Penuptial agreements can protect ideas as well as assets

| Oct 14, 2019 | divorce, Firm News

When matrimonial attorneys in Kentucky and around the country were polled in 2016, three in five of them said they were drafting more prenuptial agreements. What the survey did not reveal is that many of these prenuptial agreements were requested by individuals who wanted to protect their ideas rather than their assets. Entrepreneurs are usually dynamic individuals who are convinced that their business ventures will grow and thrive, and they may request prenuptial agreements to prevent the fruits of their labors being divided in a divorce settlement.

Prenuptial agreements may also be requested by venture capitalists or business co-founders who may be reluctant to invest time or money into a venture that could change ownership in property division negotiations. When spouses are awarded business interests in a divorce, there is no guarantee that they will be qualified to wield the influence they have been granted. When entrepreneurs do not have a prenuptial agreement in pace, investors or business partners may ask them to provide a spousal consent form. This document assures backers that spouses will not be able to use the shares they are awarded to exert control over the business and vote for board members. Spousal consent forms may also prevent shares awarded in a divorce from being sold.

Prenuptial agreements and spousal consent forms are particularly common in the technology sector and have been used to protect some of Silicon Valley’s most prestigious companies. A prenuptial agreement allowed Sergey Brim to retain control of Google when he divorced in 2015, and Larry Ellison’s stake in Oracle has withstood multiple property division settlements.

When drafting prenuptial agreements, experienced family law attorneys may strive to ensure that the provisions are essentially equitable. This is because grossly unfair prenuptial agreements are likely to be challenged in court and could be difficult to enforce. Attorneys might also recommend revising these documents when the assets they protect have increased in value substantially.