Exit remedies for minority shareholders in close companies
Einde inhoudsopgave
Exit remedies for minority shareholders in close companies (IVOR nr. 82) 2011/3.3.6.2:3.3.6.2 Discount of shares
Exit remedies for minority shareholders in close companies (IVOR nr. 82) 2011/3.3.6.2
3.3.6.2 Discount of shares
Documentgegevens:
dr. Q. Wang, datum 02-05-2011
- Datum
02-05-2011
- Auteur
dr. Q. Wang
- JCDI
JCDI:ADS410794:1
- Vakgebied(en)
Ondernemingsrecht (V)
Toon alle voetnoten
Voetnoten
Voetnoten
Cavalier Oil Corp. V. Hamen, 564 A. 2d 1137, 1141 Del.
In re Valuation of Common Stock of Mcloon Oil. Co., 565 A. 2d 997, Me. 1989.
MT properties, INC. v. CMC Real Estate Corp., 481 n.w. 2d, 383 Minn. App. 1992.
In re Valuation of Common Stock of Mcloon Oil. Co., 565 A. 2d 997, Me. 1989.
The RMBCA 13.01 (4) Except, if appropriate, for amendments to the articles by private negotiated appraisal in 13.02 a (5). The Principles 7.22 (a): Lack of marketability, in extraordinary circumstances leads to discount.
Deze functie is alleen te gebruiken als je bent ingelogd.
Dissenting shareholders' interests should not be discounted just because of the minority status or lack of marketability. This viewpoint is consistent with the current court decisions and recommendations from the academie field. The Delaware Supreme Court stated in Cavalier Oil Corp. v. Harnett,1
“To fail to accord a minority shareholder the full proportionate value of his shares imposes penalty for lack of control and unfairly enriches the majority shareholders who may reap a windfall for the appraisal process by cashing out a dissenting shareholder, a clearly undesirable result."
The Maine Supreme Court agreed with this reasoning and addressed the discount issues in detail in Re Mcloon Oil Co.:2
<"...in the statutory appraisal proceeding, the involuntary change of ownership caused by a merger requires as a matter of faimess that a dissenting shareholder be compensated for the loss of his proportionate interest in the business as an entity. The valuation focus under the appraisal statute is not the stock as a commodity. But rather the stock only as it represents a proportionate part of the enterprise as a whole. The question for the court becomes simple and direct: what is the best price a single buyer could reasonably be expected to pay for the firm as an entirety? The court then prorates that value for the whole firm equally among all shares of its common stock. The results are that all of those shares have the same fair value.”
The majority of states, with the aim to protect dissenting shareholders, reject the idea of discounting minority shares.3 Deviation from the pro rata share rule would encourage freeze-out mergers.4
The RMBCA and the Principles adopt a similar approach by focusing on the value of the firm as a whole, rather than on the value of specific shares.5 In general, it is inconsistent with the current appraisal norm to discount dissenters' interests because of their minority status or lack of marketability.