Valuations for Shareholder Transfers
An independent valuation puts a documented value on shares in a trade business when they are bought, sold or transferred between shareholders or to a new owner.
Why an independent valuation
When shares change hands inside a private company, the market rarely sets the price. A brother buys out a sibling, a long-serving manager buys in, or a founder sells part of the company to a successor. Each side usually has a view of what the shares are worth, and the views seldom match. An independent valuation gives them a shared starting point that neither side owns.
The shareholders agreement often decides how the price is worked out: a formula, a named valuer, an annual agreed value, or “market value” or “fair value” as the agreement defines it. The valuation has to follow that wording, including whether a minority discount applies, so reading the clause comes first. Where the agreement is silent or unclear, we say so and set out how we have approached the question.
The value of shares is also not simply a percentage of the business. A 30% holding in a company controlled by someone else is a different asset from 30% of the whole, and how it differs depends on the constitution, the agreement and the way the business is run. A good valuation explains this rather than assuming it away.
When owners and advisers ask for one
- A shareholder in an electrical, plumbing or civil contracting company who wants to sell their shares to the remaining owners
- A key employee or manager buying shares in the business for the first time
- A founder transferring shares to children or a successor in stages over several years
- A new shareholder admitted by a share issue, where existing shareholders want to know the price is fair
- A buy-sell or option clause in the shareholders agreement has been triggered and the price must be set
- Shareholders who disagree about the value of the shares and agree to use an independent valuation to settle the price
- A transfer of shares between related parties, such as from an individual to a family trust
- A company buying back shares from a departing shareholder
What the valuation needs to address
Settled in the engagement letter before work starts, so the report answers the question it is being used for.
The valuation clause
The shareholders agreement, constitution or trust deed may set the standard of value, the valuation date, who appoints the valuer, whether discounts apply and how the report is used. We read it first and follow it. Where its terms are unclear, we say how we have read them and why.
Standard of value
Market value, fair value and fair market value can mean different things in different agreements. We use the meaning the agreement gives, and if it gives none, we agree one with the parties in writing before we start.
Controlling and minority interests
A holding that controls the company is generally worth more per share than one that cannot direct it. We assess the rights attached to the shares, the voting arrangements and any restrictions on transfer, then say whether any discount or premium applies under the governing documents and why.
Valuation date
The date is usually set by the agreement or by the event that triggered the transfer. We state it, and we note any later trading or events that a buyer or seller would reasonably know about.
Entity and class of shares
A company may have several classes of shares, a trust may hold some of them, and the business itself may sit in a subsidiary. We confirm what is being valued: the company, a class of shares, units in a trust or the underlying business.
Who relies on the report
The buyer, the seller, the company and their lawyers may all rely on it, and we name them in the engagement. If the agreement calls for an expert determination with particular procedural steps, tell us at the outset: that is a different engagement from a standard valuation report.
How it runs
Shareholder transfers involve more than one party, so scope matters. Before work starts we confirm in writing which shares are being valued, the date, the standard of value, the agreement clause that applies and who will rely on the report. Intake starts online at /start.
We act for the parties named in the engagement and have no interest in the outcome. A draft report is provided before the report is finalised so that factual errors can be corrected. Typical turnaround is 3 to 7 business days once all required information has been received, which is typical rather than promised.
The Independent Business Valuation is a fixed fee of $1,995 + GST. Companies with several entities, unusual ownership structures or historical valuation dates are complex valuations, quoted in writing from $2,995 + GST before work starts. See pricing.
- Tell us about the business. Complete a short valuation intake.
- Upload your information. Financial statements and supporting information are securely uploaded through the client portal.
- We analyse the business. We review earnings, operating structure, industry characteristics, risks, assets and transferable goodwill.
- Valuation prepared. Appropriate valuation methodologies are applied and the evidence is documented.
- Draft and final report. You receive a draft before the report is finalised.
Important
We do not give legal advice and we do not interpret a shareholders agreement as a lawyer would. Where a clause is unclear we state how we have read it for valuation purposes, and the parties should take legal advice on its effect. We also do not give tax advice on the transfer.
Information on this website is general in nature and does not constitute legal, taxation or financial advice. The appropriate valuation approach depends on the circumstances and purpose of each engagement.
Common questions
Do minority shares get a discount?
Sometimes. Whether a discount applies depends on the shareholders agreement, the constitution and the rights attached to the shares. Some agreements require a pro rata share of the whole business with no discount, and others say nothing. We follow the documents where they are clear and explain our reasoning where they are not.
Who should engage the valuer when shareholders disagree?
Usually all the parties together, or one party with the written agreement of the others, so that nobody can say the valuer worked for the other side. Your lawyers can advise on what the agreement requires. We confirm in writing who the report is for.
Can you value shares in a trust-owned business or a company with several classes of shares?
Yes. We confirm the structure first: which entity owns the business, who holds which shares or units, and what rights they carry. Matters with several entities or unusual ownership are complex valuations, quoted from $2,995 + GST.
What if the agreement has no valuation clause?
Then the parties need to agree the basis before we start, including the date, the standard of value and whether discounts apply. We can set out the choices for your lawyers to consider, but we do not choose the basis for you. We record what is agreed in the engagement and the report states it.
Related
Start with a short intake. We confirm the fee and scope in writing.
An Independent Business Valuation is $1,995 + GST, with a draft before the report is finalised. Typical turnaround is 3 to 7 business days once all required information has been received.