Louisiana has revised its appraisal statute in the course of other sweeping changes to the state’s business corporation statute. The previous law had been in effect for more than 40 years.
The new law, the Louisiana Business Corporations Act, took effect January 1 and is based on the Model Business Corporations Act (MBCA). BVWire spoke with Gilbert E. Matthews (Sutter Securities Inc.) about the changes most relevant to valuators.
Standard of value: The standard of value applicable in appraisals has changed under the new law, Matthews says. Previously, Louisiana was one of the handful of states (along with California, Ohio, and, for some transactions, Wisconsin) whose statute used fair market value for appraisals rather than fair value. Now, Louisiana follows most other states in awarding dissenting shareholders fair value (the pro rata share of equity value with no discounts or premiums).
Market exception: Another revision is to the market exception provision, says Matthews. Previously, Louisiana denied appraisal to all shareholders of companies listed on a national securities exchange other than shareholders who received only common stock, with no requirement that the shares received be marketable. The current provision tracks the MBCA in: (a) denying appraisal when the company’s shares are traded in an organized market, have at least 2,000 shareholders, and have an aggregate market value of $20 million excluding shares held by senior executives, directors, and 10% beneficial shareholders; but (b) permitting shareholders to retain appraisal rights if the transaction is with an interested party or if a shareholder receives anything other than cash or marketable shares, such as debt or warrants.
The revised statutes are included in the state’s House Bill 319 (Act No. 328), which can be accessed at the state’s website.
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