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The importance of business valuations on divorce

As businesses differ, it is important to ascertain their value with care to ensure a fair division of the family wealth, advises Rakesh Kapila

14 March 2017

The value of a family business or business interest is included in the matrimonial pot to be distributed when it comes to negotiating a financial settlement on divorce. Since the business valuation may be the most significant component of the total matrimonial assets, it needs to be ascertained with care, normally with expert assistance, in order to achieve a fair division of the family wealth.

What needs to be valued?

In order to value a party’s ‘stake’ in a business, it is necessary to value the business as a whole. A business with a consistent history of profits expected to continue as a going concern is generally valued on the basis of its maintainable earnings stream.

In order to determine the ‘value’ attributable to the annual maintainable earnings of a business, it is normal practi...

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