BVR's Guide to Fair Value in Shareholder Dissent, Oppression and Marital Dissolution
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Preview the Table of Contents & Excerpt from BVR's Guide to Fair Value in Shareholder Dissent, Oppression and Marital Dissolution
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For a list of links to full texts of court case opinions related to Fair Value Dissent and Oppression, click on the heading below.
Statutory Fair Value of Real Estate Holding Co. Includes Transaction Costs, Taxes
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Brynwood Co. v. Schweisberger, 2009 WL 2218728 (Ill. App. 2 Dist.)(July 23, 2009)(unpublished)
Several professional tenants in a commercial office formed a C corporation to purchase the property in 1979. The owner of an accounting firm took a lead interest (26%), served on the board of directors, and provided the company’s accounting services until he retired in 1996. The remaining shareholders’ interests ranged from 11% to 14%.
The company owned and operated the building as its sole asset for nearly twenty-five years when the directors considered converting to an S corporation, primarily to avoid double taxation (at the corporate and shareholder level). The board also discussed selling the building and dissolving the company. The building was appraised five times, with values ranging from $850,000 to $1.43 million. In 2000, the company repurchased the shares of two non-tenant owners at $42.50 per share. During the next year, it offered to repurchase the interests of all non-tenant owners, including the retired accountant, for $48.50 to $50.00 per share.
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Bonus article by Douglas K. Moll: Shareholder Oppression and “Fair
Value”: Of Discounts, Dates, AND
Dastardly Deeds in the Close
The doctrine of shareholder oppression protects a close
corporation minority investor from the improper exercise of
majority control. When a minority shareholder establishes
“oppressive”majority conduct, a court typically orders the
majority to purchase the minority’s stock at its “fair value.”
But what does fair value mean? Further, when is fair value to
be measured? The questions are critical ones that affect the
lives of countless close corporation investors and that
generate an enormous amount of present-day litigation. This
Article builds a case for defining fair value as enterprise
value in the shareholder oppression context. The Article
argues, in other words, that the buyout remedy should
provide an oppressed minority investor with his pro rata
share of the company’s overall value, with no reductions (or “discounts”) for the lack of control or liquidity associated
with the minority’s shares. Moreover, the Article suggests
that, in many situations, courts should allow an oppressed
shareholder to choose between the “date of filing”and the
“date of oppression”as the appropriate valuation date.
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Fair Value In The News
Note: News feeds are automated and not screened for accuracy or applicability
Fair Value In The BVWire
Fair Value In The Blogs
Note: Blog feeds are automated and not screened for accuracy or applicability
It’s no secret that the Delaware Court of Chancery has a strong liking for the discounted cash flow (DCF) analysis in fair value determinations. For this reason, a decision in which the court expressly rejected the DCF method in favor of the actual merger price—which recently happened—is sure to...
The much-anticipated Standards of Value: Theory and Application, second edition, by Jay Fishman, Shannon Pratt, and William Morrison (John Wiley & Sons) is now available. Fishman was at the recent NACVA annual conference appearing on behalf of the book. BVWire believes this completely updated...
We believe BV appraisers should be on the speed-dial list of every business reporter, their expertise the "center column" of financial pages, but recently we’ve seen articles on appraisal topics in places from The New York Times to Forbes to a daily business blog that have somehow omitted BV...
Business appraisers may recall Giaimo v. Vitale, a dissenting shareholder case that affirmed the application of a discount for lack of marketability (DLOM) to the statutory fair value of a company that owned 19 apartment buildings. Importantly, the lower court did not distinguish between the...
The article on the "Future of Valuation Litigation"—which we’ve been discussing the past couple of weeks—essentially argues that courts should rely on contemporaneous market evidence rather than "testimony of paid litigation experts" to determine the value of public as well as private companies in...
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