Two shareholders can each own 10% of the same company and still hold shares worth very different amounts. That’s the part many owners miss when they first think about share valuation.
A share’s value is not only about percentage ownership. It’s also about voting power, dividend rights, rights on a sale, and how easy that share is to transfer. That matters if you’re planning a sale, a fundraise, an employee share scheme, or an HMRC valuation.
The key point is simple, the label on the share certificate matters less than the rights behind it.
What a share class is, and why it matters in valuation
A share class is a group of shares with the same rights. A company can have one class, or several. In smaller UK companies, that often means ordinary shares only. In others, you might see A ordinary, B ordinary, preference shares, growth shares, or non-voting shares.
On paper, that can look tidy. In practice, it changes value.
Why? Because not all shares let the holder do the same thing. One class may vote. Another may get paid first on a dividend. A third may only benefit if the company is sold above a hurdle. So if two classes don’t carry the same rights, they shouldn’t be assumed to have the same value.
The main rights that shape value
These are the rights valuers usually focus on first:
| Right attached to the share | Why it matters | Usual effect on value |
|---|---|---|
| Voting rights | Influence over decisions, directors, and major actions | More control can mean higher value |
| Dividend rights | Access to income from profits | Stronger rights can raise value |
| Capital rights | What the holder gets on a sale or winding up | Priority can raise value |
| Transfer rights and restrictions | How easy it is to sell the share | Tighter limits often reduce value |
A share’s value comes from what it can actually do. Not what it’s called.
Why two shares with the same percentage can be worth different amounts
Imagine a company is worth £1 million. Shareholder A owns 10% of ordinary shares with full voting, dividend, and capital rights. Shareholder B also owns 10%, but those shares carry no votes, can only be transferred with board approval, and only share in value above a future hurdle.
Both hold 10% by number. They do not hold the same economic bargain.
A 10% holding is only worth 10% of the company if the rights support that outcome.
That is why class-by-class valuation matters. It’s also why a simple cap table rarely tells the full story.
Why control usually increases share value
Control has real value in a private company. It isn’t abstract. It affects decisions that shape cash, risk, and timing.
If you control the vote, you may influence dividend policy, appoint or remove directors, approve new share issues, or decide whether to back a sale. A buyer will usually pay more for the steering wheel than the passenger seat.
Majority control versus minority influence
A controlling stake often attracts a premium over a straight pro rata value. A minority stake often suffers a discount. That’s because control changes what the shareholder can do.
In UK companies, some decisions pass with a simple majority. Others, such as changes to the articles, usually need a 75% special resolution. That means a 51% holding and a 26% holding can each have different kinds of power, depending on the rights attached and the wider documents.
There is no fixed rule saying every minority share gets the same discount. The facts drive the answer.
When voting power makes a real difference
Voting rights matter most when the company faces a live decision. That might be approving dividends, issuing more shares, changing the articles, taking on new investors, or selling the business.
And there is rarely a one-size-fits-all answer. Some shareholder agreements give certain holders veto rights. Some articles strip back rights for one class and strengthen them for another. That is why control must be checked in the actual documents, not guessed from the percentage alone.
How dividend and capital rights affect what investors will pay
Not every shareholder wants the same thing. Some care about regular income. Others only care about a future sale. Share rights change both.
If a class has stronger access to dividends or priority on capital, that can increase value. If a class only shares in future upside, the current value may be much lower.
Shares with stronger dividend rights
A share class with priority dividend rights can be more attractive than ordinary shares, especially where the company is profitable and pays cash out regularly.
Preference shares are the obvious example. If they carry a fixed dividend, or if they rank ahead of ordinary shares for dividends, a buyer may pay more for that certainty. The same applies where a class has priority on return of capital.
But context matters. If the business reinvests all profits and has no history of paying dividends, those rights may have less practical value today.
Shares that only share in future growth
Growth shares often work the other way. They are designed to benefit from future upside above a hurdle, not from value already built into the business.
That can make them useful in management incentive arrangements, but it also means they may have a lower value at the grant date. If the hurdle is high, or the path to growth is uncertain, the present value may be modest. If the business is expected to grow strongly, the value may be higher.
If you’re dealing with hurdle shares or employee equity, a HMRC-defensible valuation for growth shares depends heavily on the exact rights and restrictions.
Why private company shares often need discounts
Private company shares are not like listed shares. There is no open market, no live price, and often no easy buyer.
That is why share valuations in SMEs often apply discounts. The two big reasons are lack of control and lack of marketability.
Minority discounts and lack of control
A minority holder usually cannot direct the business. They may not be able to force a dividend, replace directors, or trigger a sale. That weak position affects what a buyer will pay.
