Valuing a Business for a Divorce Financial Settlement: Insights from Vince v Vince
In high-net-worth divorces, accurately valuing a business is often the most complex and contentious issue. The recent case of Vince v Vince [2024] EWFC 389, has brought this challenge into sharp focus, offering valuable lessons for family law practitioners navigating similar disputes.
The Importance of Business Valuation in Divorce
In England and Wales, the Matrimonial Causes Act 1973 requires a fair division of assets upon divorce. For couples with significant business interests, determining the business’s value is crucial. An accurate valuation ensures that both parties receive a fair share of the matrimonial assets, reflecting their contributions to the marriage.
In divorce proceedings in England and Wales, valuing a business is a key component of the financial remedy process when one or both parties have an interest in a company. The aim is not to produce a speculative market valuation, but rather to establish a fair, reasoned figure that can inform the division of matrimonial assets. Typically, a business will be valued by a single joint expert—usually a forensic accountant—appointed by both parties or directed by the court. This expert will assess the business based on a range of financial documents, including the company’s accounts, management forecasts, recent trading performance, and the broader economic context.
There are several methodologies used in business valuations, with the most common being the earnings or profits method, which involves applying a multiplier to the company’s maintainable earnings to arrive at a capital value. The multiplier is determined by the risk profile of the business and industry norms. For smaller, owner-managed businesses, an asset-based valuation may be more appropriate, which involves calculating the net asset value of the company. In some cases, particularly where the company is essentially a vehicle for the owner’s income, the business may be treated as an income stream rather than a capital asset.
It is also necessary to distinguish between matrimonial and non-matrimonial elements of the business, especially where it was founded before the marriage or has grown significantly post-separation. The court has broad discretion in this area, and context matters. Moreover, issues such as liquidity, tax consequences of a potential sale, and whether the business can realistically be divided or sold will influence both valuation and settlement outcomes. The court will rarely order a sale of a functioning business, instead favouring offsetting or staged payments to preserve the company while ensuring a fair division of wealth.
Vince v Vince – background and decision
In Vince v Vince, the High Court dealt with the division of assets between Dale Vince, founder of Ecotricity, and his ex-wife, Kate Vince. The primary asset in dispute was Ecotricity, a green energy company. The court’s approach to valuing this business provides critical insights for similar cases.
The court adopted a valuation of £153.5 million for Ecotricity, based on assessments from a single joint expert. This valuation considered both the company’s financial performance and the market conditions at the time of separation. The court emphasised the importance of using a single joint expert to ensure impartiality and reduce costs.
A significant issue was determining the proportion of the business’s value attributable to the marriage. The court concluded that approximately 74.16% of the business’s value was matrimonial, reflecting the duration of the marriage relative to the business’s existence. This approach aligns with the principle that assets acquired during the marriage are subject to division, while those acquired before or after may not be.
Kate Vince argued that Dale Vince had made substantial donations to political and charitable causes during the divorce proceedings, potentially diminishing the matrimonial assets. The court found that these donations were made for political reasons and not to reduce the asset pool. However, it did consider unspent donations, amounting to £4.5 million, as part of the matrimonial assets.
The court awarded Kate Vince £41.81 million, representing 50% of the matrimonial element of the business’s value. This award was structured to be paid in three tranches, reflecting the liquidity of the business and ensuring fairness in the settlement.
How Your Family Law Solicitor Can Help with valuing a business
Valuing a business as part of a financial settlement requires a strategic and forensic approach—something an experienced family law solicitor is well-placed to provide. At the outset, your solicitor will identify whether the business is likely to be classified as a matrimonial asset and, if so, whether its full or partial value should be brought into account. They will also advise on the appointment of a single joint expert, often a forensic accountant, whose role is to provide a valuation that the court can rely on. This reduces the risk of conflicting reports and escalating costs.
Your solicitor will scrutinise the timing and source of the business’s growth to determine what portion of its value should be included in the asset schedule. This analysis is crucial where one party seeks to ring-fence a business they claim was built up independently. They can also challenge transactions which appear designed to reduce the matrimonial pot, such as large personal loans or unexplained transfers—ensuring the court is asked to consider whether those sums should be “added back” to the asset base.
Where liquidity is a concern, your solicitor can structure settlement proposals that are practical and enforceable, perhaps involving staged payments or offsetting the business interest against other assets such as property or pensions. Above all, they will ensure that your financial disclosure is robust, your arguments are well-evidenced, and your long-term interests are safeguarded.For expert legal advice and support, please call our office today on 02476 231000 or email enquiries@askewslegal.co
