Appeals court affirms modified liquidation value in shareholder dispute

BVWireIssue #237-4
June 29, 2022

shareholder dissent/oppression
litigation, shareholder dispute, buyout, liquidation, stock, dissolution

In a Michigan shareholder deadlock case, a special master recommended that a sale of shares from one shareholder to the other would yield more value than if the company were dissolved. The special master used a “modified liquidation value,” which was close to the middle between the liquidation value and the fair market value of the shares. The valuation did not account for cash advance receivables, the value of noncompetition agreements, or a going-concern value. It also did not consider certain expenses that would have been incurred if the company were dissolved. The plaintiffs challenged the valuation, but the appeals court affirmed it, finding no clear error on the part of the trial court. Plus, the parties showed an initial willingness to sell their stock for the amount the valuation indicated.

The case is Pitsch v. Pitsch Holding Co., 2022 Mich. App. LEXIS 2730; 2022 WL 1508774, and a case analysis and full opinion are available on the BVLaw platform.

Please let us know if you have any comments about this article or enhancements you would like to see.