Fair Share?

One question that features regularly in enquiries is “how much will my shares be worth?”

More specifically, people often want to know whether the value of their shareholding will be discounted by reason of the fact that they do not hold a majority or controlling interest.

The answer to this question needs to first ascertain the context in which a valuation is contemplated.

In the context of shareholder disputes that take the form of “unfair prejudice” allegations, much may depend on whether the company in question can be regarded as a “quasi partnership”. Typically in “quasi partnership” companies, it can be argued that a discount is unfair and runs contrary to the (presumed) commercial intentions of the parties.

In the context of a valuation being triggered by a provision in a company’s articles of association, often very different considerations apply. In these cases, the precise language of the articles may well be crucial to whether there is scope for any discount to be applied in valuing a shareholding.

In practice, in far too many cases, the issue of a discounts is given only superficial consideration. It is not uncommon for minority shareholders to simply assume that a discount will be applied to the valuation of their shareholding without having given enough attention to the detail of the specific circumstances.

For more information on the topic please contact Paul Lunt directly.