We value shares in shareholder disputes as independent advisers, party-appointed experts, Single Joint Experts or expert determiners, depending on how the dispute is being resolved.
When is this valuation required?
- A shareholder has petitioned, or is considering petitioning, for relief from unfair prejudice.
- Shareholders are deadlocked and a buyout is being negotiated.
- The articles require a valuation following a transfer notice, and the parties disagree.
- A shareholder has been excluded from management and seeks to be bought out.
- A mediation needs an independent view of value to work from.
Who instructs us?
- Dispute resolution and corporate solicitors
- Shareholders and companies
- Mediators and the parties jointly
What exactly is valued?
The shares held by the party being bought out, and usually the company as a whole as a starting point. Where it is alleged that the company's value was damaged by the conduct complained of, we may also be asked to value the company as it would have been without that conduct.
How is value assessed?
The company is valued using approaches suited to its business. The holding is then valued on the basis the instruction requires, which in a dispute may be the critical issue. We address the valuation date and the treatment of any minority discount explicitly, and show the effect of alternatives where those points are contested.
How the approaches are usually weighed
Typical
- IncomeMaintainable earnings or discounted cash flowUsual starting point
- MarketComparable transactions and companiesCross-check
- AssetAdjusted net assetsWhere relevant
Unfair prejudice petitions
Under section 994 of the Companies Act 2006, a shareholder may petition the court on the ground that the company's affairs have been conducted in a manner unfairly prejudicial to their interests. A common remedy is an order that the petitioner's shares be purchased, and the court decides the basis of valuation.
In some cases, particularly where the company operated as a quasi-partnership, courts have ordered a pro rata valuation without a minority discount. In others a discount has been applied. The appropriate valuation date is also decided case by case. These are legal questions on which the expert takes instructions, showing the valuation consequences of each approach.
What factors influence the result?
- Basis of valuation
- Pro rata or discounted, depending on the court, the articles or the agreement.
- Valuation date
- The date of petition, of the order or another date the court considers fair.
- Effect of the conduct
- Whether value was diverted or reduced by the matters complained of.
- Remuneration and dividends
- Changes in how profits were distributed during the dispute.
- Information access
- Records held by one side, and gaps in disclosure.
What information is required?
- The petition or claim and the defence
- Articles of association and shareholder agreements
- Accounts and management information for the relevant periods
- Details of remuneration, dividends and related-party transactions
- Any offers to purchase made between the parties
We send a tailored information request once the scope is agreed.
What report will you receive?
Depending on our role, we provide an advisory valuation, an expert report compliant with the court's rules, or a determination under the articles. Each sets out the bases and dates instructed and the resulting values.
See types of business valuation reports for how the scope of each type differs.
Timing and cost
How long will it take?
Negotiated buyouts can move quickly; litigated disputes follow the court timetable. We confirm what can be achieved once we understand the stage of the dispute.
How much does it cost?
Fees depend on our role, the complexity of the company and the issues in dispute. We provide an estimate before accepting the instruction.
How our fees are set →Frequently asked questions
How are shares valued in a shareholder dispute?
By valuing the company and then the holding on the basis that applies, which may be set by the articles, an agreement or the court. The valuation date and any minority discount are often the key points in dispute.
Is a minority discount applied in unfair prejudice cases?
Not necessarily. Courts have often ordered pro rata valuations in quasi-partnership cases and applied discounts in others. It is a question for the court on the facts.
Can you act as the valuer named in our articles?
Often yes, if we are eligible and free of conflicts. Where the articles provide for an expert's determination, our role and duties differ from those of an expert witness.
Can a valuation help settle the dispute?
Often. A credible independent valuation can narrow the gap between the parties and form the basis of a negotiated buyout or mediated settlement.
Do you value the company as if the misconduct had not happened?
Where instructed, we can value the company on the assumption that the conduct complained of did not occur, showing the effect on the shares.