The UK law firm explores divorce and the complexities at play, including the fate of Steiner's business assets.
Divorce and the division of assets is a complex affair, especially when millions are at stake. In the case of the marital breakdown of Ocado chief Tim Steiner, several issues, relating to the high net worth divorce landscape, have come to the forefront. For example, how will business interests be affected? Where do company shares come into the financial settlement? The authors of this article are Fiona Turner, partner, and Lottie Tyler, associate, at Weightmans family law team; and Sarah Walton, partner at Weightmans corporate team. As always, the editors of this publication don’t necessarily endorse all the views expressed but are pleased to share these insights.
When Tim Steiner married his wife Belinda in 1999 he was working as a bond trader at Goldman Sachs. In 2000, he quit his job to set up the online supermarket giant Ocado, which was floated on the stock market in 2010. Their wealth is said to include a house in Highgate worth £15 million ($21 million) and a chalet in France. As CEO of Ocado, Mr Steiner retains a 5 per cent shareholding in Ocado (the fourth largest shareholding in the company). The parties were married over 14 years at the time they separated.
Business interests form part of the assets to be shared on divorce and can be a central part of the financial settlement. Mr Steiner’s shareholding in Ocado accounts for a significant portion of the couple’s wealth and cannot be overlooked. The family courts, rather than the commercial courts, deal with such business interests as part of a wide consideration of all the resources available to the parties.
Businesses and business interests/shareholdings are routinely valued as part of the financial disclosure exercise undertaken on divorce. Valuing business interests can be extremely difficult. In the Steiner divorce, Ocado shares have a value on the open market, as a PLC, subject to market forces. For many divorcing couples, particularly those with privately held businesses, valuation issues can be much more complex.
Options available to the court
The family court’s role is to assess the scope of a fair and reasonable settlement. If a business interest is necessary to maintain an income stream the court is likely to leave the business owner with the business and compensate the other spouse with a larger share of the other assets ("offsetting") - and/or maintenance – and/or order a share of net sale proceeds as and when the business interest is sold.
The court can be flexible; it is possible to share the income or to divide shares, investigate liquidity issues with a view to extracting capital from the business, or assess borrowing capacity. It can order a sale of a business, but this is unusual.
Is only one party involved in the business, or is it a joint or shared enterprise with the other spouse or family members/others? Will third party interests be damaged?
A lot will also depend on the resources available to the divorcing couple – is the business the only asset or just one aspect of their financial portfolio? Tailored, expert, legal advice is required in every case.
The impact of divorce on a business
As every family is different, every business is different - as is the stake which is held within that business.
As CEO of Ocado, Mr Steiner is a key player in the boardroom. How his divorce affects him personally, and whether it impacts on his leadership in the boardroom / confidence in the company, will be determined by the passing of time.
However, in terms of equity, he is a minority shareholder. He does not have a controlling interest, and as such, if he has to sell some of his shares or transfer them to his wife as part of a financial settlement on divorce, given they are publicly listed, this is unlikely to have any significant impact on the fortunes of the Ocado business. Other market forces in the competitive field of grocery shopping, particularly the recent reporting of online competition from companies like Amazon, will be far more relevant.
But what if we compare that scenario with those of a majority shareholder in a PLC who is susceptible to an order to divest some of his interest? That could of course have major implications, particularly if a substantial shareholding has to be divested. The potential impact on fellow shareholders and stakeholders within the business; whether the approach of investors/funders would be affected; issues around the Listing Rules and the Takeover Code could well impact; and general issues of market sensitivity are all extremely relevant issues for the family court to factor in.
Both of these examples are very different to the forced divestment of shares in a private limited company on divorce – such shares are illiquid assets (as not publicly traded) therefore any transfer shares required by the court, even of a relatively small percentage, can have significant and detrimental implications for the company concerned and its business. In practice, the transfer of shares is unusual and other solutions tend to be found by the family court.
If the prospect of a divorce looms for any business owner or shareholder, it is essential that expert legal advice is taken early on from a divorce expert, coupled with corporate advice from lawyers and accountants.
Following the highly publicised Supreme Court decision of Sharland, when the owner of the privately owned company, AppSense Inc, was found to have dishonestly withheld details of an impending IPO from the divorce negotiations, many business owners will be concerned about market sensitive information being disclosed to a spouse or their advisors.
The duty of disclosure is paramount, and as such, methods to avoid the leaking of market sensitive information can be commonplace – confidentiality agreements, non disclosure agreements and possible super injunctions.
The media have access to family court proceedings. Although court rules make it clear that financial claims hearings are private and the general public has no right to be present, accredited members of the press are entitled to attend, unless they are excluded. In the widely reported divorce of Sir Christopher Hohn, the hedge fund manager, the court had to determine the extent to which the press were able to report an account of the proceeding. Likewise in the divorce of Liam Gallagher and Nicole Appleton. The divorce of Dragon’s Den entrepreneur Duncan Bannatyne has also been widely reported, as has that of Khoo Kay Peng, the non executive chairman and significant shareholder in Laura Ashley Holdings. Whether the reporting has a significant impact on their business dealings is difficult to assess.
In cases where privacy is paramount, financial negotiations could be resolved by an arbitrator rather than making application to the family court. The detailed provisions of arbitration are outside the scope of this article but it can be agreed that all proceedings and negotiations are entirely private and the parties nevertheless secure a binding agreement.