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Share Value

Our knowledge will help you find out what your shares are really worth. 

Pre-emption rights can have a dramatic effect on not only who you can sell to, but how much you can get for your shares, making it harder to earn a profit on your initial investment.

A right of first refusal does not in itself present any great problem if you want to sell your shares in a company. But the catch is often what price you can sell for.

In a typical right of pre-emption, the price to be paid by those exercising their right of first refusal is expressed to be a 'fair value'  (which in the absence of any agreement is independently determined, often by the company auditors).

Unless the shareholding represents a majority shareholding, a 'fair value' will normally include what could be a very substantial discount on what the owner will normally regard as the 'real' value.

This is a 'minority discount', reflecting the fact that the shareholding is not a majority shareholding, and does not itself carry the ability to control the company. This can lead to substantial under valuations against what many would regard as the 'true' value of the shareholdings.

Let’s say you are a 49% shareholder in a £10m company. You would like to sell your entire shareholding to the 51% majority shareholder. What might this look like in practice?

With the company valued at £10m, 49% of £10m would be £4.9m.

But let’s say the minority discount comes in at 75% - the value of your shares would be £1.225m.

The majority stakeholder might see a ‘true’ value of your shares at £4.9m or more, but they would only have to pay £1.225m by reason of the calculation of a 'fair value', putting you at a distinct disadvantage that makes it impractical to sell.

Our team can advise you on any legal issues that may impact share value before you decide to sell.