For many years accountants have advised
This nostrum has had a consequent influence on the valuations when we have to value a minority interest in a company within the matrimonial and
In the absence of a shareholders agreement, there is a default presumption that a rational investor will not pay very much for a minority shareholding in a private company.
This is predicated on the basis that the controlling shareholders (who will be the
Thus, if there is no shareholders agreement with a clause requiring a dividend to be declared, then the controlling shareholders will decline to declare a dividend.
With no prospect of a guaranteed
This is a very decent point. We still tend to be influenced by the thought that the rational investor cannot be sure that a dividend will be declared and hence perhaps discount the tax impact more than one might initially think.
Recent tax changes have reduced the benefit of taking reward by way of dividend. This is the consequence of the additional levy of 7.5% on dividend income. The palliative of a dividend allowance has now been weakened by its reduction to just £2,000.
A dividend based reward strategy still has the edge but it is far less significant.
Accordingly, it probably reinforces our instinct that the rational investor will judge that he cannot reasonably expect a dividend to be declared as a matter of course.
Thought processes will
If we can determine that the
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The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.