21 MARCH 2012
A contentious issue in shareholder oppression cases is often the date at which the minority shareholders’ shares should be valued where the remedy of the Court orders a compulsory acquisition of the shares of the minority.
In a recent judgment, the Federal Court has revisited this question and reinforced that in the absence of the Corporations Act fixing the date at which valuation should occur, it is for the judge to fix a price for the shares that represents a fair value in all the circumstances of the case.
Not surprisingly, this flexibility regularly leads to argument as to what is the proper date to undertake the valuation. A valuation later in time may be substantially less where the minority shareholder has been excluded from participation in the affairs of the company.
In Harding Investments Pty Ltd v PMP Shareholding PL the dates advanced included the following dates:
- Commencement of the oppression;
- Dismissal of CEO and removal from the board of directors;
- Issue of proceedings;
- Voluntary Administration of the company;
- Court Order to transfer the shares.
Ultimately, the Court agreed with the independent valuer’s selection of 30 June 2011 as the relevant date. The reasoning included that the date was close in time to the date of the Court Order, that it was the end of the financial year for the company making it the date for which the full years financial performance could be utilised to determine value and the date on which reasonably accurate financial information was available.
However, the case authorities recognise that on occasions the relevant date may well be the date on which the proceedings were commenced, or the date of exclusion of the minority shareholder. The Courts discretion may also be exercised to give the oppressed shareholder what is in effect money compensation for the injury done.
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