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Divorce Involving Closely Held Corporation

Occasionally, a marital estate will involve a successful closely held corporation. The corporation may have extensive agreements with commercial lenders which require continued management by a key individual, continued ownership by a key individual, and continued control though voting rights by a key individual. When that type divorce arises, you will need a family lawyer and likely a corporate type lawyer to familarize you with the lender's requirements. After all, the goal is NOT to destroy the company by ruining its relationship with its bankers. The goal is to protect the assets so they continue to exist and provide value to the divorcing spouses.

Recently, I was involved in such a case. It was most helpful that both spouses wanted the business to continue and grow from the point of view of the spouse actually running the business and to furnish a stream of income for the other spouse. Documents involving voting rights, transfer of shares, contractual obligations to pay the other spouse, security for the contractual obligations to pay the other spouse were all required in addition to the usual Marital Settlement Agreement and Divorce Decree.

Valuation of the going business may or may not be necessary. There are experts, both valuation experts and C.P.A.s, who can shed light on the value of the going concern. Keep in mind, the winding up or dissolution value of the business is nowhere near its value were it to continue. Keep an open mind. Hire a good lawyer and rely on his/her advice to help you through the "corporate divorce."

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