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The economic war of millionaire divorces

2021-05-14T06:22:46.474Z

Fights over the valuation of assets and the continuity of common businesses are the most common after the breakup



Bill and Melinda Gates have announced their divorce after 27 years of marriage.Sebastian Derungs / REUTERS

The announcement of the divorce of Bill Gates, the fourth richest man in the world, and his wife Melinda after 27 years of marriage has not only shaken the world of philanthropy, but also that of business.

Beyond the personal and family repercussions of their decision, it is inevitable to think about the economic consequences of the breakup and the distribution of the immense fortune, calculated at more than 130,000 million dollars, which they have amassed, among other reasons, thanks to Microsoft .

If a divorce is already complicated, the process can become entangled and end in a war when there is an empire to divide.

Despite the indications that the Gates' will be friendly, behind every multi-million dollar separation there is an army of discreet and combative lawyers willing to defend the interests of their client.

More information

  • From Bezos to Spielberg: the most expensive celebrity divorces

  • Bill and Melinda Gates announce divorce after 27 years of marriage

In these cases, reaching a settlement can be much more beneficial than airing disputes in court.

Not only because the media hurricane is partly avoided, but because it is easier to negotiate which goods to keep.

In fact, says the expert lawyer in Family Law, Paloma Zabalgo, "it is rare that this type of fortune ends up in court."

Although there are always exceptions, such as the litigation for the divorce of the president of Ferrovial, Rafael del Pino, which ended in the Supreme Court in 2019. The high court cut the compensation that he should pass to his ex after from six million to 840,000 euros the separation.

To anticipate these problems, it is normal for the so-called prenuptial agreements to be signed in Anglo-Saxon countries. However, in Spain this type of agreement is not common. In the first place, because they do not have a specific regulation, except, says Olatz Alberdi, partner of ABA Abogadas, “in some provincial territories, such as Catalonia”. Second, because they have certain limits, such as child custody agreements, "which will not have legal validity until they are ratified by a judge," says the lawyer.

However, the pacts are legal and have the effectiveness of a contract, although, Zabalgo adds, they tend to adhere to the economic regime of marriage, that is, the way they will manage their assets. This can also be done, and so is expressly contemplated, before a notary through the so-called marriage contracts, which allow setting a regime of joint property or separation of assets.

To avoid disappointment after the break, "the simplest thing is to apply the property separation regime, since, in principle, there will be nothing to distribute," says Lidia Bazán, Tax Director at Marimón Abogados.

In large fortunes, complications usually come from the valuation of common goods and the difficulty of respecting the 50% share in the distribution.

Especially, he points out, when the greatest asset is made up of shares in a company that are awarded to one and there are not enough assets left to compensate the other.

This scenario could also cause problems with the Treasury.

The compensation to the consort "can give rise to a capital gain subject to personal income tax, in the same way as if there had been a sale to a third party," explains Bazán.

Comprehensive regulation

Unlike Anglo-Saxon law, in which, if there is no agreement between the parties, the court has total freedom to distribute the assets as it deems fair, including private ones, the Civil Code exhaustively regulates which are considered common and how they are liquidate this kind of society, called community property. In this way, the houses, companies or shares that each one had before the link will not enter the distribution. Neither, says Alberdi, "inheritances or donations." Regarding the companies, the date of the start-up of the businesses is key, which will be both if they were founded with common money after the link.

On the other hand, there is child support and the compensation that the spouse most harmed by the divorce can receive. As Zabalgo points out, when there is so much money to distribute “there is usually no discussion for this last reason, because both assets are balanced”. It is more common, clarifies the lawyer, that a compensatory pension is set when the woman or man dedicated himself entirely to the family or the business without obtaining income for it.

Other times the fights can center on who gets the business. The normal thing, says José María Rojí, partner of CMS Albiñana & Suárez de Lezo and specialist in advising family businesses, is that this is assigned to the spouse who “has a more intense bond, compensating the other with the value of the part that yields ”. But the situation is complicated if both are equally involved in the business. "When coexistence is not sustainable, it is preferable to sell and distribute what is obtained with total transparency," he says.

If the conflict becomes entrenched in the management of the company, affecting its management and stability, its subsistence may be jeopardized.

As Rojí describes, jurists have been trying for years to find effective unblocking mechanisms for these situations.

However, "although all kinds of agreements have been developed with Anglo-Saxon or simply exotic names, such as

tag

and

drag along

, fully satisfactory and generally applicable solutions have not been achieved," he regrets.

The usual thing is to design these remedies "like a tailored suit."

Support of the rich

In high-profile divorces, child support from separated wealthy parents can reach dizzying numbers. The Spanish Civil Code establishes, however, that the alimony must keep a proportion between the expenses of the minors and the means of who must pay them. In this sense, the economic level of these families determines the cost to be borne by the spouses. In these cases, it must be taken into account that the expenses of private schools, courses, travel or housing will be much higher than those of the offspring of mileurista parents. However, Olatz Alberdi, a partner at ABA Abogadas, points out, "even if the obligor has or earns a lot of money, he will never have to pay more than the amount that meets the child's needs."

Source: elparis

All business articles on 2021-05-14

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