Independent Expert Evidence on Business Valuation for Shareholder and Corporate Disputes.

Frequently Asked Questions

How is fair value determined in a UK shareholder dispute?

Fair value in private company shareholder disputes is generally determined by establishing the pro-rata enterprise value of the corporate entity as a whole, typically utilizing earnings multiples (EV/EBITDA) or discounted cash flow (DCF) models, and adjusting for normalization vectors. In cases of unfair prejudice under Section 994, the High Court frequently directs that the valuation should exclude any minority discount, treating the enterprise as a quasi-partnership to achieve an equitable exit.

What is a minority discount and when does it apply in Section 994 petitions?

A minority discount reflects the reduced commercial control and lack of marketability inherent in a minority shareholding block. In standard corporate transactions, this discount can range from 10% to over 50%. However, in Section 994 unfair prejudice petitions, if the corporate entity is classified as a 'quasi-partnership' founded on mutual trust and an assumption of active participation, the court typically rules that the petitioner's shares must be purchased at full pro-rata value without any minority discount application.

What date of valuation does the court apply in a shareholder buyout order?

The High Court retains absolute overriding discretion to determine the valuation date that achieves fairness. The default baseline is typically the date of the judicial determination (the trial date) or the date the petition was formally issued. If the majority has deliberately suppressed or siphoned company value post-exclusion, the court will backdate the valuation to the date of exclusion, or reconstruct the company's financial model to neutralize the prejudicial actions.

How does an expert witness normalize EBITDA for a contentious private company valuation?

Normalizing EBITDA involves adjusting a private company's historical profit-and-loss statements to reveal its true underlying maintainable earnings on an arm's-length commercial basis. A forensic accountant strips out excessive above-market director salaries, non-commercial intercompany transfer pricing, personal expenses run through the business, non-recurring transaction legal fees, and arbitrary management adjustments, aligning the financial baseline with real market conditions.

What absolute criteria must a business valuation report meet to be admissible under CPR Part 35?

To satisfy Civil Procedure Rules Part 35 and Practice Direction 35, a business valuation report must: be addressed explicitly to the court rather than the instructing client; document the expert's professional credentials; outline the explicit and implied instructions received; delineate the core facts, source accounts, and baseline assumptions applied; present clear technical reasoning for the chosen valuation metrics; define any applicable ranges of valuation opinions; provide a structured summary of financial conclusions; contain a formal statement confirming compliance with expert duties; and be signed under a strict regulatory statement of truth.