4.3.8.1 Valuation methods

As we have seen, a shareholder is entitled to claim his exit and request compensation if an important reason justifies the exit. In order to award this claim, the shares have to be valued. If there is an important ground to exit the company, the starting point is that shares of a profitable company are valued at their full market value.1 The full market value is based on what a willing buyer would like to pay for the company to a willing seller.2 The valuation of the shares at their full market value comes down to a valuation pro rata parte according to the total value of the company.3 Usually, the valuation of the shares requires an expert report.4

An exception to the tule that shares have to be valued at their full market value is made if the articles of association comprehend valuation mechanisms. These valuation mechanisms are described below in § 4.3.9.

A prima vista there is no exclusively prescribed valuation method to be used when assessing the value of the shares.5 The Supreme Court though, has cleared that several factors are relevant to the assessment of the valuation of the shares.6 According to the Supreme Court, a first relevant factor is the amount of the equity of the company according to the balance sheets of the preceding years. These balance sheets can provide an impression of the development of the equity of the company, and of the profits, the distributable reserves and the profit reserve of the company. Even though the balance sheets provide a lot of information on the economie and financial development of the company, this information is merely one of the relevant factors in the valuation process. This information is not decisive. As a further relevant factor the Court regards the fact that a company can have a higher value than appears from its balance sheets, amongst other things if hidden reserves and goodwill are present. Thirdly, as a point of departure, the Supreme Court decides to value the company at going concern, and not at liquidation value.7

The Supreme Court did not express a preference for one valuation method or another. Nonetheless, the Court refers to the valuation by way of discounted cash flow method (Ertragswertmethode) as the most commonly used valuation method in Germany.8 The Supreme Court has explicitly lelt it open to lower courts to decide on a valuation method that suits best in the circumstances of the case.