Legal Question in Business Law in Virginia

Valuation of company vs. Pricing of shares

I am in the process of locating an attorney, but have an issue that needs immediate attention.

The VA corporation my spouse and I formed is in the process of developing a prospectus for potential investors. We have 2 business/financial advisors who are offering conflicting advice.

In regards to determining the price per share, one states we need to base it on cash needed, not company value, while the other states we must base it on a proforma valuation of the company in order to fairly represent the initial value of the shares.

One suggests we set aside 10% of the shares for ourselves as a management fee, then base the amount of cash needed on the remaining 90%, which obviously increases the price per share. The other advisor states this cannot be done, and the pricing of the shares must be based on the entire 100% to be legally responsible.

I respect both advisors, but what is legal and/or ethical?

Thank you for your time.


Asked on 1/14/07, 11:55 am

1 Answer from Attorneys
Daniel Press Chung & Press, P.C.

Re: Valuation of company vs. Pricing of shares

You can sell whatever percentage of the company for whatever amount you and the investor(s) agree on. You just need to accurately disclose everything.

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Answered on 1/14/07, 12:22 pm


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