With an ongoing Oklahoma divorce case in mind last month Tilting wrote about Tigh A. Knott, his wife Lucy Knott and how a business owner’s divorce can impact his business and affect his partners. The real players were Harold Hamm and his wife Sue Ann.
Last week the court granted Oklahoma oil tycoon Harold Hamm (aka “Tigh”) a divorce from Sue Ann. Harold was ordered to pay her $323 million before end of 2014 and $7 million a month for 93 months. Harold’s fellow shareholders were relieved. Why? Because Hamm gets to keep his company and they don’t get Sue Ann as a member of the board. A larger property award might well have required Harold to sell controlling interest to get enough cash. Or, worse yet, placed his ex-wife on the board. Could Harold aka “Tigh” have avoided betting his company?
Absolutely. Either or both of a prenuptial agreement and a company agreement (signed by his wife) could have sidestepped the drama.
The Facts. Harold Hamm is a self-made oilman and the chief executive and majority shareholder in Continental Resources. His foresight and timely investments in the Bakken Shale formation and fracking technology turned his company into a powerhouse and made him a billionaire 18 times over. Due to a lack of planning – a prenuptial agreement or a company agreement – Harold’s ex-wife was awarded over two billion – that’s “billion” with a “b” – dollars worth of marital assets, including a payment that Mr. Hamm must make to his wife of almost one billion dollars. The payment is so large that the presiding judge ordered that it be secured by a lien on twenty million shares of Mr. Hamm’s stock in Continental, valued at over one billion dollars. A copy of the Court’s 80-page long Memorandum Order can be found here.
Tilting the Scales in Your Favor – 4 Reasons to Sign a Prenuptial Agreement.
- Protect your business: If you own your own business, a divorce can cause that business a myriad of problems. Protect it with a prenuptial agreement and perhaps a company or shareholder agreement.
- Protect your partners: If you have partners, failing to have a signed shareholder agreement with all owners and spouses risks that, upon any divorce or death, the affected spouses may well become your partners with the right to participate in business decisions.
- Protect you (and your business) from debt: If most of your net worth is tied up in the value of your business and you have to split it with your spouse, then you either have to sell your stock or go into enough debt to pay off the divorce court’s property award. The right prenuptial and / or company agreements can avoid that risk.
- Protect your Business Valuation: Absent an agreement otherwise, a business can be valued a number of ways. Those signing your company agreement can agree in advance the method by which a partner’s ownership interest is valued and how a surviving spouse or ex-spouse will be paid, saving both time and money.
Previous Tilting Articles: Protecting your Business from a Lack of “Wedded Bliss”; How to Dissolve a Business;