Claim No: CR-2024-004856 - [2025] EWHC 2304 (Ch)

The value of the right to extract value

Mr Jones next considered a methodology of valuing the shares as management shares based on “what could reasonably be extracted from the company for the benefit of the management shareholder on earnings per management share basis”. This might include remuneration over and above a reasonable market rate for the work done but not so high as to enable other shareholders to petition the court for unfairly prejudicial conduct or to justify a winding up on a just and equitable basis.

He notes that under the articles, Mr Ipek as the sole director is able to set his own remuneration. He wrongly states that the court has ordered consultancy fees of £250,000 per annum. More correctly this should state that the court has limited consultancy fees to that amount. On this basis he suggests an exercise of assuming that Mr Ipek will earn at this amount for another 13 years until the age of 75 and reaches a value of £3.25 million on this basis.

This appears to be a fundamentally flawed methodology.

Mr Jones fails to suggest any discounting of this potential stream of revenue having regard to future receipt or uncertainty, as would, in my view, be a standard valuation approach.

Neither does Mr Jones take any account of the fact that Mr Ipek would need to work to receive these amounts, and therefore they should be reduced by the value of his labours (presumably what he could earn somewhere else). Indeed, the premise on which he values this – that the director could arrange to be overpaid, as long as he did this at a level just below the level at which the matter could be challenged in court does not appear a sound basis for the court to take into account – essentially it depends on the director, in breach of his fiduciary duties, approving a payment to himself that is in excess of that which he is worth.

Most fundamentally, it appears that Mr Jones wrongly assumes that this point has value in the hands of the purchaser, ignoring the fact that the A ordinary share provides only veto rights not rights of appointment. I question whether there is anyone other than Mr Ipek himself or his friends and family, who would pay for a right to ensure that Mr Ipek can continue to enjoy a good salary.