Plesner successful in leading case before the Supreme Court concerning valuation of minority shareholdings subject to compulsory redemption
On 10 May 2021, the Danish Supreme Court delivered judgment in favour of Plesner’s clients in a case concerning the valuation of minority shareholdings in connection with compulsory redemption by the majority shareholder.
The background to the case was that a majority shareholder of a family-owned manufacturing company decided to redeem compulsorily the shares of four minority shareholders. Each shareholder owned 1.38% of the share capital.
In connection with the compulsory redemption, the majority shareholder offered a price of 301 for the shares based on a previous share deal in the same company, the shares of which were not listed on a stock exchange.
Two of the minority shareholders found that the price was too low and requested, under sections 67/70 of the Danish Companies Act, that the City Court appoint an expert to determine the price.
The expert determined a price of 780, which was considerably above the price offered.
The majority shareholder brought the expert’s valuation before the court.
In addition to the dispute as to whether the expert’s valuation should be used as a basis, the case concerned two questions of general public importance.
The issue of the first question was whether the valuation of the minority shares was to be based on a proportionate share of the company’s total value as determined by the expert, or whether the value was to be determined on the basis of the value of the minority shareholdings in a stand-alone sale in the open market. The expert had also expressed an opinion on such a (lower) price.
All three courts found for the minority shareholders in that, in a compulsory redemption situation, the valuation of the minority shareholdings was to be based on a proportionate share of the company's total value.
The issue of the other question was whether, as assumed in the act, the minority shareholders were to pay the expenses relating to the assessment, or whether there was in this case, exceptionally, reason to depart from the assumption of the act and order the redeeming majority shareholder to pay such expenses in accordance with section 70(3) of the Danish Companies Act. According to printed case law, section 70(3) of the Danish Companies Act had not previously been applied.
The minority shareholders were also successful on this point, as all three courts found that the majority shareholder was to pay the full amount of the expenses for the expert’s fee in view of the considerable difference between the price offered and the price determined by the expert.
Partner Peter Bang conducted the case before all three courts.