{"id":774,"date":"2018-10-24T00:00:00","date_gmt":"2018-10-24T04:00:00","guid":{"rendered":"https:\/\/jcdesnoyers.ca\/7-basic-principles-business-valuation-principle-7\/"},"modified":"2025-05-21T13:30:43","modified_gmt":"2025-05-21T17:30:43","slug":"7-basic-principles-business-valuation-principle-7","status":"publish","type":"post","link":"https:\/\/jcdesnoyers.ca\/en\/7-basic-principles-business-valuation-principle-7\/","title":{"rendered":"7 basic principles of business valuation : Principle 7"},"content":{"rendered":"

Principle n\u00ba\u00a07:<\/b> Absent a shareholders\u2019 or other ownership agreement, or legislation or adjudicated legislative intent that dictates otherwise, the value of a controlling interest in a business may have a greater value per share than does a minority interest in that same business when each is viewed in isolation. <\/em><\/p>\n

The first 6 basic principles explained in the previous articles allowed the Chartered Business Valuator (CBV) to determine the total value of a business. The 7th principle, instead, revolves around the value of an individual shareholding: can the value per share be different for one shareholder or another? The answer is yes: being a majority or minority shareholder will influence the value of your shares.<\/span><\/p>\n

The role of the CBV is also to give you information on the value of a shareholding. <\/span><\/p>\n

\"Minority<\/p>\n

Controlling interest and minority interest<\/b><\/p>\n

We must first understand what a minority shareholding is: it is present as soon as a business belongs to two or more owners. For example, if one of the shareholders holds 60% of the shares of a business, it will be said that he has a controlling interest. The one who owns 40% will have a minority interest since he has an ownership percentage of less than 50%. As a result, his rights will be limited concerning some business-related decisions<\/span> that will be listed below, resulting in a minority interest could be worth less than a majority interest.<\/span><\/p>\n

Please note:<\/strong> even if a business is run by two shareholders with 50% of the shares each, their interest can be considered as a minority shareholding, since neither shareholding confers control. <\/span>To determine the value of a minority interest, the CBV will take into account various parameters that will also be presented in this article. This step will allow him to calculate the minority discount,<\/span> which is a downward adjustment of the value of the shares.<\/span><\/p>\n

Things a controlling owner may be able to do that a minority cannot<\/b><\/p>\n

There are some disadvantages to being a minority owner since majority ownership provides greater control in the business<\/span>. <\/b>It usually makes it possible to take a good part of the decisions, such as:<\/span><\/p>\n