Valuation of Shares in Small and Medium-Sized Enterprises - A Legal Perspective on Valuation with a Special Emphasis on Shareholder Conflicts

Abstract

Over time all close cooperative relationships will experience conflicts. Shareholders in small and medium-sized enterprises (SMEs) are no exception. The vast majority of such conflicts are solved through continuing dialogue and negotiations between the shareholders. However, in some cases a conflict can be so severe that an amicable solution is not possible. In such cases the only alternative to dissolution of the company will typically be one or more of the shareholders leaving the company by selling their shares – but the question is at what price? The paper discusses shareholder conflicts and valuation of shares in exit situations in a company law context. Emphasis is on the regulation in the Danish Companies Act, but also the regulations contained in the company law statutes of the other Scandinavian countries are discussed. The paper covers regulation, general legal issues involved in the valuation of shares, regulation laid down in contract (shareholders’ agreement) or articles of association, and valuation methods. The paper argues that there should be some form of statutory regulation regarding the basic legal assumptions involved in valuing shares.