The New Abnormal: Business Valuations In Post-COVID Family Law

• Published date: 28 May 2020
• Author: Ms Diane Bell, Chantal M. Cattermole, James Cudmore, Jeannette Aucoin, Emily Raven and Sarah Tradewell
• Subject Matter: Family and Matrimonial, Coronavirus (COVID-19), Operational Impacts and Strategy
• Law Firm: Clark Wilson LLP

Today marks the beginning of British Columbia's Phase 2 following the COVID-19 shutdown. While some businesses have thrived through online forums, many are opening their doors for the first time in months, forced to tackle compliance with updated health and safety protocols, WorkSafeBC Guidelines, and restrictions on space to accommodate social distancing.

In the last eight weeks, many businesses have been negatively impacted - which will undoubtedly have a ripple effect into family law.

In family law disputes in BC, business valuators are frequently retained to conduct Joint Expert Reports to determine the fair market value of a spouse's interest in a business, so family assets can be divided. The valuation date of the business (and all family property for that matter) is required to be as of the date the parties' agreement is made, or the date of trial.

However, the reality is that businesses are valued as of the date specified in the Joint Expert Report. The documents used to determine the business's value vary, but they most frequently consist of its recent corporate tax returns and financial statements. COVID-19 has thrown a wrench into the valuation process, as business owners have utilized capital, liquidated assets, or obtained loans from the Government to stay afloat. Thus, the business' most recent year-end figures may have changed dramatically in the past eight weeks.

Courts across the country are already anticipating the impact of COVID-19 upon businesses in family law disputes. For example, in a recent case from Ontario, Jayawickrema v. Jayawickrema, 2020 ONSC 2492, the Court declined to make an order for an otherwise required...