START-UP SAFE HARBOUR VALUATION CHECKLIST

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Net Tangible Assets Market Valuation Methodology 

  • The company has not raised capital of more than $10m in the previous 12 months before the valuation time;
  • At the valuation time, either the company:
  • has not been incorporated for more than 7 years; or
  • is a small business entity as defined under the ITAA 1997;
  • The company prepares or will prepare a financial report for the year in which the valuation time occurs in accordance with the accounting standards under the Corporations Act

If the abovementioned conditions are met and the company chooses to adopt this valuation methodology, the relevant formula is as follows:

Step 1  – Work out the amount of net tangible assets of the company (disregarding any preference shares on issue) at that time.

Step 2  –  Work out the amount of the return that would be required to be provided under the terms of any preference shares on issue at the valuation time if those shares were to be redeemed, cancelled, bought back or otherwise satisfied at that time (disregarding any contingencies as to the provision of that return and any return that would not rank before ordinary shareholders upon a winding up).

Step 3  –   Reduce the Step 1 amount by the Step 2 amount.

Step 4  –   Divide the Step 3 amount by the total number of:

(i)         ordinary shares; and

(ii)        any preference shares that may participate together with any ordinary shares in the residual assets of the company upon a winding up;

on issue in the company at that time.

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