Reading through the Erdal case the shares the Tribunal was ruling a value in as at 31 March 1982 represented on around 1% of the issued share capital with the Russell trust owning 51% (to which Mr Erdal appears to be unconnected, importantly).
So the 40% discount in that case already took into account a minority shareholding.
However the company was a long established company Incorporated in May 1906 so around 100 years old operating from a 250 acre site in Fife Scotland well established manufacturing high quality engineered paper products for customers worldwide. The paper mill having been originally founded almost a 100 years before that in 1809!
On Companies House the company concerned I think is Tullis Russell Papermakers Limited although the Tribunal ruling actually refers to Tullis Russell Ltd but there is no such company on the register.
TULLIS RUSSELL PAPERMAKERS LIMITED
ROTHESFIELD
MARKINCH
FIFE
Company No. SC006195
Status: Active
Date of Incorporation: 21/05/1906
To put this into perspective the oldest company registered at Companies House is currently Cupar Corn Exchange
Limited, company number 53 incorporated on 13 February 1860 so Tullis Russell Papermakers Limited must be one of the oldest and this need to be remembered when looking at the Erdal tribunal case discount percentages etc.
Don't let HMRC quote Erdal out of context in this respect!
I doubt many clients with unquoted private shareholdings needing valuation will be quite so well established! In fact the Tribunal say in the Erdal ruling that they viewed shares in this company as slightly less difficult to market for sale than say a smaller less well established company and reduced the "marketability discount" because of that as far as I can see from 50% to 40% largely for that reason.
So if a discount of around 50% before reduction by the Tribunal to 40% to reflect less "marketability" affect applies to Tullis Russell Papermakers Limited a larger discount may well be more appropriate for smaller less established unquoted companies.
Although if breaking the discounts down between "size of holding" (to reflect the power the voting rights of the holding in question carry) and "lack of marketability" discounts need to combined need to reflect the facts of each case.
Hence the Tribunal comment that discounts (overall) seem to span the 25% to 75% margins.
Controlling holdings over 50% and over 75% holdings will be lower down the scale generally from my reading of this but interestingly the Erdal ruling seems to cast doubt of the importance of "voting rights" i.e. voting power and the affect this has on the valuation.
Liz
Edited by user 25 September 2014 14:57:33(UTC)
| Reason: Added bit more detail about company Tullis Russell as this is important when reading this