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A certified valuer will listen to your situation and answer any questions you may have, at no cost.
Valuations built to be cross-examined: for oppression proceedings, contractual buy-outs, expert determinations and partnership dissolutions across Sydney.
Indicative valuations from A$799. Certified Summary and Detailed reports from seven business days.
A shareholder dispute valuation in Sydney puts a price on the buy-out that usually ends the dispute. The valuer establishes the company's value with and without a minority discount, at the date or dates the case requires, reverses the effect of any oppressive conduct with evidence, and sets the reasoning out so it survives cross-examination in the Supreme Court of New South Wales.
When co-owners of a private company fall out badly enough to litigate, the outcome is rarely that the company is wound up. The Court, or the parties before they get there, almost always arrives at a buy-out: one side purchases the other's shares at a price. Sections 232 and 233 of the Corporations Act 2001 give the Court that power where the affairs of a company have been conducted oppressively or unfairly, and the order most often made is that a member's shares be bought by the other members or by the company itself.
That order needs a figure, and arriving at it is not arithmetic. The basis of value, the date at which the shares are valued and whether a minority discount applies are all shaped by the conduct the Court finds, not by valuation convention. A report that would satisfy an auditor or a bank can come apart quickly under cross-examination if it has assumed answers to questions that were still open.
The same is true outside the courtroom. Shareholder agreement buy-outs, partnership dissolutions and expert determinations all reduce to a contested value between people whose working relationship has already broken down. A valuation from someone neither side controls is often the thing that converts an expensive fight into a negotiated exit, and when it does not, it becomes the central piece of evidence at the hearing.
We prepare these valuations for shareholders, partners and their solicitors across Sydney, from two-director companies in Western Sydney to professional partnerships in the CBD, acting for one side, as a jointly appointed expert, or as the determining expert the parties have agreed to be bound by.
A certified valuer will listen to your situation and answer any questions you may have, at no cost.
Whether conduct is oppressive is a question for the lawyers and the Court. What the valuer needs to understand is how the answer changes the valuation, because it changes it substantially.
Section 232 is engaged where the company's affairs, an act or omission, or a members' resolution works against the interests of the members as a whole, or treats a member in a way that is oppressive, unfairly prejudicial or unfairly discriminatory. The test is commercial unfairness judged objectively; the majority need not have acted dishonestly. Exclusion from management, business diverted to a related entity, excessive director salaries, years without dividends, refusal of financial information, dilutive share issues and related-party dealings on soft terms are the usual complaints.
Outside litigation a non-controlling parcel in a private company is worth less per share than the whole, because its holder cannot direct the company or readily sell. In oppression cases courts have often declined to apply that discount, reasoning that a member forced out by the majority's conduct should not hand the majority a windfall as well. Whether the company was a quasi-partnership, how the member came to hold the shares and whether the conduct itself caused the exit all bear on the answer. We value on both bases and say by how much they differ.
The starting point is the hearing, or the date of the Court's order. Where the conduct has eroded the company's value, that date rewards the party who caused the damage, so an earlier date, such as when the member was excluded or when proceedings began, may be argued. The alternative is to value today and add back what the conduct took out. Either way the valuer is usually asked to work at more than one date.
Where value has been extracted, the valuation may need to put it back: director remuneration above a market rate for the role, evidenced by salary benchmarking rather than assertion; revenue and margin diverted to another entity; rent, management fees and loans restated to arm's length terms; personal spending put through the company's accounts. More value usually turns on these adjustments than on the choice of method, and each one is attacked separately.
Where the constitution or a shareholders agreement sets out a pricing formula, pre-emptive rights or a compulsory transfer clause, that governs a contractual buy-out, and the first task is to read exactly what it requires: fair value or market value, at what date, decided by whom. In oppression proceedings the Court's discretion under section 233 is not confined by the agreement, so the formula is evidence rather than the answer, particularly where the minority says the formula itself was part of the unfairness.
The methods are the same ones used in any valuation of a private company. The difference in a dispute is that nothing is taken on trust. The income approach usually leads for a trading company: maintainable earnings after normalisation, capitalised at a rate or multiple drawn from comparable evidence. In a dispute the majority argues the earnings are lower and the multiple should be lower, and the minority argues the reverse, so each input has to be sourced rather than judged.
Forecasts prepared by the party in control after the dispute began are treated with the scepticism they deserve, and the valuer forms and states a view on them rather than adopting them. The asset approach matters where the company holds property or investments, where it is in decline, or where winding up is the alternative order and the Court wants to know whether a buy-out at going concern value actually leaves the minority better off. Prior transactions in the shares, offers received and other members' buy-ins are relevant market evidence, but a transaction between related parties or one priced by an untested formula carries less weight, and a low historical price is often one of the things the minority says was oppressive.
Partnership dissolutions raise their own version of the same questions. Under the Partnership Act 1892 (NSW) the partners' entitlements on dissolution depend on the value of the partnership assets, and in a professional partnership the largest asset is goodwill. Whether that goodwill belongs to the firm or follows the individual partners out of the door is the issue that decides most accounting, legal and medical partnership splits in Sydney.
A valuation that fails in a shareholder dispute usually failed at one of these points, most of them before any number was calculated.
In a dispute the report will be read by an opposing expert, a mediator or a judge, so the depth is set by that reader rather than by the size of the company.
A dispute report sets out who instructed us and what we were asked, the facts we assumed, the documents we saw, and then the reasoning from those facts to each conclusion, so that a reader with no prior involvement can follow every step. Both bases of value and every date instructed are presented with the differences explained. Limitations, including information one side did not produce, are stated where they can be seen. We assume the report will be read by an expert looking for its weakest point, because in a dispute it will be.
In New South Wales proceedings the report complies with the Expert Witness Code of Conduct in Schedule 7 of the Uniform Civil Procedure Rules 2005 (NSW), and in the Federal Court with its expert evidence practice note. The certified valuer who signs it attends conferences of experts, prepares joint reports identifying what is agreed and what is not, and gives evidence, including concurrently with the other side's expert, which NSW courts increasingly prefer. We also review opposing reports in a consulting role, identifying the assumptions with nothing behind them and the questions worth putting in cross-examination, and we act as the determining expert when both sides have agreed in advance to accept the determination.
Will you give evidence on this report, including concurrently with the other side's expert, and confer with them beforehand? A valuer who is not prepared to be cross-examined on their own opinion is of little use once proceedings are on foot.
Talk your situation through with a certified valuer before you commit to anything, at no cost.