Valuation of claim for unfair prejudice

Appointed to act as the expert on behalf of a minority shareholder in their claim for unfair prejudice against a fellow shareholder of a company which collected waste products to be recycled into aggregates for use in the construction industry.

The claim centred on allegations that the majority shareholder had transferred contracts or otherwise skimmed or diverted profits from the company to other associated companies in which the minority shareholder had no interest.  There were further allegations that the majority shareholder had received remuneration which far exceeded that to which he was entitled and had resulted in him having received a disproportionate share of the company’s profits.

We were instructed to prepare a report predominantly concerned with the value of the company at various points in time which had been established as being relevant to the claim for unfair prejudice.

We were also instructed to comment on the extent to which contracts had been diverted and whether the majority shareholder had received a disproportionate share of profits and, if so, the effect on the value of the company.  This required an extensive review of the company’s SAGE accounting records, those of the other associated companies.  It also necessitated interrogation of thousands of documents and accounting transactions on an e-disclosure platform.

As a result of this process we assessed that at least £5 million of sales had been diverted from the company as well as it having been improperly invoiced by the associated companies which had resulted in additional costs of sales of a further £1 million.  We also assessed that the majority shareholder had received excess remuneration of £600k.

Our instruction subsequently required us to review and comment on a claim against the minority shareholder by the majority shareholder for damages arising from the seizure of the Company’s computer server.  It was alleged that the actions of the minority shareholder had caused the company to suffer a direct loss of up to £250k and had necessitated the transfer of the contracts to the associated companies.

As a result of the complete breakdown in the relationship between the shareholders, the case proceeded to trial and the expert provided evidence over two days at court.