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When the two owners of a Wingfield engineering company, or the partners in a Kent Town accounting firm, can no longer work together, the argument is really about the exit price. We set that price in a form the opposing expert has to answer, not wave away.
Indicative valuations from A$799. Certified Summary and Detailed reports from seven business days.
Most Adelaide shareholder and partnership disputes end with one owner buying the other out, and that buy-out needs a price that will survive challenge. We value the interest with and without a minority discount, at each date the case calls for, restore value removed by oppressive conduct, and set out reasoning built for the Supreme Court of South Australia.
Two directors of a Wingfield engineering company who now speak only through solicitors, a Kent Town accounting practice where one of three partners wants out, a Barossa family company whose siblings in the business have stopped paying dividends to the sibling who works elsewhere: disputes like these rarely end with a winding up. They end with one side buying the other out. Sections 232 and 233 of the Corporations Act 2001 let the Court step in where a company's affairs are conducted oppressively or unfairly, and the order most often made is for the other members or the company to buy the aggrieved member's shares.
That order needs a price, and setting it calls for judgement rather than arithmetic. The basis of value, the date and whether a minority discount applies all depend on the conduct the Court finds proved, not on valuers' habits. A valuation that would satisfy a bank or an auditor can come apart under cross-examination if it assumed answers the Court had not yet given.
Nothing changes before proceedings are filed. A buy-out under a shareholders agreement, the dissolution of a partnership and an expert determination all turn on a contested value between owners who have fallen out. Many South Australian disputes go to mediation first, with a private mediator or, for some small business matters, the Small Business Commissioner (SA), and a figure from a valuer neither side controls is often what brings the parties to a negotiated exit. If it does not, that figure becomes the central evidence in the Supreme Court of South Australia.
We act for shareholders, partners and their lawyers across South Australia, from closely held manufacturers in Lonsdale, Edinburgh and the northern suburbs to professional firms in the CBD's Square Mile and family wine businesses in McLaren Vale and the Clare Valley. We can be retained by one party, appointed jointly by both, or engaged as the determining expert whose decision the parties have agreed to accept.
A certified valuer will listen to your situation and answer any questions you may have, at no cost.
Whether the conduct was oppressive is for the lawyers to argue and the Court to decide. The valuer's job is to show how each possible finding changes the value, because the changes are large.
Section 232 applies where the conduct of the company's affairs, an act or omission, or a resolution of members is against the interests of the members as a whole, or is oppressive to, unfairly prejudicial to or unfairly discriminatory against a member. The test of unfairness is objective and commercial; dishonesty need not be shown. Common complaints are exclusion from management, business diverted to a related entity, directors' pay far above market, years without dividends, information withheld, dilutive share issues and generous related-party dealings.
In a normal sale a minority stake in a private company is worth less per share than the whole company, because the holder has no control and few buyers. In oppression cases courts have often declined that discount, reasoning that a member forced out by the majority should not hand the majority a further gain. A quasi-partnership history, how the shares were acquired and whether the conduct forced the exit all bear on the answer. We report both figures and the gap between them.
The default is the hearing or the date of the order. If the conduct has eroded the company's value, that date rewards the party who eroded it, so the other side may press for an earlier date, such as when the member was excluded or when the claim was filed. A current value with the lost value added back is another route. In practice the valuer is normally instructed to give figures at two or more dates.
Where value has been taken out, the valuation may need to put it back: directors' pay above the market rate for the role, proven by salary benchmarking rather than assertion; work and margin shifted to another entity; rent, management fees and related-party loans restated at arm's length; and private costs met by the company. These adjustments often move the result more than the choice of method, and each is fought on its own.
Where the constitution or a shareholders agreement sets a price formula, pre-emptive rights or a compulsory transfer process, that clause governs a contractual buy-out, and the first task is to pin down what it actually requires: fair value or market value, at which date, decided by whom. In oppression proceedings the Court's power under section 233 is not confined by the agreement, so the formula becomes evidence the Court weighs, especially where the minority says the formula was part of the unfairness.
The techniques match those used for any private company; what changes in a dispute is that both sides attack every input. A trading company is usually valued mainly through the income approach, applying a capitalisation rate or multiple supported by comparable evidence to the earnings it can sustain after the accounts are normalised. The majority will argue the earnings and the multiple down and the minority will argue both up, so each input has to be traced to a source the Court can check.
Forecasts prepared by the controlling party after the dispute began are handled with appropriate caution; we form our own view and state it rather than adopting theirs. The asset approach comes forward where the company holds land or investments, where trading is falling, or where the Court is weighing a winding up against a buy-out and needs to know which leaves the minority better off. Earlier share transfers, offers received and buy-ins by other members are relevant market evidence, although a related-party transaction or a price fixed by an untested formula counts for less, and the minority will often say a low historical price was itself part of the oppression.
Dissolving an Adelaide partnership raises the same issues in another form. Under the Partnership Act 1891 (SA), unless the partnership deed says otherwise, each partner's share on dissolution depends on the value of the partnership assets, and in a professional firm the largest asset is usually goodwill. Whether that goodwill remains with the firm or goes with the departing partner decides most splits in accounting, legal, engineering, medical and dental practices, from firms in the East End and Kent Town to specialist rooms near the Royal Adelaide Hospital and Flinders Medical Centre.
When a shareholder dispute valuation collapses it is usually for one of these reasons, and most of them are in place before a single figure is calculated.
Report depth follows the audience rather than the size of the company. Two partners settling a buy-out in good faith need less than a report that the opposing expert, a mediator and eventually a judge of the Supreme Court of South Australia will test page by page.
Every dispute report records who instructed us and the questions asked, the assumptions made and the documents reviewed, then moves from those facts to each conclusion so a reader coming to the matter fresh can follow it. Where more than one basis or date is asked for, the figures are set out side by side and the difference is explained. Limitations, including documents a party did not produce, are stated openly. We write on the footing that another expert will hunt for the weakest point, because in a dispute one will.
In the Supreme Court and the District Court of South Australia the report is prepared to meet the court's expert evidence rules, which place the expert's duty to the Court above any duty to the client; in the Federal Court of Australia's Adelaide registry it follows that Court's expert evidence practice note. The certified valuer who signs it attends conferences of experts, contributes to joint reports recording what is agreed and what is still in dispute, and gives evidence, alongside the opposing expert if the Court directs concurrent evidence. We also review the other side's report as consulting experts, identifying unsupported assumptions and lines for cross-examination, and we act as determining expert where both parties have agreed in advance to be bound by the result.
Will you meet the other expert and then give evidence on this report in the Supreme Court of South Australia, concurrently with them if the Court so orders? If the answer is anything other than yes, find another valuer before the case gets under way.
Talk your situation through with a certified valuer before you commit to anything, at no cost.