This article looks at a recent divorce case involving a prominent business owner, the founder of online retail business ASOS, and the subsequent share sale to raise assets for the divorce settlement.

There have been a number of high-profile rulings and cases around divorce with relevance for advisors to high net worth individuals. In this article, Joanna Pratt, partner and head of the family department at Thomson Snell & Passmore, discusses a case in which a business owner sold a large block of shares in a company to fund a divorce settlement. The editors of this publication invite responses; as always, the views of the authors are not necessarily endorsed by the editors of this news service but we greatly value such contributions from experts in the field. To see some other recent guest contributions around divorce cases, click here and here.

In March 2016, judgment was delivered by the High Court following a contentious, and very expensive, battle between Nick Robertson, one of the co-founders of ASOS, and his former wife. In round figures, Mr Robertson was ordered to pay a figure of £70 million ($92.1 million) to his former wife, amounting to one third of his total fortune.

Between them, Mr and Mrs Robertson owned properties both in this country and abroad, with a total net value of just under £60 million. Save for some relatively modest (at least in the context of their case) savings, investments and chattels, the other significant asset was Mr Robertson’s shareholding in ASOS, valued at £140 million net of capital gains tax. Mr and Mrs Robertson agreed that she would receive or retain certain properties and assets, which left a lump sum payable to her by Mr Robertson of just over £30 million, being the balance of the £70 million ordered by the judge. 

To raise that £30 million, Mr Robertson either needed to sell some properties, dispose of part of his shareholding in ASOS, or a combination of the two. 

It is always up to the paying party in a divorce settlement to decide which assets they realise in order to pay a lump sum which they are ordered to pay by the court. 

There are a number of factors that are likely to influence which assets an individual decides to sell in order to raise a lump sum. These include: 

•    The speed with which a sale can be achieved of specific assets; 
•    The potential volatility in the value of the assets concerned. For example, if house prices are rising or falling, that may influence a decision as to whether one or more properties is sold; 
•    Tax payable – both in terms of the amount of tax and the timing of the tax payment; 
•    Loss of income from the sale of particular categories of assets; and
•    Non-financial reasons. For some individuals who have been through divorce proceedings, they may have an emotional attachment to a particular asset, such that they would not want to sell that asset in order to raise a lump sum payable to the other spouse.

For entrepreneurs who have set up very successful businesses, and have spent many years building their businesses up, it can be very tough for them to have no alternative but to dispose of a significant part of their shareholding. But often, that is the only option that they have. Disposing of a significant shareholding in a listed company will almost always impact upon the value of the company, and that is exactly what has happened to the value of the ASOS shares following Mr Robertson’s disposal of 1.3 million shares. 

For an individual who has a significant shareholding in a private limited company, realising the inherent value of the company is not always quick or straightforward. Equally, the sale of property portfolios is not necessarily quick or easy. 

It may well be the case that Mr Robertson had no choice but to realise part of his ASOS shareholding. Having co-founded ASOS four years before he and his wife were married, Mr Robertson probably found this particularly galling. 

Although the High Court judge was dealing with net asset figures, when Mr Robertson realised assets to pay the lump sum to his wife, he would have taken into account the tax which he will have to pay upon the disposal of those shares, and have sold enough shares to cover that tax liability.

The one positive for Mr Robertson is that he still has a 6.6 per cent shareholding in ASOS, remains a non-executive director, and will no doubt continue to influence the future of the company.