New York's position with respect to the discount for lack of marketability is unique compared to the other states. “It stands alone in that it favors (and some lower courts believe requires) the imposition of a marketability discount on dissenting shareholders in fair value determinations,” writes Gil Matthews (Sutter Securities) in an article that examines New York’s DLOM situation in the upcoming December issue of Business Valuation Update. “There is broad consensus that DLOMs should seldom, if ever, be permitted in appraisal or oppression cases.” Matthews points out that New York is out of line with both the Model Business Corporation Act (MBCA) and the American Law Institute (ALI) “as well as the widely accepted view in other states and in legal literature.”
The recent Ferolito decision (2014), which valued the AriZona Beverage business, would have been a great chance to re-examine the issue on appeal (the Court of Appeals is the highest court in New York). However, there was a post-trial settlement, so that won’t happen. Matthews concludes: “A re-examination of New York’s obsolete position on DLOMs is long overdue.”
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