Business Valuation in a Divorce or Shareholder Dispute in France

In a divorce as in a shareholder dispute, the value of the business must be set by an independent third party. Two routes exist: a joint, adversarial valuation, where both sides instruct the same chartered accountant, and the court route. For company shares, article 1843-4 of the French Civil Code allows the president of the court to appoint an expert, and that appointment cannot be appealed.

When a couple separates and one spouse runs a company or operates a fonds de commerce, the liquidation of the matrimonial regime always hits the same question: what is the business worth. The notary handling the liquidation and the lawyers need a defensible figure to build the split. Without it, the file stalls.

A business raises difficulties that a bank account or an apartment do not. It has no reference market, its value rests on debatable assumptions about the future, and it is illiquid: nobody sells half of a family SME on a Monday morning.

On top of that comes an information asymmetry that shapes the entire debate. The spouse who runs the company holds the accounts, the contracts, the order book and the cash. The other one often discovers the business through a liasse fiscale. A properly conducted valuation restores the balance: it forces the documents to be produced, explained and submitted to challenge.

One clarification: the chartered accountant quantifies value, he does not decide family law questions, which belong to the lawyer and the notary. Where the company is a SARL or a family SCI, the mechanics specific to parts sociales add a technical layer: approval clauses, shareholder current accounts, minority position.

The Civil Code provides a way out when shareholders cannot agree on price. Where the value of company shares is contested, in a sale or a buy-back provided for by law or by the articles of association, that value is determined by an expert appointed by the president of the court ruling in summary form. That appointment cannot be appealed (Légifrance, Code civil article 1843-4).

The consequence is significant. Once the expert is appointed, the parties no longer choose either the professional or the timetable, and the value he determines binds them. An amicable report, by contrast, remains a discussion and evidence item, which can be challenged, supplemented or set against another report.

This framework does not cover everything. It presupposes a sale or buy-back provided for by law or by the articles, and a dispute about value. Two shareholders freely negotiating the exit of one of them, outside any statutory mechanism, are not in that situation. They can, however, entrust the setting of the price to a third party under article 1592 of the Civil Code, appointing that third party themselves in their agreement. In one case the judge imposes an expert, in the other the parties choose him.

Whatever the route, the exit takes the form of a share transfer, with its registration duties and its formalities (Entreprendre.Service-Public, cession d'actions ou de parts sociales).

The choice of framework matters as much as the choice of expert, because it determines who pays and what the report is worth.

The one-sided amicable valuation#

One party instructs the expert and pays the fees. The report frames a negotiation, prepares a claim, or checks whether a proposed price holds up. Its weight is limited: the other side will object that it was never heard, and it will be right. Useful upstream, insufficient to close a dispute.

The joint adversarial valuation#

Both parties instruct the same professional through a joint engagement letter setting the valuation date, the list of documents, the timetable and the split of fees. The expert meets both sides, sends the same documents to each, collects their written observations and issues a single report. This is the most efficient framework: controlled cost, short timeframe, and a report the lawyers can attach to the settlement agreement.

The court-appointed valuation#

The judge appoints the expert, either under article 1843-4 or through an investigative measure. One party advances the funds, and the judge decides who ultimately bears the cost. The expert issues a draft report, receives the parties' written submissions, then files the final report. This is the strongest and the heaviest framework.

Four requirements separate a contentious valuation from an ordinary valuation note.

Independence first, checked and stated in writing: the expert declares that he has no link with the parties, he is neither the company's accountant nor adviser to either spouse. It is the first thing opposing counsel will attack.

Then the adversarial process: every document received from one party is passed to the other, each side can file written observations, and the report answers them point by point.

Traceability last: every adjustment (director's remuneration, rent, personal expenses, non-recurring items) points to an identified document. As for methods, they cross-check each other rather than replace one another; the detail and the sector benchmarks are covered in our company valuation guide.

The tax administration's guide confirms this logic by combining net asset value, productivity value and yield value, and by accepting minority and non-liquidity discounts (DGFiP, guide de l'évaluation des entreprises et des titres de sociétés). In practice, the illiquidity discount applied to unlisted shares is in the region of 10 to 20 %, to be justified case by case, and it is usually the most disputed point in the report.

