Transfer of shares may trigger a taxable event. Is so, tax regulations often require support of the arm’s length nature of the transfer value of the shares. For this purpose, it is recommended to perform an independent valuation study. A valuation report sets out the fair market value of the shares and can be used to justify the arm’s length nature of the transfer value towards tax authorities, auditors and/or internal stakeholders.
Valuation of shares can be complex. In a legal restructuring, an entity that is transferred may hold shares of subsidiaries that are moving along. In order to value a group of entities, a valuation of each single subsidiary may be required. In this regard, a distinction should be made between holding companies and operating companies. The value of holding companies depends on the value of its underlying subsidiaries. The value of operating companies depends on their profit potential. For valuation of a portfolio of group companies, complex valuation models may need to be developed.
Embridge has extensive experience with valuation of shares for tax and accounting purposes and has performed share valuations in a broad range of industries. For more information please contact: