Define the shares and the reason for valuing them
The company name is only the starting point. Record the share class, number of shares, total issued capital, voting rights, economic rights and valuation date. A commercial transfer, a contractual exit and a tax-related exercise may require different assumptions. The intended use needs to be settled before a method is selected.
A percentage is not the whole story
If the illustrative equity value of a business is £2 million, 15% is mathematically £300,000. That calculation does not by itself establish the value of a particular 15% shareholding. Control, transfer restrictions, distribution rights and the governing documents can affect the analysis. No automatic minority discount should be assumed without considering the basis of valuation.
Read the documents before applying adjustments
Articles and shareholder agreements may contain a valuation definition, a specific process or provisions governing an exit. Preference shares can have rights that differ from ordinary shares. Shareholder loans are distinct from shares and may need separate treatment. Legal interpretation should be obtained where a provision is unclear or disputed.
Make the conclusion usable
A useful deliverable identifies the interest valued, the information considered, the assumptions and any relevant limitations. If a third party must rely on it, explain that before commissioning the work. An informal ownership discussion and a formal disputed valuation are not interchangeable instructions.
Your starting checklist.
- Current cap table and share register
- Articles and shareholder agreements
- Details of options, preferences and shareholder loans
- Purpose, valuation date and proposed recipients
Start with the purpose. Confidential documents can follow through an agreed channel.