Share valuation is very much dependent on the type of company, and the financial position of a company, as well as the general economic climate at the time of the valuation.
If you are intending to sell shares, we highly recommend that you seek expert advice on valuation.
Publicly listed company
In a quoted company listed on the stock exchange, valuation is much more straightforward, as there will be a daily share price listed. This may fluctuate day to day given market conditions, but it will be set at whatever the share value is listed on the day that you wish to sell your shares.
Private limited company
In the case of a private company share valuation is more complex. It is impossible to say how much your shares are worth as a generalisation, but there are some methods that will help determine an accurate and fair value.
- A shareholders agreement may make provision for the valuation of shareholdings and if so, it is usual for this to state that the value must be determined by the company’s auditors.
- If there is no such agreement providing details on how shares are to be valued, then an expert in the field will inevitably be required to provide a range of valuations, to be agreed between the shareholder and the company.
Note that there may be a pre-emption right set out in a shareholders agreement or in the Articles of Association, which give the right to existing shareholders to be offered the shares first.
If a shareholder is a minority shareholder, then they may have to take into account a minority discount, which will further reduce the value of the shares. This is a discount on the share price to reflect the fact that the shares only allow for minority voting power.
Compensating adjustments
If there has been a shareholder dispute and a court has ordered that a shareholder’s shares must be sold and the shareholder exit the company, then the value of the company, or of the particular shares might be adjusted by the court to take into account any wrongdoing on either side.
- This might be for the benefit of the shareholder, for example if the company / company directors have breached their duties leading to the devaluation of the shares.
- Or it might be that the shareholder is ordered to exit the company and sell their shares due to your misconduct, in which case a court might order that the value of those shares be adjusted downwards to take account of any financial gain you may have had as a result of your misconduct.
If you are considering selling shares in a private company and are concerned about the valuation of these shares, or if you would like advice on the impact of a dispute within the company on the value of shares, then contact one of our expert team at Francis Wilks & Jones today to discuss. Please call any member of our team for your expert consultation now or alternatively email us with your enquiry or complete our contact form – and we will call you back at a time convenient for you.
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A shareholder we helped settle a remuneration dispute
