Dissenting Shareholder Matters

Conflicts may arise between shareholders regarding the direction of a business. Most state’s statutes grant minority (“dissenting”) shareholders, LLC members, and partners certain protections when those in control take action with which they disagree.

The minority shareholder(s), LLC member(s), or partners may then file legal action to have the business purchase their equity interest at fair value, the standard used in this type of litigation.

Fair value is defined as the value of the equity interest immediately before the effectuation of the action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the action unless exclusion would be inequitable.

This definition addresses only the effective date of the value, which leaves the definition of “value,” or the standard of value, to the courts. This difference varies significantly from state to state. When ABA appraisers are retained by an attorney in these matters, it is the attorney’s responsibility to establish the definition of value.

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