Case report: valuing shares and a question of interpretation

Articles of association commonly include pre-emption rights that apply on a transfer of shares to ensure that a shareholder can’t sell their shares to a third party without first offering them to the other existing shareholders. While pre-emption provisions can be lengthy and complicated, they tend to follow a common structure.

This will typically involve the price for the seller’s shares being agreed by the seller and the directors. If they can’t agree, independent accountants can be asked to certify their opinion of the relevant price, calculated on the basis specified in the pre-emption provisions. But disputes will arise where the basis for that valuation is not clear.