The valuation analyst must know and understand the nuances and subtleties associated with valuations being performed for a specific purpose. In the shareholder dispute arena, the analyst must begin with an understanding of the various actions that cause these types of suits. In addition, the analyst must understand the statutes and case law in this area, as these factors often control how the assignment is performed. These factors include the appropriate standard of value, the use of the various appraisal methodologies, and the appropriateness of valuation adjustments (discounts and premiums).
State statutes and judicial precedent control this area of valuation. Although analysts should not be acting as attorneys, it is important that they become generally familiar with the statutes and case law in the jurisdiction in which the lawsuit has been filed.
In some jurisdictions, there may not be relevant case law, in which case the valuation analyst should speak with legal counsel regarding the appropriate case law guidance for that particular matter.1
This chapter discusses the various issues that arise in stockholder dispute actions, particularly those lawsuits that are filed by minority shareholders who believe that they have been treated unfairly.
HISTORY OF SHAREHOLDER DISPUTES
Prior to the twentieth century, most states’ common law required a ...