Recap of recent BV cases of note

BVWireIssue #227-3
August 18, 2021
marital dissolution/divorce, judicial dissolution, shareholder dissent/oppression
goodwill, cost approach, enterprise goodwill, expert testimony, fair value, net asset value, personal goodwill, breach of fiduciary duty, built-in capital gains tax (BICG tax), buyout, capitalization of income approach, discount, professional practice, stock, earnings, book value, corporate dissolution, depreciation, dissolution, selling price, assets, shareholders

A number of recent cases have emerged that contain various valuation issues. Here are the most notable:

  • Judicial dissolution/breach of fiduciary duty: Guge v. Kassel Enters. was decided on appeal under the Iowa “election-to-purchase-in-lieu-of-dissolution statute.” The Iowa Supreme Court decided that, because the parties’ experts had “both included transaction costs in their valuations under a net asset approach, the district court’s failure to reduce the asset values to account for the costs to liquidate the corporation’s assets warranted reversal.” Additionally, since there was no evidence of an intention to liquidate the company or its assets, the court declined to adjust for the built-in gains tax consequences urged by the majority shareholder. Guge v. Kassel Enters., 2021 Iowa Sup. LEXIS 81 (June 18, 2021).
  • Marital/goodwill: In Maginnis v. Maginnis, an unpublished opinion, the Kentucky Appellate Court remanded the decision as to the value of the husband’s business for, among other things, the Family Court’s failure to consider an apportionment of goodwill between enterprise and personal goodwill. It also remanded for a reconsideration of the maintenance award to the wife since that award is based in part on the value of the business and the income of the husband. Maginnis v. Maginnis, 2021 Ky. App. Unpub. LEXIS 378; 2021 WL 2483877 (June 18, 2021).
  • Shareholder dissent: In Island Light & Power, the one-third shareholder dissented to a forced sale of the assets resulting in a liquidation of the company and of the shareholder Trust’s stock. In a resulting bench trial, the court rejected the fair value determinations of the experts for both parties and adopted its own methodology (as is allowed by Rhode Island courts, including its Supreme Court) to determine the fair value of the one-third interest the Trust held. Island Light & Power Co. v. Sara Golvinveaux McGinnes 2011 Trust, 2021 R.I. Super. LEXIS 48 (June 3, 2021).

Case digests and full opinions are available through BVLaw or the BVResearch Pro platform (along with over 4,000 other valuation-related cases).

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