Applicability of Small Size Premiums in Determining the Fair Value of Shares and Appropriate Consideration

In the article, the authors focus on one of the most pressing issues currently pertaining to company valuations for the purposes of determining the fair value of shares and the amount of reasonable consideration (e.g. in squeeze-out situations).

The Czech Supreme Court’s and Constitutional Court’s case law has not yet explicitly held whether the so-called “small size premium” (also “small cap premium”) can be applied to the discount rate in such cases.

The issue has been subject to a number of court cases. The authors believe there are a number of compelling reasons for applying the small size premium, including the extensive case law of the Delaware courts, to which the Constitutional Court, among others, explicitly refers.

The article is available in the double issue 23-24 of Legal Digest from 2021 and is also available on Beck-online at the link here.