Email Our Firm

Business Valuations in Shareholder Oppression cases

Previously, we've written about some of the remedies available to shareholder oppression claimants. Among those we mentioned is the judge's ability to dissolve the company, or at least the minority's interest in the company. While these actions can effectively end the oppressive conduct, the question then becomes how will each party's shares be valued? When shareholder oppression is involved, these valuations can become extremely tricky.

As you can probably imagine, if the judge orders a dissolution of the minority's interest, the majority will argue for the lowest possible valuation in order to pay the lowest amount. On the flip side, the minority will argue for the highest valuation, so as to receive the most money from the claim. While both sides are likely to present valid valuations, the question of which should be used largely turns on whether certain discounts should apply.

There are two main kinds of discounts that may apply to any business valuation, depending on the particular facts of the case. The first is called a "minority discount." This discount operates to reduce the value of a minority's shares, as that minority interest lacks the control of the majority, and is therefore worth less to a prospective buyer. The second is called a "marketability discount." This discount operates to reduce the value of minority shares because those shares are not easily marketable. Put another way, a prospective buyer will not be able to convert that investment into cash as easily as other types of investments, and will therefore demand to pay less for the shares.

Though these discounts can significantly alter valuations during shareholder oppression proceedings, they are not automatic. Whether each will apply depends upon an analysis of all the circumstances surrounding each case. Regardless of what side you're on, a shareholder oppression attorney can help you determine the best way to value your interest given the particular facts of your case.

No Comments

Leave a comment
Comment Information

Client Testimonials

  1. “Your business model is such a fresh approach to the way legal services are typically delivered.”

    President, Manufacturing
  2. “Phil will help you understand the process you are going through, and is very passionate about your needs and situation.”

  3. “Phil, responded to my numerous questions promptly and completely. Very reasonable rates, no overbilling. Kept me informed of progress.”

  4. “Ben legally clarified the language in my contracts without turning them into super verbose mumbo-jumbo.”

    Kevin L.
  5. “Everyone, that I've interacted with is professional, knowledgeable, forthcoming with information and educating and caring.”

    Alanna C.

425 NW 10th Avenue
Suite 200
Portland, OR 97209

Toll Free: 866-280-7562
Phone: 360-258-1268
Fax: 503-417-4250
Map & Directions