The steered valuation#

Whoever holds the information has an economic interest in steering the outcome. The classic signals: director's pay that collapses or explodes in the last financial year, personal expenses booked as overheads, an unjustified provision, deferred investment, a significant contract signed just after the valuation date. None of these is fraud in itself. All of them can be adjusted, provided they are spotted.

Dependence on the owner-manager spouse#

A business whose client relationships and know-how rest on one person is worth less than an organised business: the key-man discount commonly represents 1 to 2 points of EBITDA multiple. Each side will argue the version that suits it. The answer is documentary, not ideological: is there a team, are there procedures, framework contracts, a sales capability that is not the manager? The same logic applies to client concentration: beyond 30 % of turnover with a single client, a discount is open for discussion.

Accumulated cash#

A company that has not distributed for several years builds up cash that mechanically inflates the value of the shares. The operating shareholder will argue that it funds the working capital cycle and future investment, the other will see distributable reserves. The work consists in separating, with figures, the cash needed for operations from surplus cash. In the same spirit, shareholder current accounts are never merged into the value of the shares: they are receivables, settled separately.

Typical case (representative example): a services SME shows adjusted EBITDA of 400,000 EUR. Applied to the usual range for traditional SMEs, 4 to 7 times EBITDA (the observed average sitting around 5.5 times), the same file produces a value between 1.6 M EUR and 2.8 M EUR, a gap of 1.2 M EUR. Neither party is lying: each picks the end of the range that serves it. The whole point is to justify the exact position chosen inside that range.

The documents first: tax returns for the recent financial years, trial balance and general ledger, breakdown of shareholder current accounts, up-to-date articles and shareholders' agreement, minutes of general meetings, leases and finance leases, fixed asset schedule, loan schedule, significant client contracts, interim accounts at the valuation date, pending litigation and off-balance-sheet commitments. In a conflict, a missing document is never neutral: it will be read as withholding.

The timetable next. The valuation date is negotiated before work starts, not after the result has been read. Anticipating also avoids the most expensive scenario: discovering at the hearing that the other side commissioned a one-sided report months earlier.

The choice of adviser last, on three criteria: independence from both parties, experience of adversarial work, and the ability to defend the report before a judge or a peer. The company's usual accountant is not in that position, since he advises the company, and therefore in practice the shareholder who runs it. Our firm handles these files under its company valuation engagement.

Court-appointed and adversarial engagements are quoted case by case: the time depends on the number of parties, the volume of documents, the meetings and the written submissions to answer. For orders of magnitude, our other valuation engagements start at 800 EUR excluding VAT for a valuation opinion on SCI shares or a simple micro-business, at 2,500 EUR excluding VAT for a full valuation report where turnover is below 2 M EUR, and at 4,500 EUR excluding VAT for turnover of 2 to 10 M EUR. A contentious engagement sits above that, because the adversarial process and the drafting of replies consume time that a standard engagement does not.

Who pays? In a joint adversarial valuation, the split is set in the joint engagement letter, most often in equal shares. In a court-appointed valuation, one party advances the funds and the judge decides the final allocation. Measured against the amounts at stake, the cost of the valuation stays far below the gap it settles.

Samuel Hayot, chartered accountant and statutory auditor registered with the CNCC, handles adversarial valuations from Paris 8. Three observations from actual files.

The technical debate rarely concerns methods, almost always adjustments. Two competent professionals agree on the approach and disagree on the market-rate remuneration of the manager, on whether an exceptional item is recurring, or on how much cash the business genuinely needs. That is where the gap is decided, and that is where the evidence must go.

The side that arrives with a documented file sets the terms of the discussion. A well-built adversarial report closes doors, a valuation note without supporting evidence opens them.

Finally, court-appointed expertise is not a goal, it is a fallback: longer, more expensive, and the outcome escapes the parties. As long as the relationship allows it, a joint adversarial valuation delivers the same technical rigour while keeping control of the timetable and of the possibility of a settlement. The files that settle best are those where both lawyers accepted a single expert from the start.