Pre-nuptial agreements in various forms have been in existence in certain countries since ancient times. In modern times they have been widely acknowledged as valid across a number of European countries as well as in Canada, Australia and the USA. Thailand and some other countries have similar agreements based on the same principle. In England and Wales there was a reluctance to recognise such agreements and they were not legally enforceable. However, In 2010 a test case that came before the Supreme Court, Radmacher –v-Granatino, and the previous legal restrictions on enforcement were overturned, in recognition of the changing attitudes both in society and the law. As a result, the courts have now have discretion to enforce pre-nuptial agreements under the financial settlement cases under section 25 of the Matrimonial Causes Act 1973 provided the agreement qualifies in that certain criteria are fulfilled, which are:
- The agreement must be freely entered into.
- Both parties must understand the implications of the agreement.
- The agreement must be fair.
- The agreement must be contractually valid.
- The agreement must have been made at least 28 days before the wedding.
- There should be disclosure about the wider financial circumstances.
- Both parties must have received legal advice.
- It should not prejudice any children
- Both parties' needs must be met
Prenuptial agreements are often drawn up where the existing assets of both parties are very different, for example if there is a family business or substantial wealth in the family of one party which has been handed down through the generations. This appears to be a wise precaution as the assets held in those circumstances are often regarded as not being the property of the current generation and that they are merely the custodians, a link in the family chain, with a duty to preserve and if possible expand the family wealth for future generations. A well-run family business should have its business assets adequately protected but this is not always the case. A pre-nuptial agreement adds another layer of security for the business assets.
In the event of divorce, the joint assets of the marriage are divided between the couple from a starting point of 50/50. The assets of a long-established family business founded many decades earlier by a previous generation must be judged to be either marital assets or non-marital assets. A pre-nuptial agreement will indicate how the couple felt at the start of their marriage about their joint and individual assets. In the case of an acrimonious divorce and a protracted legal battle a family business could be placed in a problematic position if the business is judged to be a marital asset and could be subject to a challenge from the divorcing spouse. If the new spouse worked within the long-established business, it likely that the business will have to be valued, this is to provide a base as to value of the contribution that the spouse brought to the business. This can present complications as it can be far from straightforward to value a business and valuations involving private companies are often variable and the courts will approach the information provided with caution.
Annah Cheatham, an associate, commented, "the courts will recognise any contribution the spouse brings to the business and divide the assets accordingly." Sir Terence Coran, founder of the furnishing chain Habitat, made a costly blunder when he failed to recognise his former wife's role in building the business was equal to his own during the course of their divorce in 1997. He offered her less than a quarter of the reasonable settlement she had asked for and appeared to try and paint her as a stay-at-home wife saying she was an excellent mother and had provided him with what he described as active home support, rather than an active and energetic part of the business. His attitude and failure to acknowledge his former wife's role in their thirty year marriage cost him more money in the financial settlement which the judge eventually awarded. Lady Caroline had been one of the four principal founders of the furnishing chain and had given up her own career to work in the business. The judge recognised the significant part she played in the organisation's success saying she was "neither grasping nor dishonest", and her contribution was "in every sense outstanding" and promptly gave her around £2 million more than she had originally asked for.
Giambrone's family team together with the commercial team concentrate on delivering equitable arrangements balancing all factors from the interests of any children of the marriage under the age of majority, to the assets and increased value in a family business built up over several generations against the benefit the person working within their spouse's family business may have brought to the organisation in the shape of their level of industry and expertise.
It is highly likely that the use of pre-nuptial agreements as well as post-nuptial agreements, which can be drawn up throughout the marriage as circumstances alter, will steadily increase and avoid protracted rancorous legal disputes following divorce.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.