Q&As

How is a minority shareholding valued when it is to be purchased by a majority shareholder in the context of an unfair prejudice petition?

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Published on LexisPSL on 14/08/2018

The following Corporate Q&A provides comprehensive and up to date legal information covering:

  • How is a minority shareholding valued when it is to be purchased by a majority shareholder in the context of an unfair prejudice petition?

How is a minority shareholding valued when it is to be purchased by a majority shareholder in the context of an unfair prejudice petition?

In the context of an unfair prejudice petition under section 994 of the Companies Act 2006 (CA 2006), the court has a wide discretion as to the remedy, if any, it grants on finding that there has been unfairly prejudicial conduct.

The remedy usually sought is the purchase of the minority’s shares by the majority, at a price determined by the court and this can be regarded as the typical order to which a successful petitioner is entitled (Grace v Biagioli).

If the majority makes a plainly 'fair' offer to purchase the minority’s shares (eg offering a price determined by a reputable independent expert valuer) before proceedings begin, and which is not accepted, a petition may be struck out since such an offer means that the conduct complained of can no longer be regarded as unfair (O'Neill v Phillips).

Where an order is made for the petitioner’s shareholding to be bought out by the majority shareholders, there is no universal rule and no cemented principles as to the appropriate method of calculating the purchase price (Re Bird Precision Bellows Ltd). The petitioner will normally seek an order for the purchase of shares based on a market valuation of the company and at a pro-rata

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