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Fair Value of Shares

We deliver the advice you need to ensure a ‘fair value’ is attached to your shares.

In the majority of company or shareholding valuations, the valuer will be asked to arrive at a ‘fair value’. This may be because the company's articles of association or court order have directed that a ‘fair value’ should be determined before a sale of shares takes place.

There is no legal definition of ‘fair value’. It may not be the ‘market value’ because, unlike companies listed on the stock exchange, there is no ready market for the sale of shares in a private company.

The ‘fair value’ of any shares is likely to reflect the circumstances of the sale which is taking place between the actual participants of the sale or purchase, rather than those of any hypothetical buyer or seller. This is because the whole purpose of the valuation is to be fair between the parties involved.

The starting point in the process of determining which factors should be taken into account in order to arrive at a ‘fair value’ for your shares is your company’s articles of association. Often, the articles will set out what is meant by the term ‘fair value’ – though this this isn’t always the case.

In a shareholder dispute, potential arguments over what precisely is meant by ‘fair value’ can often be foreseen and in this instance, the court has a wide power to direct what factors should be taken into account in determining any ‘fair value’.

In the absence of other guidance, the ‘fair value’ of shares is likely to be determined by whatever your valuer considers appropriate, so it’s key you choose the right valuer.