Introduction
In unfair prejudice proceedings,[1] one question that the parties and the court have to grapple with is whether a minority discount should be applied when valuing the shares being bought out. The difference between a pro rata valuation and a discounted minority valuation can amount to millions of pounds, and when it does, this can become a critical battleground in settlement negotiations and at trial.
Recent judgments demonstrate that in determining remedy in Section 994 petitions, the courts continue to place significant weight on the specific facts of each case and the broader objective of fairness. This article identifies the legal and valuation factors that are likely to matter, including the underlying circumstances of the shareholder relationship, governance arrangements, and the nature of the unfair prejudice itself.
Legal Considerations
For some time, the court has generally determined, although not without exception, that:
i. In the case of a quasi-partnership, a minority discount generally should not be applied. It is considered unfair to apply a commercial market analysis to a shareholder forced to exit a partnership-like arrangement. Therefore, the objective is usually to give the minority their proportionate share of the company’s value, as if the business was sold as a whole, rather than the depressed value of a minority stake. This principle is rooted in the notion that it would be unfair for the majority shareholders to benefit from their wrongdoing by acquiring shares at a discounted value.[2]
ii. In the case of a trading company that is not considered to be a quasi-partnership, unless there are special circumstances, a minority discount is generally applied to the value of the minority shareholding.[3]
Nevertheless, the overriding principle is fairness. The question is often not simply whether a shareholder is a minority shareholder, but whether fairness requires that they be treated as one. Therefore, the court will consider the circumstances of each case, including:
- the nature and extent of the unfair prejudice suffered by the petitioner;
- whether the party against whom the order is made has acted in breach of obligations of good faith, which would further support a pro rata valuation; and
- whether the petitioner has themselves contributed to the unfair prejudice.
Valuation Considerations
The Association of Chartered Certified Accountants (ACCA) guidance on valuing trading companies offers a range of discounts which are considered a reasonable starting point in deciding the appropriate level of minority discount in a “normal open market value valuation.” This ranges from up to 75% for an interest of less than 10%, to 5% for majority holdings in excess of 50%.[4] In deciding what level of discount should apply, a valuation expert will consider:
- Shareholders’ Agreement / Articles of Association – Is there an agreed mechanism for determining the fair value of the shares?
- Special Rights Attaching to the Shares or Different Classes of Shares – Voting rights, preferential rights in the event of insolvency, pre-emption rights, tag along rights, and drag along rights.
- Level of Shareholding – By reference to the voting requirements in the Companies Act (CA) 2006,where shareholdings above 50% have control of the company, and shareholdings above 25% can block a special resolution. Any linked shareholdings may also need to be taken into consideration.
- Basis of Value – For example, hypothetical buyer or specific purchaser?
- Market Practice – Published industry guidance, e.g. the ACCA Factsheet.[5]
- Nature of Other Interests in the Company – One majority shareholder or lots of minority shareholders? This may impact the degree of control and influence held by the minority shareholder.
- The Implications of Effective Holdings Post-Transaction – Does the sale ordered confer control on the acquirer?
Implications for Practitioners
- Courts continue to favour a highly fact-specific approach when determining whether a minority discount should apply in unfair prejudice proceedings.
- Early assessment of minority discount risk is essential when evaluating litigation strategy and settlement options. Parties must not assume that “standard” minority discount ranges will be adopted by the court without adjustment to reflect the particular facts of the case.
- Expert valuation evidence is often critical not only in quantifying a discount but in assessing the impact of control rights, shareholder dynamics, and post-transaction ownership structures.
If you have any comments on this article or on the issue of minority discounts, please contact the authors, Eleanor Taylor, Ankura and Veronique Bergau, Fox Williams LLP.
Recent Judgments in the UK Courts
Chambi v. Aristodemou (Re Guest Supplies) (2026)[6] concerned a quasi-partnership company, found to have been based on mutual trust and confidence. Several findings of unfairly prejudicial conduct were determined, including the filing of false accounts, deliberate concealment of the company’s true financial position and the misappropriation of funds. The remedy ordered was a buyout of the petitioner’s shares without minority discount.
In Morgan v. Morgan (2026),[7] the court applied the O’Neill v. Phillips principles of fairness in quasi-partnerships and held that the petitioner’s exclusion from the company was unfair and that, on the facts, he was entitled to participate in the management of the company. The petition succeeded and the respondents were ordered to purchase the petitioner’s shares at fair value without minority discount. HHJ Paul Matthews concluded that “Richard’s shares should be valued without making any discount for the fact that he has a minority shareholding. This is because Richard did nothing to deserve his exclusion from the Companies, and he did not wish to leave otherwise. He should not be treated as a willing seller.” [152]
In Gu v. Whibberley & Ors (2025),[8] the court found that Mr. Gu had suffered unfair prejudice and ordered that no minority discount should apply to the valuation of his 7% shareholding when assessing the price at which his shares should be bought by the company. The court found that as a result of the unfair prejudice, Mr. Gu lost his right to be paid out the full value of his shareholding promptly, in accordance with the appropriate mechanism in the shareholders agreement, which provided that no premium or discount would be attributable to the shareholding of a departing shareholder.
