Readers’ forum: Minority valuation

I am advising a successful trading company which has operated for many years. It is a close company and two of its directors are retiring. The proposal is that the company buys back their minority shareholdings. Although their holdings comprise only 8% and 10% of the issued ordinary share capital I have been asked by the controlling shareholder to value these by assuming that the company were to be sold and simply calculating 8% and 10% of the estimated total sale value. In other words I am being asked to ignore the discount that might be applied to non-influential minority shareholding.

The shares were acquired at their nominal value when the business was set up and there are no special restrictions attaching to them. There is only one class of shares so the holdings rank equally with the others. They are not obliged to sell simply...