Valuing private company shares in Family Law

When a private company shareholding is part of your property settlement

If you are going through a family law separation or divorce and one of you holds a minority interest in a private company, the valuation of that interest is likely to be one of the most contested and consequential issues in your property settlement. You might assume that obtaining a business valuation expert will resolve the question. A recent decision of the Federal Circuit and Family Court of Australia is a powerful reminder that it is rarely that simple and that the outcome may look very different depending on which side of the ledger you are on.

In Meint & Lyall [2026] FedCFamC1A 24, the court declined to attribute any value to a founding shareholder's 32.8% minority interest in a private company, despite a joint expert valuing the interest at approximately $2.9 million. For the shareholder spouse, this was a significant outcome in his favour. For the non-shareholder spouse, it meant that an asset she had counted on as a substantial part of the property pool effectively disappeared. The decision contains important lessons for both spouses when a minority shareholding forms part of the asset pool.

The court and not the expert determines value

In family law proceedings, the valuation of shares in a private company is ultimately a factual question for the court, not the expert. While the court may be assisted by expert valuation evidence, it is not bound by it. The judge must form an independent judgment applying the correct legal principles to all of the evidence, including evidence well beyond the four corners of a valuation report.

As confirmed in Meint & Lyall, drawing on the Full Court's decision in Gare & Farlow (2023) FLC 94-146, the exercise is a "commonsense endeavour" to fix a value that genuinely satisfies the court's mind and is not an exercise in strict arithmetic. This means that the opinion as to the value of the shares expressed in an expert report jointly commissioned by both parties, can be rejected by the court if it concludes that the methodology does not reflect the practical reality of what the shares are actually worth.

Restrictions on the shares are everything

The most critical lesson from Meint & Lyall is that the restrictions governing what can actually be done with the shares are central to how the court will approach valuation. The long-established principle, reaffirmed in this case, is that the value of shares in a proprietary company is the value that a willing purchaser would pay for them, having regard to all of the restrictions contained in the company's articles of association or shareholders agreement.

In Meint & Lyall, the husband's shares were governed by a Shareholders Deed preventing him from selling, transferring, mortgaging or otherwise dealing with his shares without the prior written consent of the other founding shareholders. Those other shareholders who together held a controlling 66.66% interest and majority board voting rights gave unchallenged evidence that they would not consent to any transfer of the shares to the wife, and that if a transfer notice were issued they would exercise their option to acquire the shares at a price reflecting only the company's indebtedness, effectively nil consideration.

The expert had calculated the husband's interest as a straightforward pro-rata percentage of the whole company's assessed market value, without any adjustment to reflect these constraints. The court found that methodology was fundamentally inappropriate. The only available purchasers had indicated they would pay nothing meaningful, and the shares could not be transferred to the wife in any event. Accordingly, no positive value was attributed to the interest.

For the shareholder spouse, this illustrates the importance of placing evidence of the shareholders agreement and the position of the other shareholders before the court from the outset. A high valuation figure that does not reflect commercial reality can and should be challenged.

For the non-shareholder spouse, this is a sobering warning. An asset that appears substantial on paper may be worth far less or nothing once the court examines the practical constraints on its realisation. Relying solely on a joint expert report without interrogating the terms of the shareholders agreement and the intentions of the other shareholders may leave you significantly exposed.

The company's financial position at trial and not just at valuation date

Valuations are prepared as at a specific date, but proceedings can take years to resolve. In Meint & Lyall, evidence was placed before the court that the company had encountered a deteriorating financial position since the date of the expert valuation. The court had regard to this in reaching its conclusion.

Practical steps for both spouses

For the shareholder spouse, if your company's financial position has declined since the valuation date, updated financial evidence should be placed before the court. The valuation date and the trial date may be separated by years, and a snapshot taken at the wrong moment may significantly overstate what the interest is currently worth.

For the non-shareholder spouse, the same point cuts the other way. If the company has grown in value since the valuation date, or if the expert's report relied on conservative assumptions that subsequent performance has not borne out, you should seek updated evidence. Do not allow a stale valuation to be treated as representing current value without scrutiny.

Conclusion

Meint & Lyall illustrates that when a minority shareholding is part of a family law property pool, the gap between what an expert values the shares at and what the court ultimately finds can be very wide indeed. For the shareholder spouse, the restrictions in your shareholders agreement and the intentions of your co-owners may reduce the value attributed to your interest which may or may not work in your overall favour. For the non-shareholder spouse, an asset that appears substantial on paper may prove far harder to realise than you anticipated. Both spouses need early specialist family law advice.

If a minority shareholding forms part of your property settlement, you should seek advice from a family lawyer experienced in complex property matters.

Contact Fiona Hoad and the experienced family law teams at Bartier Perry for tailored, practical advice specific to your personal circumstances.

Author: Fiona Hoad

This publication is intended as a source of information only. No reader should act on any matter without first obtaining professional advice.