Valuation of company shares for deceased estates

05 May, 2022 - 00:05 0 Views
Valuation of company shares for deceased estates Valuation of business or shares is normally done by trained finance people such as chartered accountants.

The Herald

Godknows Hofisi


I have previously written on the valuation of business or shares. I strongly recommend that you read my article of   October 28,  2021 titled “Understanding asset valuation and business valuation” which was also published online by The Herald. In the current article I address valuation of a company shares for purposes of deceased estates.

Uses of share valuation report in a deceased estate

My view is that the valuation of shares owned by the deceased at the time of his or her death and constitutes deceased estate assets may be used for the following purposes:

Estate duty purposes as required by the Estate Duty Act (Chapter 23:03) or the Act.

For disposing of such shares. It may very well be agreed or become necessary to dispose of the shares. In that case the sale has to be at a fair value.

For purposes of distribution. The beneficiaries may want to know the value so that it may be agreed as to who gets which asset, including the shares.

Valuation of assets versus valuation of shares

In addition to the article I referred to above, I explain below some pertinent points, some for ease of reference. There is confusion on the market. 

Some people with limited understanding of business or share valuation consider the value of assets in a business to be the value of the business or the shares issued by a company. 

This is not necessarily the case as explained below. For the avoidance of doubt, valuation of physical assets such as property, plant and equipment, is usually done by trained professional valuers who are regulated professionals in the real estate industry. 

These professionals are not necessarily qualified to and do not usually carry out business valuations. Valuation of business or shares is normally done by trained finance people such as chartered accountants.

Valuation of assets

Professional valuers estimate values of physical assets by using methods such as open market values, replacement costs, depreciated replacement costs and others. They consider conditions of the assets, market conditions, etc.

Valuation of business or shares

There are different methods such as:

Net Asset Method, also called the liquidation approach or Balance Sheet method.

Net Present Value (NPV) or Discounted Cashflow Method (DCM).

Net Assets Method

This method is easier to use and defend. For example professional asset valuers will value the physical assets. The business valuer will then sum up all the assets of the company. All liabilities are then deducted to arrive at net assets. If there are no liabilities the assets become the value of the business or all the shares. 

For example total assets of $ 10 000 000 less creditors of $ 4 000 000 result in a value of $ 6 000 000. If there are 1 000 000 issued shares then the value per share will be $ 6. 

Net Present Value

This involves projecting future cash inflows and outflow, including discharging present liabilities. The future cashflows are then discounted to arrive at a NPV or current value of the business or all shares issued by the company.

 Requirements of the Estate Duty Act 

Section 6(1)(g) of the Act has specific requirements on shares. According to the Act, the value of any property included in the estate of any person shall be, in the case of shares in any company not quoted in the official list of a securities exchange registered under the Securities Act (Chapter 24:25) or any securities exchange outside Zimbabwe, the value of such shares in the hands of the deceased at the time of his death as determined, subject to section 9, by sworn valuation by some impartial person appointed by the Master, subject to the following provisions:

(i) No regard shall be had to any provision in the memorandum and articles of association or rules of the company restricting the transferability of the shares therein, but it shall be assumed that such shares were freely transferrable.

(ii) No regard shall be had to any provision in the memorandum and articles of association or rules of the company whereby or whereunder the value of the shares of the deceased or any other member is to be determined.

(iii) If upon a winding  up of the company the deceased would have been entitled to share in the assets of the company to a greater extent, pro rata, to shareholding than other shareholders, no lesser value shall be placed on the shares held by the deceased than the amount to which he would have been in the course of winding up and the said amount had been determined as at the date of his death.

(iv) No regard shall be had to any provision or arrangement resulting in any variation in the rights attaching to any shares through or on account of the death of the deceased.

(v) Any power of control exercisable by the deceased and the company to vary or cancel any rights attaching to the shares.


The total assets of the company are not necessarily the value of the business or the shares unless the company has no debt. Further, the net asset value may differ significantly from the NPV or DCM. Estate administrators should make use of qualified business valuers to value shares that form part of a deceased estate.


This simplified article is for general information purposes only and does not constitute the writer’s professional advice.

Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), CA(Z), MBA(EBS,UK) is a legal practitioner / conveyancer, chartered accountant, corporate rescue practitioner, registered tax accountant, consultant in deal structuring and business valuer. He is a director with Investacare International (Private) Limited. He writes in his personal capacity. He can be contacted on +263 772 246 900 or [email protected]

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