Valuation of social shares and participations
When a partner decides to separate from the company to which he belongs, in the cases in which the Law grants him that right, or is excluded from it, the dispute over the price of its capital participation frequently arises.
Art. 353.1 of the Ley de Sociedades de Capital (LSC) determines that, in the absence of an agreement between the parties on the fair value of the shares or participations, said value must be determined by an expert appointed by the Mercantile Registry.
What is fair value?
The “fair value” of the shares or corporate participations cannot be other than the real value or market value. That is, the price for which its transmission could presumably be carried out between two independent persons.
Directive 2001/65/CE of the European Parliament and of the Council, of September 27, 2001, amended Directives 78/660/CEE, 83/349/CEE and 86 /635/CEE with regard to the valuation rules applicable in the annual and consolidated accounts of certain forms of company, as well as of banks and other financial entities. In said reform (art. 42 Ter) some rules were introduced for the realization of fair value.
In those cases in which there is a reliable market, the market value must be taken as reasonable; when this circumstance does not occur, the value obtained through the application of generally accepted valuation models and techniques must be considered reasonable. Adding that these valuation models or techniques must provide a reasonable approximation to the market value.
The judgment of the Supreme Court of 2/28/2011 accepted these same evaluation criteria of the aforementioned art. 42 Ter to specify the fair value of shares and company participations.
Does fair value equal book value?
Certainly the law grants the partner who separates or is excluded the right to receive the fair value of his or her share. If the accounting does not include the real equity valuation of the company, it is obvious that the partner will not be legally satisfied with an amount that complies with the theoretical book value.
The courts have determined that when it comes to valuing a company in operation, its goodwill must be considered as well as capital gains real estate above the nominal values that appear in accounting. This was proclaimed in the aforementioned Supreme Court ruling of 05/18/2012. Our Provincial Courts have followed this same criteria (Granada SAP of 04/29/2011 and Salamanca SAP of 06/21/2016).
If the capital gains of the real estate assets are not reflected in the balance sheet and neither is the goodwill earned over time by the company itself, it is clear that the valuation of the expert appointed by the Mercantile Registry cannot be limited to a mere estimate of accounting figures. It will have to supplement the resulting value of the books with these intangibles that have a real value.
The Resolution of the President of the Institute of Accounting and Audit of Accounts (ICAC) of 10/23/1991 alluded to the assessment criteria that auditors should follow to determine the value of the shares in certain cases contemplated in the old Public Limited Companies Law.
When dealing with non-listed companies, the ICAC referred to the real net asset value, the value of capitalization of results and the present value of net monetary flows .
Using these criteria, in short, the need to arrive at an approximation of the real value of a company in operation was pointed out, considering its capital gains, its goodwill, its expectations of future profit or even the price at which the entire company could be sold. Therefore, the opinion contained in this old decision is endorsed by the doctrine of our courts.
Can the independent auditor’s assessment be rebutted?
The jurisprudence has recognized that it is possible to challenge and dispute the value specified by the auditor appointed by the Mercantile Registry.
The STS of 05/18/2012, citing other Supreme Court precedents, recognized that the appointment of an auditor by the Mercantile Registry corresponding to the domicile of the company guarantees the impartiality and the appropriate professional qualification but not the accuracy of the report.
The value set by said auditor may be revoked by the Courts if it lacks due motivation, that is, if it does not give due reasons for the calculation criteria applied to conclude the figure contained in the report.
And likewise, the valuation carried out by the independent expert will be revocable in court if objectively it does not adjust to the fair value of the corporate participation. The aforementioned Supreme Court ruling did so because it did not compute real estate capital gains and goodwill.
It is irrelevant, for these purposes, that the author of the report has acted in good or bad faith, since what is relevant is whether the assessment issued is really reasonable or not.</p > More information about our department specializing in Business Purchases</a >