Minority discount

A minority discount (or minority interest discount, DLOC — Discount for Lack of Control) is applied to the value of a non-controlling stake in a company to reflect the limited powers of a minority holder — no strategic decision authority, no control over dividends, management or asset disposals. It is the mirror image of the control premium and typically ranges from 15–35% depending on the level of contractual minority protection (shareholders' agreement, veto rights, tag-along). In business valuation, it is frequently combined with an illiquidity discount for unlisted minority interests.

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Example: in a forced share transfer under Article 1843-4 of the French Civil Code, the appointed expert values the company at CHF 12.0 million for 100%. The stake to be transferred represents 22% of capital with no enhanced voting rights or protective shareholder agreement. A 25% minority discount is applied: value of the 22% stake = 22% × CHF 12.0 million × (1 - 25%) = CHF 1.98 million.

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Hectelion justifies minority discounts with a precise analysis of the contractual and statutory rights of the minority holder in each specific situation.