Where there is an issue over the value of a business, a court will ordinarily direct that an expert (most likely a suitably qualified accountant) be instructed jointly by both parties. This expert will value the business to express a view on the income it can provide and the extent to which it can be used to assist with funding a settlement.
Whilst this can be a useful exercise it can tie the hands of either party that may be unhappy with the accountant’s opinion, which is always too high or too low depending on their point of view. The Court will generally rely on the expert’s valuation, unless they are discredited. A restriction on fees (the Court may direct the accountant providing the cheapest quote be used) can also have a detrimental effect on the extent of work the accountant can do in preparing his report. Valuations are mostly “desktop” in nature and not rigorous in the way that would be performed in the event of an actual sale of the business. The expert may not be able (for the fees authorised) to sufficiently investigate matters where it is alleged there has been manipulation of the figures. This is one of the reasons we have in-house forensic accountants at Stowe family law.
Regardless of the formal structure of the business, the valuation of it will generally proceed in the same way and is dependent on the type of business. There are three main types of business to be considered in divorce proceedings, and each is approached differently: