How to Do Valuation During a Divorce?
Divorce can be a complex and emotional process, especially when it comes to dividing assets between the parties. One of the most challenging aspects of this process is determining the value of assets, which is critical in ensuring a fair distribution.
In Singapore, the valuation of assets during a divorce is a critical aspect of the settlement process. In this article, we will discuss how to do valuation during a divorce in the Singapore context.
Types of Assets
In Singapore, all assets acquired during a marriage, including property, investments, and businesses, are considered marital assets and are subject to division. The first step in valuing these assets is identifying the type of asset and determining its value. For example, a property will require a property valuation, while a business may require a business valuation.
If there is a business owned by one party in a marital dissolution scenario, the opposing lawyers are likely to bring that business value into contention. Naturally this value will be challenged by lawyers of both sides, and determining the value of a business is a complex task that should not be attempted without professional assistance.
Who Shall Engage the Valuer?
Now who should be the one to find the business valuer during a divorce? Should the defendant be the one to engage a valuer or should the plaintiff engage a valuer?
There are several options available to the parties involved:
- The husband can engage a valuer on his own;
- The wife can engage a valuer on her own; or
- Both parties can jointly engage one independent valuer.
Engaging a joint business valuer can be convenient and less costly than each party hiring their own valuer. However, if either spouse disagree on the valuation for various reasons such as not providing full access to true financial information to the valuer or intentionally omitting certain key information to the valuer, then the valuation may be not accurate.
When each spouse hires their own valuer, it is common for them to come up with different valuations. In such cases, the spouses and lawyers should work together to reach a compromise. If a compromise can’t be reached, the court may make the final decision. It’s important to hire a valuer whose interests align with yours and who can put together a strong valuation case for submission.
In some cases, the court may order a business valuation to be conducted by an independent valuer. This may happen if the parties cannot agree on the value of a business or if there are concerns about the accuracy of a valuation report. In such cases, the court will appoint a valuer, and the costs of the valuation will usually be split between the parties.
It is essential to engage a reputable business valuer in Singapore with expertise in business valuations, as this can ensure an accurate and reliable valuation report. They should also have experience in providing expert testimony in court and be familiar with Singapore’s legal and regulatory framework.
Case Study:
John and Mary have been married for 15 years and have decided to get a divorce. During their marriage, they started a business together, which has been successful and has significant value. Both John and Mary want to keep the business, but they cannot agree on its value. Therefore, they each decide to engage a valuation expert to determine the business’s fair market value.
John engages a reputable business valuer in Singapore, who uses the income approach to determine the business’s value. The valuer analyzes the company’s financial statements, including income statements, balance sheets, and cash flow statements, and projects future earnings based on industry trends and other relevant factors. After conducting a thorough analysis, the valuer determines that the business’s fair market value is $5 million.
Mary also engages a reputable business valuer in Singapore, who uses the market value approach to determine the business’s value. The valuer conducts market research, including analyzing comparable sales and assessing industry trends, to determine the business’s fair market value. After conducting a thorough analysis, the valuer determines that the business’s fair market value is $6 million.
The difference in valuations creates a dispute between John and Mary, and they are unable to reach an agreement on the business’s value. They decide to take the matter to court, and the court orders an independent valuation by an expert in business valuations.
The court-appointed valuer conducts a thorough analysis using all three valuation methods: market value, income approach, and cost approach. After conducting a comprehensive analysis, the valuer determines that the business’s fair market value is $5.5 million.
Based on the independent valuation, John and Mary agree to split the business’s value equally, with each party receiving $2.75 million. This agreement is incorporated into their divorce settlement agreement, and the business is split accordingly.
In this hypothetical case study, both John and Mary engaged separate valuation experts to determine the value of their business as a marital asset. However, due to the difference in their valuations, they were unable to reach an agreement on the business’s value. The court ordered an independent valuation to determine the business’s fair market value, which ultimately helped John and Mary reach a fair settlement.
Conclusion
In summary, engaging a business valuer in Singapore’s divorce context is crucial for determining the value of a business accurately. Either one or both parties may engage a business valuer, depending on the situation, and it is important to select a reputable valuer with expertise in business valuations.
If you are going through a divorce and need assistance with business valuation or finding a divorce lawyer, contact us for a free initial consultation.
Visit www.businessvaluation.com.sg for more information.
