Minority and/or non-controlling shareholders in private, closely held companies can be in a challenging situation when confronted with management decisions with which they disagree. Like a marital divorce, in a business divorce property must either be divided or kept intact to maintain value with consideration of the division of value thereof. There are varying ways to reach a resolution in contested matters from pre-suit settlements to court-imposed remedies (internal operating agreement or, in Florida, Florida’s LLC statue4 ). In Florida, shareholders have dissenters’ rights or appraisal rights 5, 6 . Florida law provides that, within certain situations, shareholders have the statutory right to petition to dissolve a corporation in which they are a shareholder. In these circumstances, the corporation or another shareholder of the corporation may elect to purchase the petitioning shareholder’s shares for the fair value7 of the shares8.

Share Holders

Per Florida Statute Chapter 607 (definition of “fair value”):

  • Immediately before the effectiveness of the corporate action to which the shareholder objects.
  • Using customary and current valuation concepts and techniques generally employed for similar businesses in the context of the transaction requiring appraisal, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable to the corporation and its remaining shareholders.
  • In most instances, without discounting for lack of marketability or minority status.
  • Florida statute mandates that shareholders are entitled to certain operations and financial information and that such rights cannot be waived through the terms of a company created operating agreement.

Per Florida Statute Chapter 605 (limitations of operating agreement allowances):

Contractual agreements (i.e., operating agreement) within entities cannot unreasonably restrict the duties and rights stated in Florida Statute 605.0410, but the operating agreement may impose reasonable restrictions on the availability and use of information obtained under that section and may define appropriate remedies, including liquidated damages, for a breach of a reasonable restriction on use.

Dissenters’ rights provide shareholders the opportunity to dissent from unusual corporate actions that will negatively impact their holding. Shareholder rights are governed by state statutes and case law can be triggered by a multitude of actions of which the non-controlling shareholder objects (i.e., merger, sale of assets other than in the ordinary course of business, sale of shareholding, amendment to articles of incorporation, etc.).

A valuation may also be required in a variety of other disputes among shareholders, including the terms of a buy-sell, operating agreement, or involving transactions between new or departing shareholders or partners. These matters are directed by contractual agreements or other governing corporate documents between the owners of a business.

At Anchor Business Valuations & Financial Services, LLC, our wide breadth of experience and expertise enable us to offer comprehensive valuation reports that are carefully documented and supported. Our professionals have the knowledge, proficiency, and credibility to effectively communicate their findings to clients, and clients’ representatives, in timely, efficient manner.