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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.

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.

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.

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.

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.

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.

Indiana and South Carolina courts issue key discount rulings

The Indiana Court of Appeals and the South Carolina Supreme Court recently issued noteworthy rulings on the appropriateness of discounts in valuing minority interests. The contexts in which the issue arose were different, but both situations amounted to a compelled buyback of 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.

Magarik v Kraus

In buyout dispute, court rejects departing shareholder’s valuation based on income and market approach, where DCF model relied on company projections used for a bank loan that were never realized and, based on evidence, were “not accurate”; court says market approach used “incorrect comparables.”

Court Discredits Valuation Based on Unrealistic Projections and Incorrect Comparables

In buyout dispute, court rejects departing shareholder’s valuation based on income and market approach, where DCF model relied on company projections used for a bank loan that were never realized and, based on evidence, were “not accurate”; court says market approach used “incorrect comparables.”

Asset-based appraisal unsuitable for fair value determination, court says

In a bitter fight between siblings over the buyout of the minority shareholder’s interest in a successful construction business, the trial court found the asset-based valuation the majority shareholder’s expert proposed was fatally flawed for at least two reasons.

Connecticut court affirms lower court's decision not to tax affect

In a buyout dispute involving a Connecticut family business, an appellate court recently upheld the trial court’s earlier decision not to tax affect the earnings of the company in valuing the departing shareholder’s interest, even though experts for both sides tax affected.

Some courts prefer back-of-the-envelope calculations, expert says

Although some appraisers are categorically opposed to calculation engagements, it is not unusual for courts to want a back-of-the-envelope calculation, a veteran BV expert says.

Calculation engagements receive mixed reactions from courts

If the appraisal profession is conflicted over the validity of calculation engagements, so are courts, as a brief review of court decisions on the BVLaw platform shows.

Linde v. Linde

Appellate court upholds trial court’s finding that majority shareholder breached fiduciary duty to minority shareholder and buyout order; trial court performed careful valuation analysis finding defense expert’s asset-based approach was “simply an improper method of valuation in the present case.”

Court Says Asset Approach ‘Is Simply an Improper Method’ in Present Appraisal Proceeding

Appellate court upholds trial court’s finding that majority shareholder breached fiduciary duty to minority shareholder and buyout order; trial court performed careful valuation analysis finding defense expert’s asset-based approach was “simply an improper method of valuation in the present case.”

Puklich v. Puklich

In buyout dispute related to various family businesses, including auto dealership, high court finds trial court was authorized to adjust value finding to account for majority shareholder’s oppressive conduct; case law supported rejection of discounts in valuing minority shareholder’s interest.

High Court Approves of Trial Court’s Rejection of Discounts in Fair Value Determination

In buyout dispute related to various family businesses, including auto dealership, high court finds trial court was authorized to adjust value finding to account for majority shareholder’s oppressive conduct; case law supported rejection of discounts in valuing minority shareholder’s interest.

Court Says Expulsion Price Determination in Louisiana Buyout Dispute Is Triable Issue

In buyout dispute resulting from expulsion of LLC member, court finds state law does not preclude use of discounts in valuing withdrawing LLC member’s interest; company’s operating agreement is ambiguous on how to value expelled member’s interest, court says, leaving issue for jury to decide.

Complete Logistical Services, LLC v. Rulh

In buyout dispute resulting from expulsion of LLC member, court finds state law does not preclude use of discounts in valuing withdrawing LLC member’s interest; company’s operating agreement is ambiguous on how to value expelled member’s interest, court says, leaving issue for jury to decide.

New cases suggest British Common Law may be emphasizing 'fairness'

‘Common law is shifting under our feet, so this is an interesting time to do valuations in contentious situations, whether it’s a family or nonfamily situation,’ Andrew Strickland told BVWire—UK recently.

Smith v. Promontory Financial Group, LLC

In buyout dispute, court says parties’ letter of intent states buyout conditions; court relies on amount stated in plaintiff’s debt/equity deal proposal to value subject company, finding parties’ trial experts used methods (DCF and asset accumulation) not suited to valuing subject company.

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