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Indiana Supreme Court Issues Key Ruling on Discounts in Compelled Buybacks

Last year, in a compelled buyout, the Court of Appeals sided with the departing minority shareholder when it found discounts did not apply in a closed-market sale. In a freshly minted decision, the Indiana Supreme Court reversed the Court of Appeals, finding there was no blanket rule disallowing discounts in a compelled buyback. This is especially true where the parties exercised a shareholder agreement whose terms suggested the use of fair market value.

LLC buyout at fair value poses ‘conundrum’ for the court

In allowing LLC members to buy out a departing member to avoid the dissolution of the company, a court had to determine the fair value of the departing member’s interest in a holding company.

Indiana Supreme Court issues key ruling on discounts in compelled buybacks

Last year, in a compelled buyout, the Court of Appeals sided with the departing minority shareholder when it found discounts did not apply in a closed-market sale.

Hartman v. BigInch Fabricators & Construction Holding Co., Inc. (Hartman II)

High court says there is no blanket rule against the use of discounts in a compulsory, closed-market buyback; parties’ freedom to contract right allowed for discounts under shareholder agreement that mandated buyback of plaintiff’s minority interest by company under fair market value standard.

Indiana Supreme Court Rejects Blanket Rule Against Discounts in Compulsory, Closed-Market Share Buyback

High court says there is no blanket rule against the use of discounts in a compulsory, closed-market buyback; parties’ freedom to contract right allowed for discounts under shareholder agreement that mandated buyback of plaintiff’s minority interest by company under fair market value standard.

Finkel v. Palm Park, Inc.

In LLC member dispute, court faces “conundrum” where fair value buyout seeks to avoid LLC’s dissolution and court leans on expert’s FMV valuation using net asset value approach premised on “orderly liquidation”; court notes FMV is based on hypothetical actors and transaction, not specific parties.

Court’s Fair Value Determination Leans Heavily on Expert’s Fair Market Valuation Premised on Liquidation

In LLC member dispute, court faces “conundrum” where fair value buyout seeks to avoid LLC’s dissolution and court leans on expert’s FMV valuation using net asset value approach premised on “orderly liquidation”; court notes FMV is based on hypothetical actors and transaction, not specific parties.

Key Tennessee appeals court ruling finds tax affecting ‘relevant’ to fair value buyout

In a Tennessee buyout dispute involving a limited liability corporation organized as an S corporation, the parties disagreed over whether it was appropriate to tax affect in calculating the fair value of the terminated member’s interest.

‘Overstated’ projections sink plaintiff’s fair value determination

Earlier this year, a New York trial court presiding over a buyout dispute featuring an online wholesaler of faucets, sinks, and fixtures rebuffed the departing shareholder’s valuation.

Boesch v. Holeman

In dispute over value of dissociated partner’s one-third interest in whiskey business, appeals court says trial court erred in adopting value determination that applied discount for lack of control; applicable partnership law requires value be based on sale of entire business as a going concern.

Partnership Statute Precludes Use of Minority Discount in Buying Out Dissociated Partner

In dispute over value of dissociated partner’s one-third interest in whiskey business, appeals court says trial court erred in adopting value determination that applied discount for lack of control; applicable partnership law requires value be based on sale of entire business as a going concern.

Raley v. Brinkman

In LLC member buyout dispute, the Court of Appeals finds the term “fair value” does not contemplate the use of shareholder-level discounts. However, tax affecting is relevant evidence when determining the going-concern value of subject S corp. Trial court must consider evidence on tax affecting.

Tennessee Appeals Court Clarifies Use of Discounts and Tax Affecting in Court-Ordered LLC Buyout

In LLC member buyout dispute, the Court of Appeals finds the term “fair value” does not contemplate the use of shareholder-level discounts. However, tax affecting is relevant evidence when determining the going-concern value of subject S corp. Trial court must consider evidence on tax affecting.

‘Particular facts’ justify discounts in mandatory buyback of minority interest, says Missouri high court

Context is “crucial,” the Supreme Court of Missouri recently said in upholding the use of discounts in the court-ordered buyout of a minority owner’s shares in a family business.

Calculating Fair Value, Court Uses Experts’ Income Analyses but Adjusts for Inconsistencies

In buyout dispute over closely held corporation, State Supreme Court upholds trial court’s value determination based on income-based analyses parties’ experts presented but adjusting for inconsistencies in each opinion; asset approach was inappropriate where company would continue to operate.

Anderson v. A & R Spraying & Trucking, Inc.

In buyout dispute over closely held corporation, State Supreme Court upholds trial court’s value determination based on income-based analyses parties’ experts presented but adjusting for inconsistencies in each opinion; asset approach was inappropriate where company would continue to operate.

Biton v. Kreinis

In dispute over fair value of plaintiff’s shares, court agrees with parties’ experts on use of capitalization of earnings method to value company; court rejects defense expert’s use of QuickBooks data and post-valuation-date revenue as representative annual revenue; applies key-person discount.

In Fair Value Determination, Court Says SSVS Discourages Use of Post-Valuation-Date Data

In dispute over fair value of plaintiff’s shares, court agrees with parties’ experts on use of capitalization of earnings method to value company; court rejects defense expert’s use of QuickBooks data and post-valuation-date revenue as representative annual revenue; applies key-person discount.

Court Rejects FMV Appraisal of Dissociated Member’s Interest in Statutory Buyout

In buyout following member’s disassociation from company, appellate court affirms trial court’s fair value determination, including decision to exclude from valuation remaining members’ unsubstantiated debt claims and including litigation amount assessed against dissociated member for misconduct.

Flynn v. Maschmeyer

In buyout following member’s disassociation from company, appellate court affirms trial court’s fair value determination, including decision to exclude from valuation remaining members’ unsubstantiated debt claims and including litigation amount assessed against dissociated member for misconduct.

Discounts inappropriate in valuing minority interest in mandatory buyback, appeals court rules

When a minority shareholder in an Indiana company was terminated as a director and officer, a dispute arose over whether, under a buyback agreement, the use of discounts for lack of control and marketability was permissible in valuing his shares.

Robinson v. Langenbach

State high court upholds trial court’s use of DLOM and minority discount in buyout of minority interest resulting from shareholder oppression; court says there is no “fixed set of factors” trial court must consider for fair value calculation; “context is crucial” and here justified discounts.

High Court Says Context Supports Use of Discounts in Buyout From Shareholder Oppression

State high court upholds trial court’s use of DLOM and minority discount in buyout of minority interest resulting from shareholder oppression; court says there is no “fixed set of factors” trial court must consider for fair value calculation; “context is crucial” and here justified discounts.

In Mandatory Buyback, Indiana Appeals Court Disallows Use of Discounts

In dispute about valuation of terminated shareholder’s minority interest, appeals court finds the trial court erred when it allowed discounts for lack of control and marketability; under controlling case law, discounts are inappropriate where the buyback is mandatory and to the controlling party.

Hartman v. BigInch Fabricators & Construction Holding Co., Inc. (Hartman I)

In dispute about valuation of terminated shareholder’s minority interest, appeals court finds the trial court erred when it allowed discounts for lack of control and marketability; under controlling case law, discounts are inappropriate where the buyback is mandatory and to the controlling party.

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