Valuations For Division of Business Ownership
In the life cycle of a business, companies may unfortunately encounter damages as a result of an illegal action or business interruption due to the forces of nature. Another area where valuations are frequently requested involve disagreements among, and "divorce" of, equity owners in a business. In these situations, the valuation is typically used in pre-litigation or litigation settings involving purchases-sales of a partial ownership interest in a company (particularly minority ownership).
Valuations for such "forced" purchases/sales may be directed by buy-sell agreement provisions, standard of value dictated by state statutes, and/or as directed by legal counsel. When these situations occur, you need an expert to deal with the complex valuation issues, and to help you and your team navigate through the dispute process.
For shareholder dissent cases under Texas law, the standard of value is Fair Value - the procedure and definition of which is outlined in Section 10.362 of the Texas Business Organizations Code (TBOC) as follows:
"The fair value of the shares shall be the value thereof as of the day immediately preceding the meeting, excluding any appreciation or depreciation in anticipation of the proposed action. In computing the fair value of the shares under this article, consideration must be given to the value of the corporation as a going concern without including in the computation of value any control premium, any minority discount, or any discount for the lack marketability."
This Section of the TBOC makes clear that valuation practitioners performing valuations, for the purposes of dissenting shareholders, should not apply premiums or discounts to the measurement of fair value.
Find the experienced help you need. Contact Convergent Capital Appraisers.
The professionals at Convergent Capital Appraisers have the experience, skill and attention to detail necessary to determine applicable regulations, the valuation approaches and methods that are best suited to your specific circumstances, and the understanding of how to bring all the relevant factors together to develop an accurate and defensible value conclusion.
We would be glad to discuss your particular situation with you, and work with your legal counsel throughout the process related to your matter.