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When business owners divorce

Talking about buyout clauses or separating business assets from marital property are the least romantic things New Jersey couple could think about, but they are often necessary to avoid future headaches such as a case that has been unfolding in Delaware. The case illustrates what could happen in situations when business interests are shared by parties whose relationship is ending.

The future of a very successful translation software company based in New York is being uncomfortably played out in Delaware's Chancery Court. TransPerfect has more than 3,000 employees and boasts lucrative contracts that place the value of the company at more than $1 billion. The majority owners of TransPerfect were college sweethearts who started the business in the 1990s but never walked down the aisle.

As it happens, they eventually fell out of love and ended up in court because they could no longer operate TransPerfect without animosity getting in the way. Unfortunately, the couple believed that everlasting love would continue to propel TransPerfect forward as it did for many years. Their expectation fizzled when they realized that they could no longer stand each other and that they had neglected to draft an exit strategy in the operating and ownership agreement. Even Delaware legislators are getting involved and debating changing the law so that individual property rights can be protected instead of being challenged in Chancery Court.

Successful companies can greatly suffer in high-asset divorce cases, but they do not have to. The TransPerfect situation could have been avoided with a buy-sell clause in a document. The absence of such an agreement may make property division negotiations harder than they need to be.

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