In Business With Your Life Partner? Don't Neglect the Legal Formalities

When life partners are in business together, they all too frequently pay scant regard to the legal requirements involved in running a company. As a High Court ruling showed, however, such an informal approach can have serious and unforeseen consequences in the event of a relationship breakdown.

The case concerned a couple who had two children during their more than 20 years together. Starting out with nothing, they built up a substantial business dealing in stone and concrete products and building houses. They ran their various enterprises through a network of eight companies, but the dispute that followed the acrimonious end of their relationship focused on two of them.

Whilst their relationship subsisted, they were equal shareholders and joint directors of both companies and the main object of the business – which they ran as a quasi-partnership – was to provide for the family. They took little notice of the separate legal identities of their companies or of legal requirements in managing them. They were run without formal board meetings or resolutions and, at times, the assets and liabilities of one company would be dealt with as those of another.

After the woman launched proceedings, the Court noted that, unsurprisingly, the end of their personal relationship went hand in hand with the loss of business trust and confidence between them. The man began to focus on his own interests and certain corporate assets were misused. Her access to managerial information was restricted and some business decisions were taken without consulting her appropriately.

Upholding her claim under Section 944 of the Companies Act 2006, the Court found that the companies' business had in certain respects been conducted in a manner unfairly prejudicial to her interests as a shareholder. The man was ordered to buy out her shares in the companies for a total sum in excess of £850,000.