How the Bezos divorce offers Collaborative Law options for Accountants, Financial Advisers, Family Lawyers and family business
- February 7, 2019
- Jennifer Hetherington
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Mackenzie Bezos reportedly could walk away with as much as $96 billion from their divorce settlement, earning her in addition to her own independent professional status, a new title as the world’s richest woman.
But the Bezos divorce has also shone a light on the complexities of the business world where couples who co-own a business may want to divorce, but continue working together.
Is that even possible?
Yes, but it requires the active commitment by both parties to using a process like Collaborative Law which is revolutionising the way separating couples resolve their issues without stressful fights in court and finalise their divorce without court.
The plans for Jeff and Mackenzie Bezos to reportedly separate in an amicable way personifies what Collaborative Law is about.
In particular it can be used to retain a business partnership even if the private relationship ends.
We had a matter where the couple were getting a divorce. They were referred to us by their accountant. The parties had reached an agreement and they wanted to be able to finalise their family law property settlement.
They were co-owners of a very successful business in Brisbane and it was important to them to be able to continue working in that business together as it provided a very good income stream for them and they both had very distinct roles in that business. Neither could replace the other. The husband worked full-time and his wife was happy to work part-time.
So the challenge was to find a way that they could keep the business but also have a family law property settlement.
I brought in a colleague who was trained in Collaborative Law and together we drafted an agreement which would enable the divorcing pair to finalise a property settlement whilst remaining in the business.
We used the principles of Collaborative Law to do this including asking the parties what their ‘interests’ were which essentially means what their future goals, needs and concerns were, so that we could ensure that everyone was on the same page.
If a Collaborative Family Law approach had not been used it would have been very difficult to achieve this outcome.
Negotiation by correspondence or even mediation doesn’t really offer the opportunity to talk about what is underneath the end goal for each party. You really need to be able to dig a bit deeper and find out what’s really going on in their thinking.
In a situation where people want to continue operating a business, it’s only possible to formalise a property settlement by using a Binding Financial Agreement.
It’s not something that you would be able to have approved by the Family Court using an Application for Consent Orders because Section 81 of the Family Law Act (the ‘clean break principle’) requires the Court to finalise the financial relationship between parties.
That is not always ideal, particularly in circumstances such as this, where the parties would have had to strip money out of the business to pay out the wife her entitlement.
That would have taken away important working capital from the business or required the business to incur expensive borrowing.
Neither party wanted that and just did not see the sense in that.
An advantage in collaborating in finalising the agreement this way enabled both parties to share in the growth of the business.
It was on a significant growth trajectory and valuing it now would have been detrimental to the wife because it would not have enabled her to share in the future value of the business.
But taking into account the potential future value of the business which the Court could not do would have disadvantaged the husband as, if he had not achieved the expected growth, the business would have been overvalued.
It’s important to note that if the matter had gone through court, the business would have been valued based on historical figures at the date that the Court was deciding the matter or a valuation closest to that date.
It was important for us to work with the parties’ accountants to include provisions to enable either party to exit from the business so that they did not have another dispute on their hands.
This was factored into the Binding Financial Agreement rather than being a separate Shareholders’ Agreement or Partnership Agreement as we wanted to ensure that the terms were negotiated and clear now, to avoid potential dispute in the future.
A noteworthy factor here is that the husband had re-partnered and was in a serious, committed relationship with his new partner (to the extent that he was considering entering into a pre-nup type Binding Financial Agreement with her).
As such, it was obviously important to make sure that the ex-wife’s interest in the business was secured for her now, so that she would not lose out if the husband and his new partner separated.
This ironically probably also offered him some protection against the new partner because he didn’t own the whole business and continued to only hold a portion of it with his ex-wife.
So the ex-wife’s portion of the business would not go into the husband’s property pool if he and his new partner separated.
I regard this settlement as a very successful outcome which would not have been possible without the Collaborative approach.
It’s crucial that the accountants and other professional advisers are involved in the discussions right from the beginning, just as lawyers who practice in Collaborative Practice should be brought in early in situations like this.
People sometimes take steps which, whilst well-meaning, can be misguided. We can work with professional advisers to ensure the best outcome for the couple and their business.
The Bezos divorce will play out in the headlines of the world’s media and also dominate social media forums in the months ahead. To many this divorce is beyond their frame of reference, something that only happens at “the big end of town”.
But the legal principles that will swirl around the Bezos divorce go far wider than the estimated $A191 billion value of Amazon and how it is split.
The Bezos divorce has put a new focus on how a business and private relationship can be tangled and the steps needed to untangle it yet somehow preserve a business partnership if that is what the participants desire.