3.3.3.1.2 Liquidity

There is another widely held justification for this remedy. That is: the appraisal remedy addresses the concept of fairness and offers liquidity to shareholders when fundamental changes occur.1 Without this remedy, dissenting shareholders are locked in the corporation even though they may want to "jump the ship when the master sends it in a new direction."2 This explanation remains sound and viable today. Nowadays, however, quite unlike earlier times, instead of wishing to jump the ship, in a merger transaction for example, minority shareholders are often forced to leave the corporation with underestimated share values. In fact, the survey shows that the majority of appraisal cases involve cash-out mergers.3 Consequently, the historical liquidity function has diminishing significance.

Given that both rationales for compensation for veto power and liquidity are no longer convincing, and yet the appraisal remedy has survived in frequent corporation law revisions, there must be some new purposes that it serves. If new rationales did not exist, this remedy would have been abandoned long ago.