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The Joy of An Ex – Business Valuations

Copyright (c) 2011 Jackie Ramler

Business valuation is a complex topic. A complete lesson on business valuation is beyond the scope of this chapter. The purpose of this chapter is not to teach you how to determine the value of a business, but to give you an understanding of the basics and what you can expect if you retain a professional to determine the value of a business in the context of a divorce. To satisfy this objective, I have presented this chapter in a question and answer format. The questions I have chosen deal with both the common questions I encounter in practice and the less obvious, but important information people should be aware of if the family property includes a business interest.

1. When should I seek professional valuation advice?

The Family Law Act (Ontario) (the “Act”) does not state that you must hire a professional to determine the value of your business. However, given the complexity of business valuation, seeking professional advice is highly recommended to ensure an equitable division of assets, if nothing else but to provide peace of mind that the value agreed to is reasonable.

Where either agreement cannot be reached or where there is no expectation that the parties will agree, the spouse who owns the business will generally be the first to obtain a business valuation as it is the responsibility of the business owner to provide proof of its value. Assuming that the owner is the husband, if the wife is not satisfied that the husband’s valuation is reasonable; the wife would generally retain her own professional to determine the value of the business. As discussed further below, valuation is a blend of art and science and opinions can vary. If after the husband and wife have obtained their own separate business valuations and agreement can still not be reached, the value will be determined by a judge, arbitrator or mediator depending on the method of resolution that is agreed to.

Where cost is a constraint, the parties may agree to jointly retain one valuator. They can agree to be bound by his or her conclusion or they may agree that they can each seek their own separate valuation if they are not agreeable with the jointly retained valuator’s conclusion.

2. Who is qualified to determine the value of a business?

The field of business valuation in Canada is unregulated, therefore anyone may offer valuation advice. While many people turn to their accountants for advice, most accountants have little, if any, formal training in business valuation. It is important to realize that the qualifications of the valuator can be challenged. If a properly qualified person is not retained, his or her opinion may be given little weight, if any, particularly if the matter proceeds to trial.

Chartered Business Valuators are generally considered to be the most qualified to determine the value of a privately owned business. More information on CBVs can be found by visiting the Canadian Institute of Chartered Business Valuators’ website at

3. Does a valuator represent my interests in the same way as my lawyer does?

A lawyer is expected to be an advocate for his or her client’s best interests without regard to the interests of the other spouse. Clients often expect that a valuator can assume this same position, however, this is not the case. If a valuator is retained to provide his or her written opinion as to the value of a business in a divorce case, it is expected that the valuator may potentially be called as an “expert witness” to testify in court in support of his or her opinion. Consequently, the conclusion expressed must be an objective one, and it must not be biased in favour of the spouse that retained him or her. The expert is expected to act as an extension of the judge and exercise the same impartiality as the judge would. If the expert’s valuation report is considered to be biased in favour of the client, the judge will discount the report’s findings, or even dismiss them all together. A valuator’s independence is often a key area challenged by the opposing spouse’s lawyer. Consequently, it is very important that the valuator arrive at an objective conclusion. Notwithstanding the above, a valuator can assist with other aspects of the divorce in a less formal manner such as assisting with settlement discussions, providing preliminary calculations, etc.

Divorce Choices