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Compensating Adjustments

With our help, use every tool at your disposal to ensure your shares are valued fairly.

Compensating adjustments are often used by the courts to ensure your shares are assigned a fair value, so it is vital you know when these adjustments are likely to be applied.

You should be aware that in shareholder disputes, the process of valuing a company or shareholding can be complicated by the misconduct or wrong doings of others.

A common scenario is when majority shareholders abuse their control over the company. A director, for example, might have entered into a contract which involves substantial and excessive payments to themselves or a member of their family, which is a breach of their legal responsibilities.

That contract is obviously disadvantageous to the company and devalues the company itself. This will impact the value of your shares, so it is in your best interest to ensure this issue is brought to light.

You should know that when there is a dispute between shareholders, the court can order that a valuation should take place on the hypothetical basis that such a contract had never been entered into – in other words, they can make a ‘compensating adjustment’ for the wrong doing in question.

We deliver the knowledge, action and insight you need to familiarise yourself with compensating adjustments, and help you take advantage of this tool where possible.