Prenuptials agreements make sense. However, postnuptials are a whole other matter even when done to protect a company's assets.
Postnuptial agreements
Financial Times, Published: May 30 2007 23:35 | Last updated: May 30 2007 23:35
It now seems so genteel. In the old days, the spouses of new Goldman Sachs partners were brought in for an orientation day about the firm. That included the odd quiet word about how to avoid the financial pitfalls of their new status – with the obvious temptation of ostentatious binge spending in the good years.
Today’s financial masters of the universe appear to take a somewhat blunter approach to spouse control. A growing number of hedge fund managers who hit the big time are going straight to their lawyers to try to secure protection in the form of a “postnup” agreement. They have an obvious propensity towards hedging out massive downside risks. They also have a few vaguely reasonable excuses for trying to do a postnup deal.
One is the need to avoid dislocation in the tightly held shareholder base of a small partnership in case a marriage breakdown forces the sale – or, at least, change of ownership – of a big stake in the company. That said, it is not obvious why that should be different from any other fast-growing business that ends up making its owners rich. The other is disclosure. The last thing that secretive hedge funds want is an angry spouse trying to get as much inside information as possible aired in court to make life uncomfortable.
For those reasons, some funds are making postnup deals a precondition for being accepted as a partner. That gives the soon-to-be-vastly-rich hedge fund managers a defensible excuse for broaching the subject of a postnup in the first place – and a credible negotiating position with their spouse. It also provides the convenient fringe benefit of flexibility, should their newfound wealth make them suddenly irresistible to arm candy that was once beyond their wildest dreams.
Copyright The Financial Times Limited 2007
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