Wells v. Hornshaw & Ors (Re Transwaste Recycling and Aggregates Ltd) (2024)[9] lays out factors considered by the court in determining whether a minority discount applies. The court found that Mr. Wells, a 14.3% shareholder in TRAL, had suffered unfair prejudice in respect of a valuation exercise carried out to facilitate the transfer of his shares as a departing shareholder. The court ordered a valuation exercise to be carried out by a valuer appointed jointly by the parties (or by the court). The claimant argued that no minority discount should apply to the value of Mr Wells’ shareholding, despite the company not being a quasi-partnership. However, the court did not consider the claimant’s arguments to meet the “special circumstances,” which require treatment of the minority shareholding other than as a minority shareholding, and therefore ordered a minority discount to apply,with the valuer to determine what the amount of the discount should be. The court also considered that the petitioner was not an unwilling seller, and that there was no reason to depart from the contractual framework, which governed the valuation of the shareholding on exit from the company:
“It is not like the quasi partnership case where the minority shareholder is an unwilling seller and has no means of sale and exit absent an order from the Court, and where the Court is forced to proceed on the basis of a notional sale of the business as a whole because that is the only fair option. Here, I see nothing unfair in holding Mr Wells to the contractual framework he signed up to, to govern precisely the situation which arose, in which he wanted to leave [the Company] and dispose of his minority shareholding to the remaining shareholders. I think it would be artificial and unfair in valuing that minority holding to pretend, by means of whatever legal fiction, that there is to be a sale of the whole business of TRAL, because that it not what is intended to happen.” [266]
It is perhaps also noteworthy that a large proportion of the petitioner’s allegations of unfair prejudice were rejected.
Morris v. Elite Motors Bodyshop Ltd & Anor (2024)[10] involved a petition filed by Mr. Robert Morris alleging, unfair prejudice in the conduct of the affairs of Elite Motors Bodyshop Limited, which, it is alleged, was carried on as a quasi-partnership. The company was co-owned by Morris and his brother, the second respondent, each holding 50% of the shares. The petitioner argued for either a pro rata valuation of his 50% shareholding, to reflect that the petitioner was an unwilling seller and that the second respondent would benefit from his own wrongdoing if allowed to purchase the shares at a depressed market value, or a marriage premium, to reflect the additional value to the second respondent of acquiring control of the company via the combined shareholding. The judgment referred to here is in reference to a strike out application. which was refused; no judgment on these issues has yet been handed down, but it is interesting to see the arguments made on this point.
McMonagle v. Harvey & Ors (2023)[11] demonstrates the interplay of points of law and expert opinion in determining the minority discount. In this case, following a trial on liability in 2021, the court sought to determine the value at which Mr. Havey’s 25% shareholding should be bought out. The court considered whether a minority discount should apply to Mr. Harvey’s 25% shareholding. It concluded that a discount was appropriate because the shareholding constituted a minority interest. However, the court determined that the discount should be reduced to 15%, rather than the standard 30% recommended by the ACCA Technical Factsheet 167, due to the effective control gained by Mr. McMonagle when acting in concert with his wife, who also owned 25% of the shares.
Simpson v. Michael Agapios Diamandis & Ors (2024) EWHC 850 (Ch) – Unfair prejudice was found to have been caused to the petitioner following the transfer of shares in the company’s subsidiary, at a substantial undervalue. The petitioner argued that a quasi-partnership existed. The respondents did not make submissions to the contrary and the court found that it was a quasi-partnership. Consequently, no minority discount was applied to the value of the petitioner’s shares for the buy-out.
Simmonds v. Wilson & Ors (2023)[12] – The court found that two family-run businesses were quasi-partnerships, from which the petitioner had been excluded and denied dividends. Consequently, no minority discount was applied. However, the judge noted at paragraph 39:
“Even the existence of a quasi-partnership does not automatically entitle a petitioner to a ‘no fault divorce,’ there must be something more. In particular, a quasi-partner who decides to leave for personal reasons is not entitled to be bought out at an undiscounted value (see Phoenix Office Supplies Limited v Larvin [2002] EWCA Civ 1740, per Auld LJ, at paragraphs 32 to 34, with whom Clarke and Jonathan Parker LJJ agreed).”
Notes
[1] i.e. proceedings brought under Section 994 of the Companies Act 2006, which allows a shareholder to petition the court if they believe the company’s affairs are being or have been conducted in a way that is unfairly prejudicial to their interests or the interests of other shareholders
[2] See Re Bird Precision Bellows Ltd [1984] and O’Neill v Phillips [1999]. More recently, in Simmonds v Wilson & Ors [2023], Simpson v Michael Agapios Diamandis & Ors [2024], Morgan v Morgan [2026], and Chambi v Aristodemou (Re Guest Supplies) [2026], the Court found that no minority discount should apply as the businesses at issue were quasi-partnerships
[3] See Re Dinglis Properties Ltd [2019].
[4] ACCA Technical Factsheet 167,”Valuing trading companies”, section 6.
[5] https://www.accaglobal.com/content/dam/ACCA_Global/Technical/fact/technical-factsheet-167.pdf.
[6] Chambi v Aristodemou (Re Guest Supplies) [2026] EWHC 599 (Ch), 20 March 2026
[7] Morgan v Morgan [2026] EWHC 384 (Ch), 26 February 2026
[8] Gu v Whibberley & Ors [2025] EWHC 1816 (Ch), 17 July 2025.
[9] Wells v Hornshaw & Ors [2024] EWHC 330 (Ch), 19 February 2024.
[10] Morris v Elite Motors Bodyshop Ltd & Anor (Rev1) [2024] EWHC 1173 (Ch), 17 May 2024.
[11] McMonagle v Harvey & Ors [2023] EWHC 2406 (Ch), 6 October 2023.
[12] Simmonds v Wilson & Ors [2023] EWHC 289 (Ch), 24 February 2023.
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