How can you determine the value of a company's shares?

The value of a company's shares does not necessarily correspond to the price paid when they were issued. It can change over time depending on several factors, including the company's financial situation, the value of its assets and liabilities, its profitability, its growth prospects, and the rights attached to the relevant class of shares.

Therefore, there is no single method for determining the value of shares. This can vary depending on the context in which the valuation is carried out and the objective pursued in relation to determining the value of the shares.

For example, it may be necessary to establish the value of the shares:

• during the sale of all or part of the assets or even part of the shares of the company;
• upon the arrival or departure of a shareholder;
• as part of a corporate reorganization;
• following the death of a shareholder;
• during a transfer of the business to a family member;
• pursuant to a shareholders' agreement containing buy-sell clauses;
• in the context of a dispute between shareholders.

In some cases, shareholders may agree on the value of the shares or stipulate, in a shareholders' agreement containing buy-sell clauses, a method for determining this value. The agreement may include a valuation formula, a value established periodically by the shareholders, or the use of a professional specializing in business valuation.

In the absence of an applicable method or an agreement between the parties, it may be necessary to call upon a professional specializing in business valuation to establish the value of the shares according to the circumstances and the objective of the valuation.

The valuation used can have a significant impact on the sale, transfer, or repurchase price of the shares, the tax consequences of the transaction, its financing, and shareholder rights. It is therefore recommended to determine the applicable valuation method before undertaking such a transaction.

In summary , the value of a company's shares depends on many factors and can vary depending on the circumstances and the purpose of the valuation. A method stipulated in a shareholders' agreement containing buy-sell clauses, or a valuation performed by a specialist, can establish this value on an objective basis and reduce the risk of disputes between the parties.