New York's out-of-step position with respect to the discount for lack of marketability in fair value proceedings is a hotly debated issue—and it’s getting even hotter. A “new note” in the debate was sounded in an article in the January issue of Business Valuation Update, according to a blog post by attorney Peter Mahler (Farrell Fritz) in the New York Business Divorce blog.
Stands alone: In the article, “NY’s Unfair Application of Shareholder-Level Marketability Discounts,” Gil Matthews and Michelle Patterson (both with Sutter Securities) write that New York “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. 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.”
Mahler gives his perspective on the issue and says that it “would be nice if the business valuation community could speak with one, clear voice on the issue, which would then facilitate consideration by legislators or, should they defer to the courts, appellate judges, of any needed changes to New York’s policy toward DLOM in fair value proceedings.”