So if the company as a whole is worth £2 million, a 10% minority stake is not automatically worth £200,000. It may be worth less because the holder cannot control outcomes.
The discount depends on the facts. Rights matter. So do the size of the stake, the company’s governance, and any shareholder protections in place. If you want a closer look at that issue, this guide to minority share valuation in the UK is a useful next step.
Lack of marketability in a private company
Even a well-run SME may have illiquid shares. There may be pre-emption rights, board approval requirements, drag and tag clauses, or restrictions on who can buy. A future buyer may be hard to find, and a sale may take time.
That reduces value. Buyers usually pay less for something that is harder to sell later.
This is one of the biggest gaps between a spreadsheet valuation and the real price someone would pay in the market.
Common share classes and how they are usually treated
The names of share classes are familiar. The treatment is not always standard. Terms matter more than labels.
Ordinary shares
Ordinary shares are usually the baseline. They often carry voting rights, rights to dividends when declared, and rights to share in surplus capital on a sale or winding up.
If there is only one ordinary class, valuation is more straightforward. If there are several ordinary classes with different rights, the exercise becomes much more fact-sensitive.
Preference shares and special rights shares
Preference shares often rank ahead of ordinary shares for dividends or return of capital. That can increase value, sometimes materially.
Some shares also carry special rights, such as enhanced voting, redemption rights, or priority on an exit. In those cases, the exact drafting matters far more than the class name.
A ‘preference’ share with weak practical rights may be worth less than expected. A plain-looking share with strong protections may be worth more.
Restricted, deferred, or non-voting shares
Where rights are weaker, value usually falls.
Non-voting shares may be discounted because they offer less control. Deferred shares may have little or no value until another class receives a set return. Restricted shares may be hard to transfer, which can reduce value again.
This is where owners can get caught out. The company may feel healthy and valuable, but a particular share class can still be worth much less than a simple percentage suggests.
How valuers work out the right figure for each class
A proper valuation does not start with the share class. It starts with the whole business.
Only after that do you work down to the value of each class, taking account of the rights and restrictions attached to it.
Start with the value of the whole company
For an SME, the business may be valued using an EBITDA multiple, a discounted cash flow model, comparable transactions, or a blend of methods. The right approach depends on the company’s profits, cash generation, growth profile, and stage of development.
That gives a value for the business as a whole. It does not yet tell you what each share is worth.
Adjust for rights, restrictions, and real-world marketability
The next step is to look at the cap table, the articles, the shareholder agreement, and any investment documents. Then the valuer considers how those rights affect control, income, capital returns, and saleability.
This is also where discounts or premiums may come in. A controlling class may deserve more than a straight percentage. A minority, illiquid, non-voting class may deserve less.
The same logic applies when preparing an HMRC EMI valuation report. HMRC will care about the rights attached to the actual shares being valued, not a rough average across the cap table.
What business owners should review before valuing different share classes
Before asking for a valuation, get the paperwork straight. Small details in the documents can move the answer by a lot.
Articles of association and shareholder agreements
These documents often decide the real economics of the shares. They set voting rights, dividend rights, transfer restrictions, pre-emption rights, drag and tag clauses, and special consents.
If those documents are ignored, the valuation can be wrong from the start.
At Consult EFC, this is why the legal terms are reviewed before a figure is put on any class of share.
Dividend policy, exit plans, and future funding
Past dividends matter. So do expected dividends. If one class has stronger rights to income and the company is likely to pay out cash, that should feed into value.
The same goes for exit plans and future funding. If a sale is likely, capital rights become more important. If a fundraise is coming, dilution, conversion terms, and investor rights may change the picture.
Before a valuation, it helps to gather:
- the latest articles and any amendments
- the shareholder agreement
- the current cap table
- recent investment or option documents
- the latest accounts and forecasts
- any clear plan for dividends, fundraising, or sale
Conclusion
A share is not worth its percentage in isolation. Share rights matter just as much, and sometimes more.
Control, dividends, capital rights, transfer limits, and marketability can all move the value of one class away from another, even inside the same company. That is why a fair valuation looks past the cap table and into the legal and commercial detail.
When those rights are reviewed properly, owners, investors, and HMRC are far more likely to land on a figure that makes sense.
Not sure what your business is worth right now?
Request a confidential valuation — ICAEW Chartered Accountants, Big Four trained. No junior analysts. Fixed fees.
Request My Valuation
Over 12 years across Big Four audit, Investment Banking and corporate advisory. Kishen works with UK SMEs on valuations, exit planning, fundraising and financial strategy. ICAEW regulated. Big Four trained. Based in London.