Shareholders in unquoted companies and other parties may fall out for many reasons, and, when they do, they often need to agree on how to effect a ‘parting of the ways’. This may involve a transfer of shares – for example, when a director shareholder leaves a company and has to transfer his/her shareholding. Disputes may arise from sale and purchase agreements, for example, under breach of warranty and deferred consideration clauses. Valuation or the assessment of quantum may be required.
Each party will want to ensure that their own views on the value are heard and, if relevant, taken into account in the final figure. The valuer must arrive at a reasoned opinion based on the facts and be sensitive to the parties’ need for fairness in the process.
One of these specialist services may help you resolve your dispute:
Expert witness services
If a shareholder has suffered unfair prejudice by the majority shareholders, for example, by being excluded from the management of the company, in certain circumstances he or she may have a claim against the company under Section 994 of the Companies Act 2006.
It is essential to seek independent legal advice in considering whether a petition under S994 is appropriate in your particular circumstances.
Angela has over 30 years’ experience of preparing valuation reports for court proceedings under S994 and other dispute purposes. She acted as an independent expert witness for HM Revenue & Customs in relation to share valuation disputes for over 12 years.
Sometimes the value of a shareholding is fixed by a binding determination. Such ‘expert determination’ clauses are common in company articles of association and in shareholder agreements. Typically, parties are encouraged to make representations which the valuer may take into account in arriving at the determination. The expert is appointed for their expertise in the subject matter and is expected to carry out the work required to come to his/her own expert decision.
Where parties have fallen out over the value of a shareholding they often cannot agree on who to appoint to fix the price of the shares. The decision on whom to appoint may passed to the President of the ICAEW or another appointing body.
Angela has been on the ICAEW President’s Appointment Panel for over 20 years and has been appointed on numerous occasions to determine valuation and other disputes.
Early Neutral Evaluation
Both parties to a dispute are occasionally able to agree to appoint an independent expert jointly whom they both trust to provide a reasoned opinion on an issue. They can use this opinion to assess the likely outcome of court proceedings. In this way the parties can avoid the cost of proceedings and use the report as a basis for negotiating a settlement.
Arbitration is a way to resolve disputes outside the courts. The dispute is decided by one or more persons, who render an "arbitration award". An arbitration award is legally binding on both sides and enforceable in the courts. The Arbitration Act 1996 governs arbitrations in England, Wales and Northern Ireland. Parties are sometimes free to adopt the rules of specific institutions such as the London Court of International Arbitration (LCIA). Angela Hennessey is a Chartered Arbitrator and has held a Chartered Institute of Arbitrators Panel Appointment Certificate for over 13 years.
Arbitration & Early Neutral Evaluation
Arbitration is a way to resolve disputes outside the courts. The dispute is decided by one or more persons, who render an 'arbitration award'. An arbitration award is legally binding on both sides and enforceable in the courts. Many partnership agreements, for example, include an arbitration clause requiring partners to arbitrate any disputes they may have.
Since qualifying as a Chartered Arbitrator in 2005, Angela Hennessey has accumulated extensive experience of arbitrating disputes ranging in size from approximately £20,000 to over £1 million. She has acted as an arbitrator in disputes governed by the Arbitration Act 1996 and has acted in arbitrations where the LCIA Rules have applied.
She has been appointed arbitrator by the Chartered Institute of Arbitrators and the President of the ICAEW. She has acted as sole arbitrator in many arbitrations concerning partnership disputes, sale and purchase agreements including completion accounts and valuation of shares, businesses and goodwill.
Angela Hennessey also has experience of Early Neutral Evaluation (ENE). ENE is used when one or both parties to a dispute seek the advice of an experienced individual concerning the strength of their case. Where the parties are in dispute over the value of shares, Angela Hennessey has provided an independent assessment of the relative merits of each party’s opinion.
An objective evaluation by a knowledgeable outsider can sometimes move the parties away from unrealistic valuations, or at least provide them with more insight into the strengths and weaknesses of each side’s case.
Angela Hennessey can provide expert valuation advice in connection with:
Capital Gains Tax (CGT)
Inheritance Tax (IHT) including, transfers into trust and the 10-year anniversary charges on assets held in trust
Employee share schemes
Goodwill valuations for partnerships and sole traders
Group reorganisations and restructurings
Employee benefit trusts
Enterprise Management Incentive Schemes
Angela Hennessey has wide experience of valuing shares for tax purposes and negotiating agreement with the Shares Valuation unit of HM Revenue and Customs.
She acted as an expert on behalf of HMRC for over 15 years.
Examples of assignments undertaken can be seen in the case studies of valuations for tax purposes.
The need for a business appraisal or share valuation may arise in many different commercial circumstances, including:
The retirement of the owner and share disposal to the next generation of management
Pre-flotation or trade sale
The departure of a minority shareholder from employment in the business
The introduction of venture or development capital
When a company purchases its own shares
Share option schemes
Independent advice to directors
There may be tax implications if shares are transferred at less than their open market value for tax purposes, and this is often a consideration when transferring a family business to the next generation. Transactions may also require agreement of values with HMRC.
There are other circumstances where valuation advice might be required, for example, when drafting a valuation clause in a company’s articles of association or in a shareholders’ agreement.
Angela Hennessey has extensive experience in commercial valuations and may be brought in to value shares and agree the valuation with stakeholders and HMRC.
When a company introduces a share incentive scheme for its directors and staff, the value of the shares can be a key issue for both the company and the beneficiaries of the scheme. For example, all of these circumstances require valuation input:
The value of options for financial reporting purposes
Share allocations to employees
Enterprise Management Incentives (EMIs)
Share Incentive Plans (SIPs)
Other approved and unapproved share option schemes
Angela Hennessey has extensive experience in share valuation, including:
The valuation of shares over which option awards are made to employees on EMI schemes or under one of HMRC’s approved share plans, including negotiating and agreeing values with HMRC
Assessing the market value of intangible assets for tax purposes
Advising on the market value of shareholdings in transactions between connected parties
The valuation of companies or shares where an overseas jurisdiction requires that the transfer is taxed
It is estimated that around 40% of marriages in England and Wales will end in divorce. When a couple cannot agree between themselves on how to divide up their assets, then the matter may be referred to mediation or, as a last resort, to the court.
Angela Hennessey has given written expert evidence in several divorce cases where there were substantial assets at stake. She can provide the following services:
Valuation of shares or of a business for court purposes
Assistance with negotiation to achieve a settlement
Early Neutral Evaluation