Dissenter’s Rights

Dissenter’s rights statutes, in concept, provide a court supervised market for a minority shareholder’s interest in a business that otherwise would be subject to the terms of “the dissented from transaction” as negotiated and structured by the majority.  Typically, marketability and lack of control discounts are not applied.

As experts on behalf of the dissenting shareholder in a case involving a natural gas exploration and development company that was being acquired by a much larger company, with continuing employment for those actively participating in day-to-day operations (the majority shareholders), and a provision for a deferred earn-out:
We evaluated the company, the long-standing relationship of the company to its acquirer, the terms of the dissented from transaction, and the majority shareholders’ intended allocation of current and deferred earn-out benefits.  We then quantified the Fair Value of the dissenting minority shareholder’s stock, giving prorata effect to current and deferred “earn-out” benefits that otherwise were being preferentially assigned to the controlling shareholders.  We provided testimony as to why the value of the company was equal to the cumulative current and earn-out benefits of the dissented from transaction.  We concluded that fairness required prorata allocation of all current and earn-out benefits.  The controlling majority shareholders asserted that the dissented from transaction could not be considered in determining the Fair Value of the dissenting shareholder’s interest in the company. 
This case and our understanding of the relevant valuation issues is presented in Dissenters’ Rights: Business Valuation Issues Post-Pueblo and Szaloczi, Colorado Lawyer - June 2006, Duree / Barton
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