Reference Value

The Reference Value is calculated by adding the book value of fixed assets (i.e. buildings, property, machinery minus depreciation) to 20 times the Investor Share distributed in the previous accounting period.

For example, if a FairShares Enterprise owns a property valued at £300k, and generates an Investor Share of £25k the previous year, then the new Reference Value will be:

£300,000 + (20 x £25,000) = £800,000

The Reference Value is calculated at the start of each year to decide the number of Member Shares to issue to Labour and User Shareholders.

In practice, the 20 x multiplier needs to be sensitive to the number of active shareholder classes to avoid distorting the value of the enterprise. A spreadsheet is available from the FairShares Institute (http://fsi.coop) to help with projections and valuations of a FairShares Company.

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