Businessman Must Live With Expert Share Valuation

A businessman who bitterly disagreed with an expert valuation of his company's worth will have to pay more than £4 million to buy out his estranged partner's minority shareholding, following a ruling of the Court of Appeal. 

The businessman owned 60 per cent of the company's shares and his partner 40 per cent. After the pair fell out, the partner's employment was terminated. He claimed, amongst other things, that his dismissal was unfair; however a compromise was reached whereby the businessman and the company agreed to buy him out. 

It was agreed that the valuation of the partner's minority shareholding – which was no easy matter as the company's success relied largely on trust and good working relationships – would be delegated to a firm of accountants. The businessman and the company fiercely objected when the accountants reported that the partner's shares were worth £4,218,000. 

Their challenge to the valuation was, however, dismissed by a judge. In appealing against that decision, the businessman and the company made wide-ranging criticisms of the accountants' methodology and argued that the partner's shares were only worth a fraction of the sum at which they had been valued. 

However, in dismissing the appeal, the Court noted that the parties had voluntarily submitted the valuation exercise to the accountants and ruled that their report was binding, regardless of its alleged flaws. The Court observed, "Parties who refer a dispute to an expert must be taken to have recognised that mistakes may be made, both of fact and law, but they are prepared to take that risk because they place a high degree of confidence in their chosen expert." 

If you are in dispute with business partners or fellow shareholders, we can assist you to obtain a fair settlement. Contact our Disputes and Litigation Team on 01752 292278.

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