Conflicts of interest

Conflicts of interest

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We have been acting for husband-wife directors of a company, who are now undergoing divorce. They are living separately and in a couple of months, the settlement should be completed. In addition to the share of company profits, they have the joint rental property as well, which, for 2008/09 would be shared equally. In view of the separation, and the conflicting interests of the parties, do you think we should continue to act for both the individuals? Both the parties may not have any objection to us doing the accounts, in fact the husband is willing to pay the accountancy fees and tax liability of the ex-wife. Thanks in advance for any suggestions.

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By User deleted
26th Jun 2009 15:46

I did and struggled
There is another variable to factor in - solicitors. They can make matters very unstable.
I found I was being used to research for one party to be used against the other. So what seems like a perfectly amicable divorce arrangement can fall apart.
If I had my time over again I would resign from one before the first shots are fired.

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David Winch
By David Winch
26th Jun 2009 16:37

Valuation
It may be appropriate for the business to be valued. If you are asked to value the business I strongly suggest you should decline to do so. You will risk upsetting both husband and wife and finding yourself used as a weapon by opposing solicitors!

Instead an independent forensic accountant should be asked to value the business (or possibly husband and wife will each instruct different forensic accountants to value the business).

There may also be issues related to how much cash can be raised to buy out one spouse from the business, and there may be discussion of 'clean break' settlement or continuing income. If you wish to continue to act for the business in accountancy and tax matters, give all of this a wide berth.

(You can make yourself very useful by pointing out that, if assets are to be transferred between spouses as part of the settlement, there may be tax advantages in doing this in the (tax) year of separation. You can do that without getting involved in issues about which assets should be transferred to whom at what values.)

David Winch

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By nobbie
29th Jun 2009 13:14

that's a very, very odd......
...comment you make, David, about forensic accountants should be the folk to ask about valuing the business.
("Instead an independent forensic accountant should be asked to value the business (or possibly husband and wife will each instruct different forensic accountants to value the business).")

It is of course quite possible some forensic accountants may well be experienced and able valuers (and therefore hold themselves out to do such work). But it is far from a given.
Most forensic accountants in my experience do not hold themselves out to be valuers.

More importantly, most experienced and expert valuers would most certainly not hold themselves out to be forensic accountants !!

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David Winch
By David Winch
29th Jun 2009 14:44

You and I obviously move in different circles!
Well I am bound to say that the forensic accountants whom I know through my membership of NIFA (the Network of Independent Forensic Accountants www.nifa.co.uk) regard valuing businesses or shares in businesses in connection with divorce as a central feature of the type of work that they do.

(This is quite a different matter however from valuing land and buildings, which would not be the province of a forensic accountant.)

I am very much the odd one out amongst NIFA members in that I myself do not undertake such work (as I specialise in criminal cases and proceeds of crime).

Bear in mind that divorce is a type of litigation and "forensic" literally means "Relating to, used in, or appropriate for courts of law or for public discussion or argumentation".

David

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