Valuation Dates

The date at which a shareholding is valued can impact the valuation enormously.

For example, if a shareholder is forced out of a business when it is doing well but the remaining shareholders then make a mess of the business, is it right that the shares of the ousted shareholder should be valued at the lower, depressed value brought about by others? Or should any valuation of his shares be at the time at which he was ousted, when the company was doing much better?

Where there is an express agreement about the date to be used in any valuation, few issues arise.

However, where there is no express provision setting out the date it is often a topic hotly disputed between shareholders. Typically, the debate revolves around the question of fairness and the courts have had to grapple with many differing factual scenarios.

A recent example is the judgment of Mr Justice Adam Johnson QC in Dinglis –v Dinglis [2019]. Having decided that the majority shareholder should be ordered to purchase the shares of a minority shareholder, the court had to decide whether a ‘current day’ value was appropriate or a date some years earlier should be chosen.

The company in question was doing very well such that a ‘current day’ valuation date was likely to be much higher than any earlier date. But it was argued that the minority shareholder had done nothing for the business for many years so it would be unfair if he were to profit from the hard work/ success of others, through a ‘current day’ valuation.

The case reviews other recent court decisions on this topic, but ultimately decided that a ‘current day’ value was not unfair in the circumstances in question.

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