3.3.7 Summary of the appraisal remedy in the US

At present, the appraisal remedy is hardly used by minority shareholders, especially by those in close companies. Some reasons have already been discussed above: the proceedings are costly and take a long time and, moreover, the outcome is uncertain owing to the uncertainty of the valuation method. For these reasons, even if a court may arrive at a fair value much higher than the corporation's decision, it still will not effectively dissuade a controlling shareholder from carrying out a squeeze-out transaction with a lower share price, if he knows only a few shareholders will take the risk of initiating such a costly and complicated proceeding.1 Stipulations like the prepayment requirement and the one-step notification are therefore desirable.2

The reason for the inadequacy of this remedy as an exit remedy, in essence, is its limited scope of litigation. The triggers of the appraisal remedy are fundamental changes to the corporation which affect the fundamental expectations of the shareholders. On the one hand, this limited scope has its merits. The appraisal rights offer exit opportunities when major changes take place, so it is easier for legislators to make a general list indicating when this remedy can be invoked than to do so for the oppression remedy. The appraisal opportunities are laid down in black and white, which makes the determination of fair value the only litigious issue. As a result, this transaction-based remedy, to some extent, promotes expedience in litigation. On the other hand, it also has limitations. The most prevalent cause for shareholders in a close company to seek exit sterns from the 'non-technical realm of human business relationships' rather than from disagreement in major corporate changes.3 Possibly for this reason, Siegel comments that "any list of appraisal-triggering transactions is likely not worth the considerable amount of ink. Whatever list may be crafted, it will not meet the needs of shareholders in a non-market corporation, whose dissatisfaction is often not transaction based."4 The Delaware Supreme Court has appropriately noted that the appraisal remedy is unlikely to be adequate "where fraud, misrepresentation, self dealing, deliberate waste of corporate assets, or gross palpable overreaching are involved."5

In conclusion, the appraisal remedy provides some liquidity for shareholders in a close company, but it only applies to a limited number of situations. The following part introduces the oppression remedy, which is a more popular remedy to tackle disputes and exit issues in a close company.