When should you use a shadow business valuation expert witness?
Prior to the introduction of a Single Expert Witness for Family Law matters, each side may have appointed their own business valuers, the adversarial approach. In 2004, the Single Expert Witness regime was introduced where the parties agreed to the appointment of a Single Expert Witness or the court appointed the Single Expert Witness.
The appointment of a Single Expert Witness does not preclude a party from appointing their own expert, called a Shadow Expert. The appointment of a Shadow Expert is not mandatory and whether or not such an appointment is justified depends on the nature and quantum of the case.
Shadow Experts are more common in larger and complex cases, however they can also be used effectively for smaller businesses. For very small businesses it may be acceptable to the parties to obtain a most probable selling price estimate rather than a full valuation.
The evidence of the Shadow Expert is restricted by the rules of the court and may not be used directly. Also the Shadow Expert must not communicate with the Single Expert Witness.
The Shadow Expert’s role is to advise their client and review the report of the Single Expert Witness. The activities of a Shadow Expert may include:
- – Preparing an indicative valuation to assist in preparing your Financial Statement and/or for settlement negotiations
- – Review the valuation report of the Single Expert Witness
- – Consider the methodologies adopted
- – Prepare questions to the Single Expert Witness on the valuation report
- – Assistance in the cross examination of the Single Expert Witness
- – Investigate the information provided by the other party including disclosure of income and assets
Undertaking the role neither requires the shadow expert to be independent. The shadow expert does not have an overriding duty to the Court – rather the expert’s duty is to the party they are advising.
If we are appointed a Shadow Expert to prepare an indication on the business value for one or both parties, we cannot act as a Single Expert Witness on that matter.
Should you require any additional information of shadow business valuation services or Single Expert Witness business valuers, please do not hesitate to contact me