Company valuation: which method applies in a sale, dispute or divorce?

The value of a company is the outcome of a valuation method applied to assumptions; the price is the outcome of a negotiation. In a Dutch shareholder buy-out, the Enterprise Chamber (Ondernemingskamer) sets the price on the basis of an expert report, and in a divorce the business is valued as part of the assets to be divided.

Which method applies, and who chooses it, depends on the setting: a sale, a shareholder dispute or a divorce. The articles of association or a shareholders’ agreement often settle that question in advance.

How is net asset value calculated?

Take the assets on the balance sheet, deduct the liabilities and adjust both to current values. The method is simple and verifiable, but it looks backward and ignores future earnings.

It suits holding companies and property-owning entities. It systematically undervalues a business whose worth lies in its customers, its people or its contracts, which is why buyers of an operating company rarely accept it as the only basis.

What is the profitability method?

It divides the maintainable profit by a required rate of return. This comes closer to economic reality than the balance sheet, but it treats profit as a proxy for cash.

The outcome depends heavily on the required return chosen. A shift of one or two percentage points in that rate changes the value substantially, and it is where two experts’ valuations usually diverge most.

How does the discounted cash flow method work?

The discounted cash flow (DCF) method projects future free cash flows and discounts them to present value. It is the method used most in transactions because it makes the assumptions explicit: the forecast, the discount rate and the terminal value.

It is also the method most sensitive to those assumptions. A small change in the discount rate or the terminal growth rate moves the outcome substantially, so in a sale both sides should test the model with alternative scenarios.

How is value determined in a shareholder dispute?

In an exclusion (uitstoting) or withdrawal (uittreding) procedure under Articles 2:336a and 2:343 of the Dutch Civil Code (BW), the Enterprise Chamber of the Amsterdam Court of Appeal decides. Since 1 January 2025 it has exclusive jurisdiction at first instance in these cases.

Under Article 2:339 BW the Enterprise Chamber appoints one or more independent experts, and under Article 2:340 BW it sets the price with reference to their report. According to the court’s guidelines for experts, the price is in principle the pro rata share of the real value of 100% of the shares, on a going-concern basis.

The valuation date is usually the date of the Enterprise Chamber’s decision, as that is when it becomes certain the shares will be transferred; the court can set a different date. Later changes in value are for the account of the acquirer.

The articles of association or a shareholders’ agreement often prescribe a method or a procedure for appointing a valuer. Such a contractual mechanism generally governs, so review it long before a dispute arises.

How is a business valued in a divorce?

If the business falls within the community of property, it is valued as part of the division. Under Article 1:99 BW the composition of the community is fixed on the day the divorce petition is filed; the value is in principle determined at the time of division, unless the spouses agree another date.

The spouse who continues the business often has to fund the payment from it. Courts take that into account in the payment terms, such as instalments, rather than in the valuation itself.

What should you check as a departing shareholder?

• Do the articles of association or the shareholders’ agreement prescribe a valuation method or valuer?
• Which valuation date applies, and has the value changed since the dispute began?
• Is a discount proposed for a minority holding, and on what basis?
• Do you have access to the figures and forecasts the valuation is based on?
• Would a withdrawal request to the Enterprise Chamber under Article 2:343 BW be an option?

What should you check as the remaining shareholders or the company?

• Is there a contractual buy-out mechanism you can invoke before going to court?
• Can the company or the remaining shareholders finance the price?
• Is an exclusion request under Article 2:336a BW justified by the other shareholder’s conduct?
• Have you agreed with the other side on one jointly instructed expert?
• Can an earn-out, deferred payment or warranty package bridge the gap in value?

What can we do for you with valuing a company?

We work with valuers in transactions, disputes and divorces as part of our corporate lawyer practice.

• We review and draft valuation clauses in articles of association and shareholders’ agreements.
• We agree the method, the valuation date and the expert’s instructions with the other side.
• We conduct exclusion and withdrawal proceedings before the Enterprise Chamber.
• We comment on draft expert reports on behalf of our client.
• We negotiate payment terms, earn-outs and warranties in a sale or divorce.

Summary

• Value is the result of a method and its assumptions; price is the result of a negotiation.
• Net asset value looks backward; the profitability method and DCF look forward at expected returns.
• Since 1 January 2025 the Enterprise Chamber decides exclusion and withdrawal cases at first instance and sets the price on the basis of an expert report (Articles 2:339 and 2:340 BW).
• In a divorce the community is fixed on the date the petition is filed (Article 1:99 BW); payment terms can reflect what the continuing spouse can afford.
• Agreeing the method, valuation date and a joint expert in advance prevents most disputes.

Frequently asked questions