Profinance Trust SA v Gladstone [2002] 1 BCLC 141

Facts

  • Profinance Trust SA v Gladstone [2002] 1 BCLC 141 was decided by the Privy Council and concerned determining the fair value of shares during a buy-out.
  • The case addressed how to assess share values, notably for minority shareholders, where market value may not reflect fairness due to limited potential purchasers.
  • The court emphasized that a fair value assessment requires consideration of the company’s finances, potential future performance, and the specific circumstances of the buy-out.
  • Technical evidence from impartial, qualified outside specialists was considered necessary due to the complexity of share valuations.
  • The judgment highlighted the importance of basing share valuations on evidence, considering issues such as minority discounts, marketability, and control premiums, and requiring that any adjustments be clearly justified.

Issues

  1. What method should be used to determine the fair value of shares in a buy-out scenario, particularly where minority interests are involved?
  2. When, if ever, are discounts for minority holdings or lack of marketability, or premiums for control, appropriate in the valuation process?
  3. What is the proper role of independent evaluators in assisting the court to determine share value?
  4. How should expectations of future company performance and risks be factored into share valuation?

Decision

  • The court established that fair value assessments should reflect what a willing buyer would pay a willing seller, with each fully informed and under no compulsion.
  • Market value is not always determinative, especially for minority holdings; valuations must consider the shares’ true worth in context.
  • Adjustments for minority discounts or marketability should only be made if clearly justified by the circumstances; premiums for control may apply where appropriate.
  • Impartial, qualified outside specialists must provide evidence-based, transparent opinions to assist the court.
  • Valuations must consider both historical results and realistic expectations for future performance, including relevant risks and liabilities.

Legal Principles

  • Fair value in buy-out disputes is a flexible concept, distinct from strict market value, designed to protect minority shareholder interests.
  • Adjustments to share value (discounts or premiums) require clear, case-specific justification.
  • The use of impartial, qualified independent experts ensures accuracy and fairness in technical valuation matters.
  • Proper valuation entails both retrospective analysis and forward-looking assessment of the company’s business, industry environment, and foreseeable changes.
  • Profinance’s framework remains influential, and its principles have been adopted in subsequent case law regarding share valuation.

Conclusion

Profinance Trust SA v Gladstone set out comprehensive guidelines for share valuation in corporate buy-outs, emphasizing fairness, justified valuation adjustments, expert impartiality, and the significance of analyzing both the company’s present condition and future prospects, thereby shaping current practice in disputed share valuations.

The answers, solutions, explanations, and written content provided on this page represent PastPaperHero's interpretation of academic material and potential responses to given questions. These are not guaranteed to be the only correct or definitive answers or explanations. Alternative valid responses, interpretations, or approaches may exist. If you believe any content is incorrect, outdated, or could be improved, please get in touch with us and we will review and make necessary amendments if we deem it appropriate. As per our terms and conditions, PastPaperHero shall not be held liable or responsible for any consequences arising. This includes, but is not limited to, incorrect answers in assignments, exams, or any form of testing administered by educational institutions or examination boards, as well as any misunderstandings or misapplications of concepts explained in our written content. Users are responsible for verifying that the methods, procedures, and explanations presented align with those taught in their respective educational settings and with current academic standards. While we strive to provide high-quality, accurate, and up-to-date content, PastPaperHero does not guarantee the completeness or accuracy of our written explanations, nor any specific outcomes in academic understanding or testing, whether formal or informal.
No resources available.

Job & Test Prep on a Budget

Compare PastPaperHero's subscription offering to the wider market

PastPaperHero
Monthly Plan
$10
Assessment Day
One-time Fee
$20-39
Job Test Prep
One-time Fee
$90-350

Note the above prices are approximate and based on prices listed on the respective websites as of May 2025. Prices may vary based on location, currency exchange rates, and other factors.

Get unlimited access to thousands of practice questions, flashcards, and detailed explanations. Save over 90% compared to one-time courses while maintaining the flexibility to learn at your own pace.

All-in-one Learning Platform

Everything you need to master your assessments and job tests in one place

  • Comprehensive Content

    Access thousands of fully explained questions and cases across multiple subjects

  • Visual Learning

    Understand complex concepts with intuitive diagrams and flowcharts

  • Focused Practice

    Prepare for assessments with targeted practice materials and expert guidance

  • Personalized Learning

    Track your progress and focus on areas where you need improvement

  • Affordable Access

    Get quality educational resources at a fraction of traditional costs

Tell Us What You Think

Help us improve our resources by sharing your experience

Pleased to share that I have successfully passed the SQE1 exam on 1st attempt. With SQE2 exempted, I’m now one step closer to getting enrolled as a Solicitor of England and Wales! Would like to thank my seniors, colleagues, mentors and friends for all the support during this grueling journey. This is one of the most difficult bar exams in the world to undertake, especially alongside a full time job! So happy to help out any aspirant who may be reading this message! I had prepared from the University of Law SQE Manuals and the AI powered MCQ bank from PastPaperHero.

Saptarshi Chatterjee

Saptarshi Chatterjee

Senior Associate at Trilegal