Divorce, Family Businesses and Charities - The Case of Bill and Melinda Gates

A recent, well known example of this situation is Bill and Melinda Gates, who announced their divorce this year. The immediate question that followed was, "what is going to happen to the Gates Foundation, the largest private foundation in the world"? Despite their marital breakdown, both parties have announced that they will still co-chair the foundation. They have set out a two-year trial period, which makes it clear that if they are unable to work together, Melinda will then step down.

This situation is far from the norm, and the English courts often prefer divorcing parties to sever all financial ties, so that both spouses can move on with their lives independently. The starting point during financial proceedings in divorce is to consider who owns what and to take into account all the circumstances of the case such as income; financial resources; needs; standard of living; length of marriage and age. If there is a family owned business or charity that forms part of the couple's assets, the court will particularly look at whether it was formed prior or during the marriage, and the contributions made by both parties.

If it is established that both parties have equal rights to a business or charity, some non-exhaustive options are for:

• the parties to remain amicable and continue to run the business together
• the parties to sell the business
• one spouse to buy out the other spouses' interest in the business
• the parties to restructure the business so that each party remains involved but has their own branch

If a divorcing couple wish to continue working together, the future of the organisation will be dependent on how amicable the breakup is. To minimise the risk of future issues in this situation, we have set out a list of helpful tips below:

• Be clear from the outset what will happen and make a plan. This process itself may make apparent whether working together is a feasible option.
• Ensure there is an agreed shared objective and that both partners have a common goal.
• Make a written agreement covering in detail the allocation of responsibilities and how decisions will be made. To prevent disputes occurring, this could include deciding on an external independent adviser who will help make decisions in the event of deadlock.
• Give thought to how a dispute will be resolved if communications between the partners break down.

To maintain an organisations value, it is important that both parties are able to rise above their emotions and focus on the shared goal. If this does not appear possible, or fails after an initial attempt, further consideration should be given to the other options available to a divorcing couple.

If you need any advice concerning how your family business or charitable foundation could be impacted by your divorce and matrimonial finances please contact Sam Hickman in our Family Law & Divorce team on 0117 925 2020, or complete the form below.