What happens if Santa gets divorced? A look at business valuation in divorce

Divorce is rarely simple - especially when significant assets and business interests are involved. As we come into the festive holidays, we wonder what would happen if Mr and Mrs Claus decided to separate? Beyond the emotional fallout, the financial implications could be enormous. Let’s unwrap what could happen to Santa’s toy empire, Elf Ltd, and other festive assets in this divorce.

The Toy Business: Elf Ltd

Santa’s toy business is the crown jewel of his portfolio. Built up over the course of centuries, he employs thousands of elves to produce millions of toys each year. Though its busiest period is always Christmas, the whole year is taken up with production in preparation. Unfortunately, maintaining such a feat has strained Santa’s marriage and, in the New Year, he and Mrs Claus decide to separate.

When it comes to the business, the first step is to have Elf Ltd valued, and this is not just about counting toys. It requires expert input -  through a Single Joint Expert (SJE) appointed jointly by both parties. The SJE will consider:

• Profitability and Future Earnings: Even if Elf Ltd operates for joy rather than profit, its global reach and intellectual property have immense value. The SJE will be able to advise on how best to quantify this value.
• Shareholding Structure: Does Mrs Claus own shares? If so, her stake needs to be assessed and her proportion of the business valued. If Santa is the sole shareholder, the court will still treat the business as part of the marital pot.
• Liquidity: Can Santa extract any cash from Elf Ltd without jeopardizing operations? If liquidity is low, alternative arrangements - such as offsetting the value of the business with other assets in the case - may be necessary.
• Risk: With the rise of online shopping and direct delivery, retaining a place in the Christmas present production market is becoming harder and harder.

The court won’t just be interested in the value of Elf Ltd, it will need to look at the totality of the assets including:

• The Lapland Family Home: The former family home is often a major asset. Its value and emotional significance will weigh heavily in negotiations. This too will need to be valued.
• The Holiday Home in Barbados: Any other property, even if abroad in the sunnier climates of Barbados, will need to be valued and factored into negotiations.
• Chattels: Unique items like Santa’s sleigh, his vintage candy cane collection and even Rudolph himself all need to be considered.
• Pension Provision: Mr and Mrs Claus’ pensions have been building up for hundreds of years- there will be real value in them.

Settlement

Santa will need to first decide what he wants to happen to the business: does he want to keep running it? Does he want to sell and get out of the game?

If Santa does want to keep Elf Ltd then, depending on the value, it may be that Mrs Claus receives a larger share of other assets - such as the Lapland home or Barbados holiday home. The couple may agree to a departure from equality in Mr Claus’s favour to achieve this. It would reflect that, by keeping the business, Santa is retaining a mainly illiquid and potentially risk-laden asset, while Mrs Claus takes on more liquid and secure assets.

As Mrs Claus has worked within Elf Ltd for as long as they can remember, they will need to think about whether they are happy to continue to work together or whether Mrs Clause will take this as an opportunity for a new adventure. In either case, it would be valuable for Santa to get specialist employment law advice.

Divorce can feel like navigating a blizzard, but with the right advice and planning, even Mr and Mrs Claus can find a fair resolution. If you’re facing similar challenges, contact our specialist team today for expert guidance on protecting your interests and achieving a balanced settlement.