Entrepreneurs

Here is What Entrepreneurs Can Learn from Jeff Bezos' Divorce!

This split will make his wife one of the largest shareholders and even, put her in position to make changes in the company.
Here is What Entrepreneurs Can Learn from Jeff Bezos' Divorce!
Image credit: Reuters
Entrepreneur Staff
Senior Correspondent, Entrepreneur India
4 min read

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

By far, all of us know two facts – one, Jeff Bezos and his wife MacKenzie Bezos are getting a divorce and second, it going to cost a fortune to world’s richest man as reports suggest they don’t have a prenuptial agreement.

While according to the Bloomberg Billionaire Index, Bezos is worth USD 136 billion and this divorce could reshape the global wealth ranking.

“If the couple split their fortune equally, it could leave MacKenzie with USD 69 billion, making her the world’s richest woman. It could also make Microsoft Corp Co-founder Bill Gates, currently worth USD 92.5 billion, the planet’s richest person once again,” it reported.

However, what is more, worrisome is the fact that with his wealth, Bezos will also have to split his Amazon’s shares. Presently, as per reports, Bezos owns roughly about 80 million shares of Amazon, which is estimated to be about 16 per cent of the company.

The Power

This split will make his wife one of the largest shareholders and even, put her in position to make changes in the company.

Having said that CNN Business in a report quoted Michael Pachter, an analyst with Wedbush saying 8 per cent of the stock is not enough to actually exert any control.

“Unlike other tech CEOs, including Facebook's Mark Zuckerberg and Snap's Evan Spiegel, Jeff Bezos' control over Amazon doesn't come from having a majority of voting power at the company, but rather from a strong leadership track record over two decades. That probably wouldn't change with a reduced stake. Indeed, his Amazon stake has been declining for years as he sells stock to fund his rocket company, Blue Origin,” the report added.

Considering the news around, this divorce is only going to get murkier.

Nevertheless, the divorce also raises an important question – how funded companies suffer post the founder’s divorce.

Prenuptial Agreement

In India, entrepreneurship is on the rise and sadly, so are divorces.  However, in the domestic context, the prenuptial agreement is considered void.

Aurup Dasgupta, Partner at Jhangiani, Narula Associates says, “In India, marriage in sacrament and is driven by religion and customs. Hence, we have the Hindu Marriage law and Muslim Marriage, to look into matrimonial cases. But prenuptial is not considered legal as such.”

Get Your Clause Right

Now for a company like Amazon the founder’s divorce might not be an issue as it is well equipped to mitigate the risk with professional help but for startups, especially funded ones, it can be otherwise.

Anil Joshi from Unicorn Ventures says when the opportunity is big investors do ignore it but with a proper safety net. However, for an early-stage company, this can be an issue.

“During early days it's a major risk as venture success is dependent on founder’s contribution and hence, having proper separation clause in shareholder agreement helps,” he shared with Entrepreneur India.

The separation clause deals with situations like divorce, separation and if the spouse is your colleague – then the willingness to not working together.

A Mumbai-based lawyer, under anonymity, said, “as far as India is concerned the separation clause has not been tested. Nonetheless, theoretically it is possible, but practically, we will need to see.”

Additionally, in such a situation, Dasgupta suggests entrepreneurs look into a buyout option which would hardly have any impact on the business and its process.

“India has traditionally been a family-led business country and new age entrepreneurship is only a new trend. We have seen many high profile divorces in the traditional business segment and they are various regulations to manage the company’s stakes such as the buyout option. It is only a matter of enforceability,” he pointed out.

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