ICAEW.com works better with JavaScript enabled.

Continue reading

Martin and Martin [2018] EWCA Civ 2866 (Part 1)

If shares in a private company are worth £20 million, does that equate, in value terms, to a bank current account of £20 million? Alternatively, can one party in a divorce feel justifiably aggrieved that a division of assets on the above lines is unfair?

We can all recognise that business valuation aims to derive a value which is payable in cash on completion; we value at the cusp of a transaction taking place. Shares in a private company are likely to be very illiquid; however, the illiquidity in the current transaction is ignored due to the assumption of completion being imminent. The discount for illiquidity hard-wired into the valuation refers to the innate nature of the asset being transacted: conceptually it is the present value of the higher costs and delays which will be experienced in future changes of ownership.

This question was one of the questions to be addressed in the above case: this was an appeal from the case of WM and HM as decided by the renowned Judge Mostyn of the Family Courts. He had found the total family wealth to be £182 million after allowing for tax on disposal. With such value within the combined estates, the sharing principle was a major consideration of the Judges in both the High Court and the Court of Appeal.