Understanding the Impact of Legal Separation on Business

When a legal separation occurs, it’s not just the personal aspects that can be impacted, as your average Indonesian divorce lawyer knows full well. The comprehensive approach to understanding the disadvantages of a legal separation questions that arise during our initial consultations rarely concentrate only on a new standalone familial arrangement. The business implications, especially for Indonesian small businesses and entrepreneurs with big ideas are often significant. Office contracts and spaces, even if their duration remains undisturbed, can be hemmed with administrative challenges, financial duties, and decreased focus. For the business managers and owners, understanding how a legal separation will affect things is crucial.

Legal separations are just that – separation of agreements, duties and resolve. Often there is desire to preserve the marriage, though some see this as naïve thinking, wanting to maintain a “good thing” that has turned bad. Even where a separation as a legal matter doesn’t become an actual divorce, the impact for those with live-in arrangements or informal marriages of several decades, the impact is often similar.

Here in Indonesia, the outside view of legal separation is that it is a temporary measure to re-evaluate a marriage. It is a second chance, or at least a cooling off period before divorce, and not necessarily a marker of impending divorce. Unfortunately, that is not how individuals or businesses tend to view such matters. If someone gets a formal legal separation, then it is assumed that they will soon be single.

What do legal separation or divorce proceedings mean to office space, contracts, suppliers, customer and client interactions or meetings at the office? Those are all legitimate business concerns that can be greatly affected by family legal proceedings, whether it is a legal separation or a full-blown divorce that leads to ultimate dissolution of the relationship.

For example, let’s say you have a six-month contract for office space, either on a rental or lease arrangement. If you are married and live together, it is unlikely that you will be asked to leave even if you separate legally. However, if you are single, but were married before, then your provider may not be so accommodating when terms are changed.

As an office with two partners who no longer – in any way – interact the minimal amount required to operate the business, it might make more sense to even get a new office, or to expand in it. The owner of the contract might not be willing to change the names on the agreements, so a new one might be required. OR, a new one might not be required, but one or the other will have to pay yet another set of fees to make the transition. It’s not costing corporate offices all that much, but when you find that some partners are no longer good partners after separation and separation proceedings, the costs can add up.

Or what about as part of the same situation, someone is active in sales? The former-to-be-ex-spouse might have had a role in closing a huge deal for the company, Where that occurred in the context of spousal duty, it might seem unjust that they receive nothing when the contract closes. Or, they might now be enemies posing as friendly business partners. Perhaps your former-to-be-ex-spouse will share information on the business or your competitors that they shouldn’t.

FP&A and forecasting for the years to come are almost impossible under such circumstances, and can meaningfully impact your bottom line. Division of costs might be held pending closure of the separation process (in which both parties can have an incentive to drag things out), and this can negatively impact margins and bottom line results. If you operate a small business, this means considering whether you should treat this as one part of the company, or separate departments, so you have a clearer view of revenue, expenses, and overall profit. If you do, then file management for taxes can become more complicated, making transparency difficult.

When legal separations occur, owners of businesses with two or more partners can often tell there is a division and things are not quite right. Productivity might suffer because work is hard to focus on while separated from a spouse, former spouse or ex-spouse. Alternatively, if your soon-to-be ex is aggressive with the spouse who is also an owner or manager, then the divide is through the clouded lens of corporate business, making damage assessment more difficult. Now, you can be facing an ex-spouse who wants to damage your reputation, or otherwise bring shame to your distant cousins who now have a bad opinion of you in the office.

When it comes to things like suppliers, contracts, leases, and even employee status, orders pending or service contracts and obligations can be put at risk. Companies can over-order or purchase under clarity regarding the source of cash to pay for such things. If one party is active in handling the order, despite having a share in the business, then an abuse of power situation can loom. Money may be taken as a marital expense, diminishing the assets available for future financial distribution, and making it more difficult to close big deals.

There can often be a season of power plays that are difficult to stop until the final decree, even when both parties enter into good faith negotiations and work toward a collaborative outcome for their shared or divided business interests, which are the only ones that can remain in existence without any negative impact, legally speaking.

The result? A less successful business that makes less revenue than expected, not because the business lacked quality or offering, but because the corporate situation has been aggravated by marital problems that have spilled over the boundary between personal and professional environments.

If you want to know the true impact of a legal separation (or divorce) on your business setup, Indonesian divorce lawyers understand about things like meetings and how they can be impacted by your personal situation. Your divorce case in Indonesian courts can have real-world effects on even the smallest of businesses, and it can be challenging to focus on the things that matter when your life is in upheaval and your environment is less than beneficial for productivity.

If you’re wondering about the potential for true impact of divorce and separation on your business, check out the program offered by Anambcn.