It is commonly the case that the Articles of a private company apply pre-emption provisions on transfer, so that a shareholder wishing to dispose of his shares is first required to offer them to existing shareholders of the Company. Establishing a fair price for the shares being offered is one of the main considerations. Where agreement on price fails, a company's Articles often provide that the market value should be established by the Company's auditors. One of the attractions of this type of provision is that the auditors will already be familiar with the Company's finances and as a result will provide an accurate valuation in a shorter time and at a lower cost than another firm of accountants. So far, so good.

Problems, however, can arise where the auditors decline to carry out the valuation which they may do for a number of reasons particularly if providing the valuation threatens their independence and objectivity. The result for both the shareholders and the Company is unsatisfactory – it is unclear whether in the absence of agreement, the shares are untransferable or the provisions are void allowing the shareholder the freedom to transfer to a third party without consent. For groups of shareholders currently agreeing pre-emption provisions, the solution is reference to an independent valuer to be appointed by agreement between the parties, or failing which by the President for the time being of the Institute of Chartered Accountants. For those who may review their Articles in the coming year (a task which many companies have on their agenda to ensure the provisions of the Companies Act 2006 are adequately covered) this is another matter for consideration. Where arrangements are already in place which require a company's auditorS to become involved in share valuations, it would be prudent to raise this with the auditors to ensure that they do not have any concerns about acting, prior to any disputes arising.