3.3.6.0 Introduction

The function of the appraisal remedy is closely related to the way in which the shares are valued.1 In other words, a sound valuation method is vital to the protective function of this remedy.2 The valuation of a corporation is nevertheless not an easy task and requires great expertise and experience. It is too ambitious to address this issue extensively in this book, yet it is too important to ignore. I therefore, discuss basic principles and some frequently mentioned valuation methods in this section.

Among the states, Delaware is a preferred state of incorporation and has produced the largest body of case law on the determination of fair value.3 The Delaware state courts, especially the Chancery Court — a specialist court — have gained considerable experience with valuation issues, and their decisions in appraisal suits are influential nationwide.4 Accordingly, this section relies heavily on the Delaware case law on the valuation issue.