Expert Witness Journal Issue 65 February 2026 - Flipbook - Page 18
Example 1
A common occurrence is a minority shareholder arguing they have su昀昀ered prejudicial
behaviour and been excluded from the decision-making process of the business. They
therefore decide to pursue a claim for their shareholding to be repurchased by the
business with an adjustment to re昀氀ect that prejudicial action, in legal jargon a s994
claim (previously a s459 claim for those readers of a certain vintage).
Example 2
A joint venture where one shareholder disagrees with how the business is being
managed and decides to sell their shareholding on a clean break basis or, alternatively,
an o昀昀er to buy back a share where a shareholder is being asked to leave.
Example 3
A family business where a relative disagrees with the direction the business is moving,
or a person that is not a member of the family falls out with the family, may look to
have their shareholding repurchased as a means of exiting the business.
Example 4
A post-acquisition dispute whereby new shareholders are created but the actions of
incumbent shareholders are criticised in some way, impacting business value and
therefore creating a shareholder dispute.
In many of these situations a forensic expert will
be instructed to opine on the value of the business.
They might also be instructed to consider certain
accounting treatments that impact value. This
might typically include looking at issues such as
the valuation of stock, the treatment of intangible
assets, or revenue recognition.
Minority discounts are often applied to minority
parcels of shares, to re昀氀ect lack of marketability
and lack of control, although in certain situations,
such as valuing a minority shareholding following
prejudicial behaviour, the Court can direct that
no minority discount be applied. This e昀昀ectively
is acknowledging that the minority shareholder, if
prejudicial behaviour has been proven, should not
su昀昀er any loss as a result of that behaviour.
A company’s Articles of Association can sometimes
set out the approach to adopt when valuing shares
although, more typically, many Articles remain silent
on the matter. No company expects to have a future
shareholder dispute at the time of incorporation, so
this is perhaps not too surprising.
The level of minority discount applied can be
something of a subjective matter where an expert
applies their experience, although the Court
will of course ultimately make the decision as to
discount. It is worth noting that such discounts are
only relevant in the context of shareholdings in a
company. Minority discounts are not applicable in a
partnership situation, where there is a presumption
that all parents have equal control.
Premiums and discounts
Share value can be impacted by the split of shares
held.
Take a scenario whereby one shareholder owns 80%
of the shares in issue, but the remaining 20% are split
between a number of shareholders. The shareholder
with the 80% holding might attract a premium for
their shareholding, to re昀氀ect their control of the
company with the remaining shareholders, owning
20% between them, have little (if any) real control.
Disputes on the rise
Anecdotal evidence suggests partnership disputes
have been on the rise in recent times, possibly
created by uncertain economic conditions and
residual issues associated with Brexit, the pandemic
outbreak and geopolitical issues, whose impact will
likely continue into the foreseeable future.
Alternatively, there may be a scenario whereby
shares are held between four shareholders, with
25% held by each. Equal 25% shareholders may see
value reduced to recognise their minority stake as
they would need the support of at least two other
shareholders (to make 75%) to make any substantive
changes to the business, and so the value of those
shares to a third-party purchaser would be reduced.
EXPERT WITNESS JOURNAL
The uncertainty around the changing Capital Gains
Tax rules, impacting M&A activity, arising from the
most recent government budgets, has also led to
some hastily organised company sales, which will
likely lead to later post sale disputes and a potential
rise in breach of warranty claims.
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FEBRUARY 2026
