Is a limited company protected from divorce?
As a limited company has its own legal identity, the court cannot make orders directly against it. By way of example, if a limited company owns a house, the court could not order the company to transfer that house to the husband, even if the wife is the sole shareholder or wholly in control of the company. It is the company which owns the house, not the shareholder.
However this does not mean that a limited company is completely disregarded. If a party in a divorce is a shareholder of a limited company, it is likely the court will want to know how much the shares are worth which inevitably requires an assessment of the value of the company and its underlying assets and interests. The court could order that those shares are sold to realise their value. A court could order that there is a transfer of shares from one spouse to another, which frequently happens if both spouses are joint shareholders. Alternatively, the court may offset the value of a shareholding against other assets so the shareholder keeps the shares in full but their spouse keeps more of a different asset.
A company may also be seen as a source of liquidity if it holds excess cash. Whilst a court cannot order a company to pay a lump sum to somebody, it could make an order against a shareholder requiring them to make a cash payment to their spouse knowing full well that the only way to satisfy the payment is to extract cash from the company such as through declaring a dividend or taking a loan from the company.
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A reduction in hours or salary or changes to hours or patterns of work is a contractual change – you can’t just impose it without significant risk. The same applies for lay-off or short-time working where there is no existing contractual right to impose these.
In summary, the process that an employer should follow to implement these measures is as follows:
- Communicate the Company’s position clearly and the urgent need to achieve temporary cost-saving to ensure the ongoing financial viability of the organisation
- Explain the proposed changes in detail and seek the employee’s agreement, and
- Record the agreed changes in a letter which is counter-signed by the employee.
If employees will not agree then employers will be at substantial risk of claims for unlawful deduction of wages, breach of contract and/or constructive unfair dismissal if they seek to impose these changes unilaterally. Employers should be mindful that this approach is likely to cause significant employee relations issues and dissatisfaction if only some employees agree to a reduction in pay. Employers should have a clear strategy for what their approach will be if this is the case – for example, they may wish to instead explore a different measure such as redundancies. This may form part of the employer’s communication when explaining the reason for the changes and seeking the employee’s agreement.
Unions: Employers should also be aware that where there is a recognised trade union in respect of any part of the workforce which is being asked to agree to a change to terms and conditions, the recognition agreement or collective agreement will require the employer to consult and/or negotiate with the trade union in the first instance.
Collective consultation: Where 20 or more dismissals are proposed at one establishment in any 90-day period, there are stringent collective consultation rules which apply (regardless of whether the employees have two years’ service or not). All dismissals count towards this total unless the dismissal is “not related to the individual concerned” – therefore dismissals for things such as conduct or capability do not count, but most other dismissals will count. This will include where you are imposing changes to the contract such as reduced hours or pay.
The rules on collective consultation set out a prescriptive and time-consuming process which must be followed, and minimum timescales before any redundancies can take effect. The cost of any claims relating to failure to follow collective consultation requirements are substantial, and specific advice should therefore always be sought before seeking to implement collective redundancies. We will be publishing further guidance on this on the Hub shortly.
It is possible that you may have a claim under the 1975 Act for reasonable financial provision, depending upon the exact circumstances of your relationship with your partner. The court has a wide discretion regarding what it thinks is reasonable financial provision if it decides that the deceased’s Will did not provide for you sufficiently.
In these circumstances, it is quite important to take specialist advice as soon as possible, particularly in light of the time limits which apply.
You will need to check the terms of the contract you have with the debtor to make sure you are still entitled to be paid (including checking any force majeure clause).
It is also important to remember that the current exceptional circumstances might also affect your contractual rights in other ways too – please see our commercial & contracts site for more information.
Depending on the type of debt you are owed, there might be some additional restrictions in place that you will need to consider. For example there are certain restrictions on landlords being able to forfeit leases, evict tenants or send High Court Enforcement Officers to collect outstanding rent.
Assuming there are no sector-specific restrictions in place then you should be able to start county or high court proceedings to recover the debt.
As an alternative to starting court proceedings, if the debt is undisputed a creditor can usually opt to issue winding up proceedings against a debtor instead. However, the recently introduced Corporate Insolvency and Governance Act introduces a temporary suspension on the ability of creditors to present winding up petitions to recover money unless the reason why the debtor cannot pay is not related to covid-19. For more information click here.
Often taking firm action is the right thing to do, particularly given that it is a sad reality that it is the creditor who shouts the loudest that will often get paid first. However, one important consideration is the commercial reality that many businesses (and indeed individuals) now find themselves in.
Whether taking legal action is likely to result in payment is always a question any creditor should ask themselves. Some creditors might also want to try to support their customers during these difficult times and/or have concerns about their long term reputation if they pursue the debt too aggressively. However, even if that is the case it is still possible to engage constructively and positively with those who owe you money to try to reach the best possible outcome. This could include:
- Having clear and consistent credit control processes in place
- Obtaining statements of means to help understand what a debtor can afford to pay
- Agreeing realistic payment plans
- Negotiating formal payment holidays
- Putting in place voluntary security to secure the debt
- Identifying those debtors who can’t pay as opposed to won’t pay and targeting resources accordingly
- Looking at what other options might be available, including recovering under parent company guarantees
A pre-nuptial agreement is a legal agreement made between two individuals before they marry. A pre-civil partnership agreement (or a pre-registration agreement) is a legal agreement made between two individuals who are planning to become civil partners. These agreements work in the same way as pre-nuptial agreements.
The pre-nuptial agreement usually sets out how the couple wish their assets to be divided between them if they later separate or divorce. Some agreements also detail how the couple currently arrange their finances and how they will arrange their finances during the marriage or civil partnership.
A pre-nuptial agreement can provide the benefits of transparency in relation to financial affairs, certainty as to how assets would be divided if the parties separate or divorce and protection for assets (such as inherited wealth or pre-marital property) from a later financial claim.
Pre-nuptial agreements therefore reduce the risk of there being uncertain, emotionally draining and financially costly court proceedings if the marriage does break down in the future.
If you believe that you may require a pre-nuptial agreement or have any questions about these agreements you should seek legal advice from one of our specialist matrimonial solicitors.
Yes. Government guidance now confirms that employers can be required to take holiday during a period of furlough, so long as they are given minimum notice to do so. The notice required is double the length of the holiday.
Employers are also able to cancel employees’ holidays (or require them not to take holiday) if they are on furlough, for example if they are not in a position to pay the additional 20% top up to their normal wages (or more where they earn in excess of the £2,500 monthly cap on furlough payments). Again, employers are required to provide a minimum period of notice of cancellation, which in this case, is the length of the planned holiday.
Employers can ask employees to take or cancel holiday with less notice but they would need to get their agreement to do so.
Government guidance has been updated to state that “Employees should not be placed on furlough for a period simply because they are on holiday for that period.” If a period of furlough happens to coincide with an employee’s holiday then you should ensure that there are business grounds to support furlough being used in that instance so that it isn’t just being used as a means to fund holiday utilisation.