed for modern divorce cases.

Proposed reforms include codifying existing case law, establishing clearer principles for asset division. While no legislative changes have been confirmed, these developments may potentially impact how business assets in divorce cases are handled in future.

Understanding the valuation process

High net worth divorces involving significant business interests require understanding of how courts approach valuation. The complexity of business valuations, combined with the substantial sums typically involved, makes professional guidance essential from the outset.

The intersection of business and personal finances in divorce proceedings continues to evolve, with courts, legal professionals, and policymakers working to develop fairer, more predictable approaches to these challenging cases. Understanding how business valuations work provides the foundation for realistic expectations and better preparation for these complex proceedings.

5 Essential facts to remember:

1. Courts make final valuation decisions, not expert valuers.
2. The court will consider whether offsetting is an available outcome over splitting business ownership.
3. There are different valuation methods available to different business types.
4. Market timing can dramatically affect your business value.
5. Legal reforms may change how business assets are handled.

Sources

• Hitchings, E. (2023). Fair Shares? Dividing Assets on Divorce in England and Wales. University of Bristol. Accessed on 26th August 2025 https://www.nuffieldfoundation.org/project/fair-shares-sorting-out-money-and-property-on-divorce.
• Law Commission. (2024). Financial Remedies on Divorce: Scoping Report. Accessed on 26th August 2025 https://lawcom.gov.uk/project/financial-remedies-on-divorce/.
• Financial Remedies Journal. (2024). Business Interests on Divorce. Spring Edition.