Commentary

I8.313 Information relevant to the valuation of unquoted shares and securities

IHT, trusts and estates

I8.313 Information relevant to the valuation of unquoted shares and securities

I8.313 Information relevant to the valuation of unquoted shares and securities

The following is a brief summary of the most important factors to be considered in valuing unquoted shares1 in the open market.

The state of the economy

Whatever the nature of the business in which the company is engaged it is bound to be affected by the state of the national economy, the money supply and government policy in general. To a large extent, the impact of these factors upon share valuation will be reflected in the current ratings of quoted shares, although any comparisons between shares in private companies and quoted shares should be made with circumspection2. In A-G of Ceylon v Mackie3 consideration was given to the effect the Second World War would have had on profitability and in Holt v IRC4 the share valuation reflected the fact that there had been riots following a boycott of European traders shortly before the deceased's death and the devaluation of the French Colonial franc5.

The nature of the business

To some extent, the nature of the business carried on by the company will determine the values accorded to its shares. Generally, the shares of a company engaged in a speculative trade or in a dying industry will clearly be rated less highly than shares in a company operating in a growth industry, or shares in an investment company. The relative status of quoted shares listed in the various industrial classifications used by the financial press provides a useful guide to the

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